MicroStrategy’s preferred stock, known as STRC, fell to a record low of $75 on Wednesday, as Bitcoin (BTC) slid to its weakest level since 2024 and dragged the company’s Nasdaq-listed securities sharply lower.

But even as the selloff intensified worries about how the firm will keep funding STRC’s rich dividend while its Bitcoin holdings sink below their average purchase price, Arkham says it is not a crisis for Michael Saylor.

Bitcoin’s Slump Drags MicroStrategy’s Preferred Stock Lower

Bitcoin dropped to an intra-day low of $58,115 on Thursday, its lowest level since September 2024. The token has fallen more than 20% in a month.

That Bitcoin price slump has pulled MicroStrategy’s whole capital structure lower.

STRC is a perpetual preferred stock nicknamed “Stretch,” built to trade near its $100 stated value. It closed at $87.31 on June 23, the day Strategy, formerly MicroStrategy, moved to amend the stock’s terms. The next session it tumbled to a record low near $75.

“Investors may have sold STRC because they believe Saylor is unlikely to pay future dividends, will have trouble raising capital in the future, or potentially to chase returns in other stocks,” Arkham wrote.

The company’s MSTR common stock has fared worse, losing about 72% over the past year. Strategy has even signaled disciplined Bitcoin sales as a capital tool, a reversal for a treasury built only by buying.

Why STRC Is Not the Next Terra Luna

The drop below par revived comparisons to Terra’s Luna. The algorithmic stablecoin’s May 2022 depeg erased tens of billions of dollars within days. That collapse was mechanical, because Terra’s code forced new tokens into the market and fed a death spiral.

STRC works differently. Its prospectus shows dividends are paid only if Strategy’s board declares them, from legally available funds. The company can also adjust the rate at its own discretion to steer the price toward $100.

Blockchain analytics firm Arkham pegged STRC around 25% below par. It made the point in a post about STRC’s record-low slide.

“Unlike Terra LUNA, Saylor cannot ‘get liquidated’ if STRC falls in value,” Arkham explained.

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Still, the strain is real. Arkham estimates the 11.5% dividend costs about $1.2 billion a year. Strategy disclosed a $1.4 billion cash reserve on June 22, barely a year of cover.

That gap sharpens questions about whether STRC can survive a long downturn.

“If it looks like Strategy won’t be able to raise capital and pay dividends, investors may sell STRC, but Saylor is not forced to spend money keeping the price up…Will this kill Strategy? No. But it may hurt them in the long run. To keep STRC afloat, Saylor needs to keep paying $1.2 Billion per year in dividends. If MSTR investors realize their money is just being used to pay back earlier shareholders, they may buy less MSTR in future,” Arkham added.

The deeper cushion is its growing Bitcoin treasury. Strategy held 847,363 BTC on June 22, more than 4% of all the Bitcoin that will ever exist.

Yet its first-quarter accounts put the average cost near $75,500 a coin, well above today’s price. Michael Saylor, the chairman who began buying in 2020, has avoided large sales since offloading 704 coins in December 2022, until recently.

The amended terms take effect June 30, shifting STRC to twice-monthly dividends. Whether that steadies the price near $100, or simply spotlights the cash Saylor must find each month, will shape the next phase of his Bitcoin bet.

Source: BeInCrypto