Strategy’s STRC preferred stock remains stuck below par at $95.31 even as Bitcoin surges, prompting public criticism from Multicoin Capital co-founder Tushar Jain that STRC’s 12% dividend doesn’t compensate investors for the risk of big drawdowns. Why STRC hasn’t “repegged” - STRC closed at $95.31 on Aug. 21, about 4.7% under its $100 stated value, despite Bitcoin trading near $77,125 on Aug. 22 (intraday high $78,763). The preferred’s price has rebounded from a June low of $71.25 but has not returned to par. - Jain argued in an Aug. 22 X thread that STRC’s 12% annual dividend is too low relative to a roughly 30% drawdown investors endured, and that investors who accept that downside would demand a higher yield. - Strategy marketed STRC as a fixed-income-style product, but Jain says the realized volatility and capital losses undermine that framing. Dividend mechanics and policy - Strategy currently pays a 12% annualized dividend on STRC’s $100 stated value (paid in two monthly installments of $0.50 per share), which at the Aug. 21 share price yields about 12.6% effective return. - Management raised the rate from 11.5% to 12% for record dates beginning in July and then decided on July 27 to hold the dividend at 12% until STRC shows sustained trading near $100. - Strategy’s revised rate-setting framework (changed in June) lets management weigh STRC’s market price, competing yields, credit spreads, Bitcoin price and volatility, reserve coverage, capital-market conditions and the company’s capital structure. A prior automatic rule (VWAP below $95 triggers a 50 bps recommended increase) was removed. Capital structure, strategy and constraints - STRC is perpetual preferred stock that sits above MSTR common shares but below the company’s debt; it carries no contractual redemption right for $100. - Strategy designed STRC’s variable dividend to incentivize trading close to par so the company can issue shares at or above $100 and use proceeds—including to buy more Bitcoin. - CEO Phong Le has tied further issuance of STRC to purchases of additional Bitcoin, but Jain warns that persistent discounting would block accretive issuance and could push MSTR toward a closed-end–fund‑style discount. - Jain also noted a tradeoff: increasing the dividend to force a repeg would raise Strategy’s annual cash burn, creating its own headaches. Buybacks, Bitcoin sales and balance-sheet moves - Instead of boosting the dividend, Strategy repurchased STRC shares while selling Bitcoin to fund repurchases and dividends: - Week ending July 26: repurchased 288,930 STRC for ~$25 million at an average $86.53. - July 27–Aug. 2: sold 1,638 BTC for $104.7 million — ~$52.4M went to preferred dividends and ~$52.3M to STRC buybacks. - Following week: sold 1,690 BTC for $108.6 million, using net proceeds to repurchase about 1.15 million STRC (avg ~$94.29). - Aug. 10–16: raised $333.7 million by selling 3.46 million MSTR shares. SEC filings show $132.2M funded repurchase of ~1.39M STRC shares, $52.4M covered STRC dividends, and $149.1M added to U.S. dollar reserves. - Result: Strategy’s USD reserve rose to about $4.80 billion, while its Bitcoin holdings remained at 840,447 BTC (acquired at an average of $75,385, total cost about $63.36 billion). Market reaction and wider implications - Jain closed his thread saying the MSTR-to-Bitcoin trade has “fully retraced,” arguing the digital‑asset‑treasury trade may have run its course—an opinion on valuation rather than company guidance. - MSTR closed at $119.25 on Aug. 21 (up 6.05% on the day), and Strategy’s modified NAV ratio hovered near 1.00—though the company warns mNAV is not equivalent to traditional NAV measures or a price predictor. - Both STRC and MSTR trade on Nasdaq. STRC holders receive cash distributions but don’t have a direct claim to a fixed amount of Bitcoin; MSTR holders are exposed to operating costs, preferred-stock obligations, debt and potential dilution. Company disclosure - Strategy’s Aug. 17 Form 8-K reported no Bitcoin purchases or sales between Aug. 10 and Aug. 16, leaving holdings at 840,447 BTC and U.S. dollar reserves at roughly $4.80 billion. Bottom line STRC’s persistent discount—even amid a strong Bitcoin rally—highlights tension between Strategy’s goal of using preferred issuance to grow its Bitcoin treasury and investors’ demand for yields that properly compensate for realized volatility and drawdowns. Management prefers buybacks and reserve-building while holding the dividend steady, but critics say the current payout may not be enough to lure capital back to par. Read more AI-generated news on: undefined/news