By Andrew Bary
Strategy's move to market preferred stock to retail investors is running into trouble as the company's main preferred stock issue trades more than 10% below its face value, boosting its current yield to about 13%.
Unlike most preferreds, which are geared toward institutional buyers, Strategy has cultivated a retail base for its preferred stock, reflecting the high retail ownership of its common stock.
Chaired and controlled by Bitcoin enthusiast Michael Saylor, Strategy holds 847,000 coins, or about 4% of the total supply of the cryptocurrency. It has been using sales of preferred stock over the past year as a key source of funding, along with common-stock sales, to add to its Bitcoin holdings.
Strategy runs ads on X for the preferred including one modeled on the HBO show "Industry" where the head of a Wall Street trading desk holding a baseball bat asks his team for income ideas.
The Strategy variable-rate preferred known as Stretch comes out the winner because it offers an 11%, tax-deferred yield.
"All of our customers would want that," he says. "Stretch is for everyone."
One Wall Street analyst, citing the company, has estimated that 80% of Stretch preferred shares are held by retail buyers.
The company has about $15 billion of preferred stock outstanding and an equity market value of $40 billion. The Bitcoin holdings are worth over $50 billion. Stretch accounts for $9 billion of Strategy's $15 billion of outstanding preferred.
The Nasdaq-traded variable-rate preferred, ticker STRC and known as Stretch, is designed to trade near its face value of $100. Strategy adjusts the dividend monthly -- it now pays 11.5% on the face value of $100 -- in an effort to keep the securities trading close to $100.
That approach worked for much of 2026, but Stretch was trading Tuesday at $88, down 0.8% on the day and below its targeted price of $100. The Stretch preferred is down from about $95 on June 12 and close to $100 in late May. Strategy common stock is off 3% Tuesday to $106 and is down 70% over the past year after trading near $450 last July.
With the preferred trading so far below par, it appears unlikely that the company will issue additional Stretch shares unless the price rebounds.
Strategy did not immediately respond to a Barron's request for comment.
The preferred has been pressured by several factors, including a decline in Bitcoin prices, concerns about the sustainability of the preferred dividend, and retail selling.
Bitcoin is off about 3% Tuesday to around $62,000 and has fallen nearly 20% in the past month. Strategy generates no income from its Bitcoin to support the preferred dividend payments so it has relied largely on equity sales to fund the payments. There is no common stock dividend.
Preferred dividend payments now total about $1.7 billion annually, according to information on the Strategy website.
The company sought to soothe investor concerns by selling stock recently to boost its cash reserves b y $300 million to $1.4 billion, bringing the reserves to about 10 months of preferred dividend coverage. Despite that announcement Monday, Stretch continued to weaken.
Benchmark analyst Mark Palmer addressed the preferred-stock situation in a note Monday, writing that investors last week focused on a sharp decline in the price of Strategy's STRC perpetual preferred stock, which has become the company's primary vehicle for funding Bitcoin acquisitions.
He wrote that there was talk on social media that the STRC had "depegged, " a reference to stablecoins.
Palmer called that a misperception .
"The term 'peg' implies the existence of a fixed exchange relationship. Stablecoins such as TerraUSD, USDC, and USDT were designed to maintain a defined value relative to another asset, typically the U.S. dollar. STRC has no such obligation. Strategy's objective has been to support STRC's trading at a level near $100, not to guarantee it," he wrote.
He cited retail selling as a factor behind the Stretch weakness, noting the company has put retail ownership at about 80%.
"The extent of STRC's downward price move appears to have been exacerbated by the forced unwinding of leveraged positions in the instrument. Some investors had borrowed against their STRC holdings to amplify returns, and when the preferred stock's price fell below expected ranges, the associated margin requirements triggered cascade selling."
Strategy may boost the rate on the preferred to 12% from 11.5% later this month, Palmer wrote, but that might not be enough to boost the Stretch price.
Some investors have questioned the logic of using preferred stock to buy Bitcoin when the company lacks operating earnings that could support the dividend stream.
Strategy's view is that Bitcoin will appreciate at a faster rate than the dividend cost of the preferred stock. Under that framework, issuing preferred shares to fund Bitcoin purchases can create value for shareholders if the cryptocurrency continues to rise over time.
So far that view hasn't panned out. Bitcoin has dropped and preferred dividend obligations have increased, raising questions about Saylor's strategy.
Write to Andrew Bary at andrew.bary@barrons.com
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(END) Dow Jones Newswires
June 23, 2026 13:44 ET (17:44 GMT)
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