Key Takeaways
- Strategy has submitted a proposal for shareholders to authorize daily dividend payments for four preferred stocks: STRF, STRC, STRK, and STRD.
- The proposal modifies only the distribution schedule, leaving dividend yields and aggregate payouts unchanged.
- A virtual shareholder meeting scheduled for Oct. 28 will determine the outcome of the vote.
- Since May, STRC has consistently traded beneath its $100 stated valuation, reaching a low point of $71 in June.
- According to CEO Phong Le, excessive market leverage in STRC positions triggered the valuation decline.
The bitcoin treasury giant Strategy is pursuing an unprecedented move: daily dividend distributions to shareholders. The company has formally requested investor approval for a daily payment structure across its four preferred stock offerings listed in the United States. On Friday, MSTR shares settled at $158.61, hovering near $158 throughout the session with a 2.15% decline.
The initiative encompasses all four preferred share classes: STRF, STRC, STRK, and STRD. The proposed framework designates each calendar day as a dividend record date, with distributions occurring on the following business day.
Importantly, this restructuring affects only payment frequency. Dividend percentages and overall payment obligations remain identical. Shareholders will cast their votes during a virtual extraordinary meeting scheduled for Oct. 28.
STRC will serve as the pilot for this new approach. Upon approval, the inaugural daily dividend distribution would occur on Nov. 2. The remaining preferred stocks—STRF, STRK, and STRD—would transition in January, with initial payments anticipated for Jan. 4.
The STRC Valuation Challenge
The past year has proven difficult for STRC holders. Despite offering a 12% annualized dividend yield, the preferred stock has failed to regain its $100 stated value since May.
During June’s widespread bitcoin market decline, STRC plummeted to $71.25. While it has rebounded to approximately $98.65, closing the remaining gap to $100 has remained challenging.
During an appearance on Natalie Brunell’s Coin Stories podcast this week, Strategy CEO Phong Le addressed the valuation issues. He revealed that STRC attracted significantly more leveraged trading activity than company projections anticipated.
Market participants had been securing low-cost loans backed by bitcoin holdings to purchase STRC shares, capturing the differential between borrowing costs and the stock’s dividend return. Bitcoin’s subsequent price deterioration forced these leveraged investors to liquidate STRC positions or deposit additional margin collateral.
“We did not expect the amount of leverage that came into the system,” Le said. “And so that’s a lesson learned, next time around.”
Adopting Strive’s Innovation
Strategy isn’t pioneering this approach. Strive implemented daily dividends for its SATA preferred shares in May, establishing itself as the inaugural publicly traded company to distribute dividends on a daily basis.
Strive’s SATA distributes payments each business day at a 13% annual rate and has maintained tighter proximity to the $100 threshold compared to STRC. Strategy’s proposal contains a subtle distinction: it recognizes every calendar day, encompassing weekends and holidays, as a record date instead of limiting it to business days exclusively.
Strive’s bitcoin treasury contains 26,355 BTC. Strategy’s holdings dwarf that figure: 846,000 bitcoin, purchased for $63.80 billion at an average cost basis of $75,416 per coin.
Strategy has simultaneously deployed a share repurchase strategy targeting its preferred securities. The firm has allocated approximately $1 billion from a $2 billion buyback authorization, including $174 million in STRC purchases during the week concluded Sept. 20.
Le indicated the company’s intention to strengthen its cash reserves while maintaining its strategy of acquiring STRC shares when trading below the $100 threshold. He also emphasized attracting more institutional investors with longer investment horizons.
Bitcoin traded around $83,600 on Friday. Strategy’s proposed modifications to its preferred stock certificates would become operative upon filing with Delaware state authorities.
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