Strategy has pivoted away from its traditional method of raising capital through common share issuance, opting instead for a more strategic approach with its perpetual preferred stocks. The decision, made over the past fortnight, aims to raise funds for further Bitcoin acquisition, all while sidestepping shareholder dilution—a move that caught many in the crypto community by surprise.
A Tactical Shift in Capital Strategy
In a market where subtle shifts can have significant repercussions, Strategy’s latest move is noteworthy. The company has refrained from leveraging its at-the-market (ATM) equity program for common shares, a tool previously used to fund Bitcoin purchases. Instead, the focus has shifted to its two perpetual preferred stocks, STRK and STRF. According to sources familiar with the matter, this pivot is largely driven by the narrowing premium between Strategy’s share price and its multiple net asset value (mNAV). This strategic shift aligns with Strategy’s broader ambitions, as detailed in Strategy’s $84B Bitcoin Expansion Plan Backed by Wall Street Analysts.
Issuing common shares under the ATM program becomes less appealing when the share price is closely aligned with the value of the company’s Bitcoin holdings. The current landscape favors the preferred stocks, which have yielded impressive lifetime returns of 35% for STRK and 24% for STRF. This strategic move not only facilitates further Bitcoin accumulation but also preserves potential gains for common stockholders.
The Allure of Preferred Stocks
Jeff Walton, a seasoned analyst, sheds light on an intriguing dynamic in play. The effective dividend yields of STRK and STRF have seen a gradual decline from about 10%, despite the U.S. 10-year Treasury yield holding steady at 4.5%. Walton explains, “As the price of these preferred stocks increases, their dividend yield falls—a behavior reminiscent of bonds.” This bond-like behavior enhances the attractiveness of preferred shares, especially in a stable interest rate environment.
Recent transactions underscore this strategy. Strategy funded its latest acquisition of 1,045 BTC through the proceeds from its perpetual preferred stock ATMs—59.18% from STRK and 40.82% from STRF. This approach grants the company greater financial agility, allowing it to capitalize on Bitcoin’s potential upside without eroding shareholder value. This is part of a larger trend, as seen in Strategy Raising Another $21B to Buy Bitcoin, Posts Large Q1 Loss on BTC Price Decline.
Market Implications and Future Prospects
The implications of this shift are multifaceted. For one, it positions Strategy to potentially reengage the ATM for common stock issuance if market conditions become favorable—specifically, if the share price surges to double the mNAV. Such a scenario would create an opportunity for dilutive issuance at a premium, enabling Strategy to further bolster its Bitcoin holdings.
Yet, questions linger. Will the strategy hold if interest rates fluctuate? How will common stockholders react if Strategy resumes dilutive practices? The answers remain uncertain. Nonetheless, Strategy’s flexibility to use either preferred or common stock ATMs to meet dividend obligations provides a cushion against market volatility.
As the crypto market continues to evolve, Strategy’s approach exemplifies the importance of adaptive capital strategies. By leveraging the strengths of preferred stocks, the company not only navigates the complexities of shareholder expectations but also positions itself to seize future opportunities in the Bitcoin market. For now, the strategy seems to be paying off—but only time will tell how this calculated gamble plays out in the ever-dynamic world of cryptocurrency finance.
Source
This article is based on: Strategy Shifts Capital Raise to Preferred Stocks as Common Share Issuance Loses Allure
Further Reading
Deepen your understanding with these related articles:
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- Strategy ends April up 32% in best month since November as Q1 earnings loom
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
