Strategy, a Bitcoin-focused treasury firm, has recently unveiled a new class of perpetual preferred shares known as the Series A Variable Rate Stretch Preferred Stock (STRC), as detailed in a statement released on July 21st.
The firm plans to issue five million STRC shares at a face value of $100 each, pending regulatory approval and favorable market conditions.
STRC offers investors an initial annualized dividend of 9%, paid monthly and subject to board approval. While the dividend rate is variable, Strategy has implemented a cap of 25 basis points per change to ensure stability in yield. This feature makes STRC an attractive alternative to traditional money market funds, which currently offer yields of around 4.25%.
Joe Consorti, Head of Growth at Theya Bitcoin, views this product as a strategic move to shift capital from conventional fixed-income investments to Bitcoin-backed instruments. He highlighted the 9% initial yield of STRC as a competitive option within the $7.05 trillion money market funds market.
In addition to its high payout, STRC includes redemption mechanisms designed to benefit both Strategy and its investors. The company has the option to redeem shares at $101 plus any unpaid dividends, while investors have the opportunity for a par-value exit in the event of a “fundamental change.” These provisions offer flexibility and downside protection, enhancing the product’s appeal in uncertain market conditions.
STRC is the latest addition to Strategy’s lineup of Bitcoin-linked preferred securities offerings. Previous issues include STRK, a convertible series with an 8% fixed dividend that can transition into common equity under specific conditions, and STRF, a non-convertible series offering a 10% cumulative dividend that must be paid in full before common distributions.
Adrian Cercenia, a Bitcoin analyst, commended Strategy for building a range of products to cater to varying risk appetites and return profiles. He noted that these offerings provide investors with the opportunity to diversify away from traditional Treasuries, seek income that outpaces inflation, and indirectly gain exposure to Bitcoin without directly purchasing the digital asset.
Overall, Strategy’s perpetual preferred shares, including the new STRC offering, present investors with innovative ways to generate income, hedge against market volatility, and participate in the growing Bitcoin ecosystem. With a focus on yield and flexibility, these products serve as valuable tools for investors looking to navigate the evolving financial landscape.