Bitcoin holder Strategy's push into the preferred-stock market has backfired amid concerns about the company's ability to maintain dividends on some $15 billion of high-yield preferred securities, given the declining prices of Bitcoin and the company once known as MicroStrategy's common stock.
The Strategy preferred -- four separate Nasdaq-traded issues with cute nicknames like "Stretch" -- now yield 10% to 16% after dropping in price by an average of 10% over the past month. That compares with 6% yields on preferred stock issued by leading banks like JPMorgan Chase and Bank of America.
Since Strategy began issuing the preferred in early 2025, the company formerly known as MicroStrategy has used the proceeds to help fund its purchases of Bitcoin. Its stash now totals some 843,000 coins, or 4% of the outstanding supply, worth over $50 billion.
Bitcoin prices, however, have come under pressure, dropping about 30% this year to $62,000 a coin. That has dragged down Strategy shares, which are off almost 40%, at $94.
Retail investors are sitting with losses because Strategy, more so than any other issuer in the $400 billion preferred market, pitched its preferred to individuals, who also make up a sizable chunk of the company's common shareholders.
Strategy marketed its preferred through Robinhood, brought in Morgan Stanley to its underwriting group to access the firm's retail clients, and wooed financial advisors, family offices, and registered investment advisors. It also advertised on X and other forums, including an ad modeled on the HBO show Industry.
The push mainly involved Strategy's Stretch preferred, traded on the Nasdaq under the ticker STRC. It was pitched as the Bitcoin-backed Treasury bill with a floating yield that would be adjusted up or down to keep it trading close to its face value of $100.
Strategy issued more than $10 billion of Stretch preferred. The securities now carry a rate of 12% based on the face value and a current yield of about 14% given the current discounted price of $86. Strategy's other preferreds -- known as Stride $(STRD)$, Strike (STRK), and Strife (STRF) -- yield 10% to 16%.
The big investor question is whether Strategy can pay its preferred dividends. The main negative is that the company generates no income from its Bitcoin holdings.
To allay concerns, Strategy recently has raised cash through common stock and Bitcoin sales and now has about $2.6 billion in cash reserves -- enough to service about 1.5 years of preferred dividends of $1.8 billion annually.
Since preferreds are a form of equity -- albeit a senior one -- companies can skip dividends without defaulting. But Strategy appears committed to paying them -- to preserve its ability to issue new preferreds and support the many retail investors who bought the securities. The company recently said it plans to maintain a reserve of one year's worth of preferred dividend and interest payments.
Strategy preferred isn't for everyone. But the securities carry big yields -- comparable to low-grade junk bonds -- and make sense for investors who are comfortable owning what effectively is a Bitcoin-secured security.
There is a lot of collateral backing the preferred, given the company's Bitcoin stash. And there are tax benefits to the Strategy preferred as well, given its lack of income. If the company owned gold and not Bitcoin, few would question its financial strength.
Write to Andrew Bary at andrew.bary@barrons.com
To subscribe to Barron's, visit http://www.barrons.com/subscribe
(END) Dow Jones Newswires
July 10, 2026 21:31 ET (01:31 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments