According to CoinDesk, Strategy (MSTR), a U.S. company known for its significant investments in bitcoin (BTC), has broadened its financial strategies by introducing a second Series A perpetual preferred stock. This new offering, named Strife (STRF), is part of the company's expanding capital market instruments. The company is selling 8.5 million shares of STRF at $85 each, aiming to raise a net $711.2 million for further bitcoin acquisitions, surpassing its initial target of $500 million. The sale is set to conclude later on Tuesday. Previously, Strategy's first preferred issuance, Strike (STRK), raised $563 million.
Perpetual preferred stocks like STRF are positioned between debt and common equity in the capital structure, typically providing dividends and greater price stability, which appeals to investors seeking lower volatility and predictable returns. Unlike common stockholders, preferred stockholders do not have voting rights. STRF offers a 10% annual dividend on a $100 stated amount, with quarterly cash payments. If Strategy misses a dividend payment, the amount compounds at an additional 1% annually, up to a maximum 18% dividend rate, incentivizing timely payments. Strategy retains the option to redeem all STRF shares if less than 25% of the original issuance remains or under specific tax events, in which case shareholders would receive the liquidation preference plus any unpaid dividends. Additionally, in the event of a "fundamental change," holders can compel the company to repurchase their shares at the stated amount plus any accrued dividends.
In contrast, STRK offers an 8% annual dividend based on its $100 liquidation preference, though the effective yield decreases as STRK’s price increases. Unlike STRF, STRK includes a conversion feature, allowing holders to convert their preferred shares into common stock at a 10:1 ratio if the common share price reaches $1,000, providing potential equity upside. This makes STRF more akin to a fixed-income security, appealing to those prioritizing income and capital stability. To support these dividend payments, Strategy plans to utilize a combination of operational cash flow, proceeds from convertible debt offerings, and at-the-market (ATM) share sales on the common stock.
Strategy also maintains an open ATM program for STRK, having recently purchased 130 BTC, with approximately $3.57 billion remaining on its ATM capacity through common stock. This provides significant flexibility to fund dividend commitments while continuing its bitcoin accumulation strategy. The company's shares increased by over 10% on Monday, with Strategy holding 506,137 BTC at that time.
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