Strategy's Credit Risk Eases with Shift to Permanent Capital Structure

Bitcoin treasury company Strategy has seen a reduction in credit risk due to its permanent preferred stock reaching a nominal value of $83.6 billion, surpassing its $82 billion convertible debt, according to PANews. This shift towards permanent capital reduces refinancing risks and balance sheet volatility. Convertible bonds pose maturity refinancing risks and are linked to stock price volatility, whereas permanent preferred stock does not require principal repayment and pays fixed dividends, ranking between common stock and debt. The company's preferred stock portfolio includes four instruments, with an annual dividend total of approximately $8.76 billion. Additionally, Strategy holds $2.25 billion in reserves to improve dividend coverage and reduce short-term financing risks. The number of common shares in circulation has increased from 76 million in 2020 to over 310 million, potentially alleviating dilution pressure from future bond conversions.