Strategy, a company focused on accumulating Bitcoin, has announced a novel type of preferred stock. This new offering is named Series A Variable Rate Stretch Preferred Stock (STRC), as revealed in a public statement on July 21.
The company intends to introduce five million STRC shares, each with a face value of $100. The issuance is subject to regulatory approval and prevailing market conditions, according to the announcement.
STRC vs Money Market Funds
The STRC shares will provide an initial annualized dividend rate of 9%, distributed on a monthly basis, pending approval from the board of directors. While the dividend rate can fluctuate, Strategy has implemented a limit of 25 basis points on any downward adjustment, aiming to maintain yield stability.
This structure positions STRC as an attractive alternative to conventional money market funds, which are currently offering returns in the vicinity of 4.25%.
Joe Consorti, who leads Growth initiatives at Theya Bitcoin, views this new instrument as a strategic maneuver to shift capital away from traditional fixed-income investments and into assets backed by Bitcoin.
He commented:
“Strategy’s innovative variable rate preferred STRC offers an appealing initial yield of 9%, specifically targeting money market funds. This represents a market of $7.05 trillion, equivalent to roughly 25% of all US Treasuries, which currently yield around 4.25%.”
Beyond the high dividend yield, STRC incorporates redemption features designed for both Strategy and its investors.
The company retains the option to repurchase shares at a price of $101, in addition to any outstanding dividends. Concurrently, investors are guaranteed a redemption at par value should a “fundamental change” occur. These provisions provide both operational flexibility and protection against downside risk, making the product more appealing during periods of market instability.
Strategy’s Perpetual Offerings
STRC is the latest addition to Strategy’s expanding portfolio of preferred securities linked to Bitcoin.
Prior offerings from the company include STRK, a convertible series that features a fixed dividend of 8% and the potential to convert into common stock under specific conditions. This provides holders with both income and potential capital appreciation.
Another offering is STRF, a non-convertible series that focuses on a cumulative dividend of 10%. The company has stated that any unpaid dividends will accumulate and must be fully paid before any distributions are made to common shareholders.
Additionally, STRD, another non-convertible product, aims for a 10% annual payout but does not accumulate missed dividends. This creates a simpler and more adaptable obligation for the issuer.
Regarding these offerings, Bitcoin analyst Adrian Cercenia observed:
“Strategy is constructing a ‘yield curve’ of products tailored to various risk tolerances and return expectations… [The company] is developing multiple mechanisms to draw capital from sources of static or otherwise restricted liquidity and convert it into bitcoin.”
He believes these offerings enable investors seeking yield and indirect Bitcoin exposure to diversify away from traditional Treasuries, pursue income that potentially surpasses inflation, and gain exposure to digital assets without directly purchasing Bitcoin.