Strategy's STRC Preferred Stock Hits Record Lows as Leverage Cascade Deepens

Strategy's STRC preferred shares have hit a new all-time low this week, trading in the $73-78 range and extending a selloff that began in mid-June.

The preferred shares spent months trading near their $100 par value. On June 18, the stock was at $82.60. By Wednesday, STRC dropped to a fresh all-time low, with the price dropping another ~10% on Thursday. The total drawdown from par is approximately 25% in under two weeks.

The Leverage Cascade

Jesse Myers, head of Bitcoin Strategy at The Smarter Web Company, identified the selloff as a liquidation cascade rather than a change in fundamentals. His account: the stock's prolonged spell near par encouraged investors to buy on leverage, betting the price would remain above $95. When prices began to slip, hedge funds shorted aggressively, triggering margin calls and feeding a self-reinforcing decline.

"The price action today is a clear liquidation cascade," the analyst, who goes by Croesus_BTC on X, wrote, "rapidly pushing prices lower, in turn triggering additional liquidations."

Strategy's Balance Sheet

Strategy's bitcoin reserve provides substantial runway for dividend payments. The company holds 847,363 BTC, per a June 22 update that also confirmed the company increased its USD Reserve to $1.4 billion. On the liability side, total debt and preferred obligations stand at roughly $8 billion.

Strategy stated on June 17 that its BTC reserve provides 32 years of dividend coverage at current rates, and indefinite coverage if bitcoin appreciates at roughly 2% per year.

The current STRC dividend rate is 11.50% annualized. The company switched to semi-monthly dividend payouts this month, with the first record date under the new cadence on June 30.

What Buyers Get at Current Prices

At $73-78, STRC offers an effective yield of approximately 15-16%, based on the $11.50 annual dividend on a $100 par security now trading at a steep discount.

Myers sketched the bull case from $82.60 on June 18: holders at that level were getting roughly 13.7% effective yield, with an additional 18% in price upside if the stock returns to par. At current prices, both figures are wider.

He also raised the possibility that Strategy could increase the dividend rate on June 30, potentially to 11.75% or 12%, which would push the effective yield higher for holders who bought during the dip.

Strategy could also repurchase STRC on the open market using proceeds from new MSTR share issuances, which trade at a premium to Strategy's net asset value. Each dollar of discount captured in a buyback would be accretive to MSTR holders without reducing the bitcoin stack.

Saylor retweeted a post on June 22 from an investor who said they bought $1 million in STRC and would hold until par.

Bitcoin traded at around $59,000 on Thursday, down more than 2% on the day, per CoinGecko. MSTR stock has also sold off sharply alongside bitcoin, falling from highs above $300 earlier this year.

Lower bitcoin prices reduce the mark-to-market value of Strategy's collateral, even as the absolute coverage ratio for dividends remains wide.

June 30 Dividend Decision

The next scheduled catalyst is June 30, the first semi-monthly record date and the point at which Strategy may announce a new dividend rate. A rate increase would raise the effective yield for current holders and could draw fresh buyers into a stock trading at a roughly 25% discount to par.

Saylor's June 24 post described STRC as "income for investors who believe in Bitcoin." As of Wednesday, the company had made no public statement specifically addressing the selloff.