Original Author: Lesley
In the history of financial innovation on Wall Street, few have been able to transform personal beliefs into corporate strategy like Michael Saylor, thereby reshaping the entire industry's financing model. The chairman of Strategy (formerly MicroStrategy) is driving an unprecedented financial experiment: replacing traditional equity and debt financing with perpetual preferred stock to continuously "supply blood" for its aggressive Bitcoin accumulation strategy.
According to Bloomberg, this year, Strategy has successfully raised approximately $6 billion from the market through four rounds of perpetual preferred stock issuance, with the latest round of perpetual preferred stock "Stretch" (STRC) reaching as high as $2.5 billion. Michael Saylor described STRC as Strategy's "iPhone moment," emphasizing its potential to open a scalable and low-volatility capital market access channel for the Bitcoin treasury.
This once-obscure business intelligence software company has leveraged its firm belief in Bitcoin to unlock such a massive capital leverage. As of August 18, Strategy holds 629,400 Bitcoins, with a total investment of $33.139 billion, valued at over $72 billion at current market prices.
Top 100 publicly traded companies holding Bitcoin globally (Source: bitcointreasuries.net)
Even more striking is that in the latest issuance of perpetual preferred stock, retail investors accounted for nearly a quarter—something almost unimaginable in the traditional corporate preferred stock market. However, behind this financial engineering is a radical evangelist who once urged fans to "sell a kidney to buy Bitcoin," along with a legion of retail investors willing to follow his beliefs.
To understand this financial experiment that could reshape the digital asset industry landscape, we need to start from the beginning.
The Story and Mechanism of Perpetual Preferred Stock
Perpetual preferred stock is a hybrid financial security with no fixed maturity date, combining the income certainty of bonds with the perpetual characteristics of stocks. The issuing company is not required to repay the principal but must pay agreed dividends regularly, allowing the company to use investors' funds indefinitely.
From the investor's perspective, purchasing perpetual preferred stock is akin to obtaining a "perpetual income right"—returns primarily come from ongoing dividend income rather than the principal repayment of traditional bonds.
The table below compares the differences between perpetual preferred stock, convertible bonds, and common stock across several key dimensions:
In summary, perpetual preferred stock is a "third type of financing tool" that lies between debt and equity:
• For companies, it allows them to lock in funds long-term without repaying the principal, alleviating cash flow pressure through flexible dividend arrangements while avoiding equity dilution from common stock issuance;
• For investors, although it ranks lower than debt in the capital structure, perpetual preferred stock typically offers higher and more secure returns, and in the event of company liquidation, it is prioritized over common stock for repayment.
Because of this, it combines flexibility on the financing side with stable returns on the investment side, becoming an increasingly important option in corporate capital operations.
Despite providing Strategy with a flexible financing method, the market volatility, liquidity, and structural risks of perpetual preferred stock cannot be ignored.
• Market volatility and liquidity risk: The volatility of Bitcoin prices directly affects Strategy's repayment and refinancing capabilities, and the burden of dividend payments increases with the scale of financing. According to Saylor's "HODL" strategy, selling Bitcoin further restricts the company's cash flow channels.
• Structural risks of the financing model: The dividend payments of non-cumulative perpetual preferred stock are at the discretion of the issuer, which may lead to refinancing difficulties if market confidence wavers; excessive reliance on retail investors means that if retail enthusiasm wanes, attracting institutional investors becomes a challenge.
• Market bubbles and systemic risks: The crypto asset treasury company model may show signs of a bubble; once market demand dries up, companies relying on this financing model may face the risk of a broken capital chain, leading to broader market volatility.
Since early 2024, Saylor has raised over $40 billion through stock and bond financing. This year, Strategy has raised approximately $6 billion through four issuances of perpetual preferred stock. Saylor even claims that theoretically, they could raise as much as $100 billion to $200 billion. These four issuances demonstrate a clear evolution of strategy and distinct market positioning.
Last month, Strategy launched STRC (Stretch), a floating-rate perpetual preferred stock designed to provide stable pricing and high returns for yield-seeking investors looking for indirect Bitcoin investment. Each share of STRC, with a par value of $100, will pay monthly dividends, with an initial annualized yield of 9%.
The core of Saylor's issuance of STRC (Stretch) is to highlight its accessibility. Unlike earlier tools he praised as innovative but overly complex or volatile—such as STRK, STRF, and STRD—STRC resembles a yield-enhanced savings account. By focusing on short-term investments and low price volatility, it eliminates the risks associated with long-term volatility while offering higher returns than bank deposits. By using Bitcoin as excess collateral, it ensures that even during Bitcoin price fluctuations, the trading price of STRC can remain close to the $100 par value, providing investors with a more stable and attractive investment option.
Why Choose Perpetual Preferred Stock? A Fundamental Shift in Business Model
As the bottlenecks of traditional financing models become apparent, perpetual preferred stock has become a key choice for Strategy in the context of mNAV premium compression and the exploration of new funding sources.
1. Traditional Financing Models Encounter Bottlenecks: Compression of mNAV Premium
Strategy's perpetual preferred stock experiment stems from a real challenge: the compression of the mNAV premium.
The so-called mNAV premium refers to the phenomenon where Strategy's stock price is consistently higher than its net asset value in Bitcoin. This premium was once central to Saylor's "financial magic"—the company could finance in the market at prices above the actual value of Bitcoin, achieving the effect of "buying Bitcoin at a discount." However, Brian Dobson, a disruptive technology equity research analyst at Clear Street, pointed out, "The mNAV premium has compressed in recent weeks, and Strategy's management is understandably concerned about creating too much dilution."
This change has forced Strategy to seek new financing paths. Traditional common stock issuance becomes much less efficient when the mNAV premium narrows; while the convertible bond market has lower costs, it excludes the important funding source of retail investors. The emergence of perpetual preferred stock is a necessary choice under these constraints.
2. Discovering New Funding Sources: The "Faith-Driven" Model of Retail Investors
More critically, Saylor has identified an unprecedented financing opportunity: directly converting personal influence into corporate capital.
Michael Saylor currently has 4.5 million X Followers (Source: X platform)
Michael Youngworth, head of Global Convertibles and Preferred Strategy at Bank of America, candidly stated, "To my knowledge, no company has utilized retail enthusiasm like Strategy has." In the latest STRC issuance, retail investors accounted for as much as 25%, which is almost unimaginable in the traditional corporate preferred stock market.
These retail investors have adopted a "faith-driven" investment model towards Strategy, providing the company with a relatively stable source of funding. Compared to institutional investors, they are less affected by short-term market fluctuations and are more willing to accept higher risk premiums. This unique investor structure has become an important competitive advantage that distinguishes Strategy from traditional companies.
3. Strategic Transformation and Upgrade: From Equity Financing to Hybrid Capital Structure
The introduction of perpetual preferred stock marks a fundamental shift in Strategy's business model.
Under the traditional model, Strategy relied on rising stock prices to support its financing capabilities, but this model is highly dependent on market sentiment and Bitcoin price fluctuations. The new model creates a relatively stable "intermediate layer" through perpetual preferred stock: preferred stock investors receive relatively certain dividend returns, common stock shareholders bear more volatility risk, and the company obtains perpetual funding that matches the duration to hold Bitcoin, a perpetual asset.
This redesign of the capital structure allows Strategy to better respond to market cycle changes. Even in the event of a decline in Bitcoin prices and the disappearance of the mNAV premium, the company can still maintain its financing capabilities through perpetual preferred stock.
4. Ultimate Goal: Building a $100 Billion BTC "Credit" Concept
Saylor's ambitions go far beyond this. He speculates that "theoretically, we could raise $100 billion… even $200 billion," with the goal of creating a large-scale "credit" system based on Bitcoin as the underlying asset.
The core logic of this vision completely overturns traditional corporate financing: no longer relying on cash flows from products or services, but rather constructing a self-reinforcing mechanism of "holding Bitcoin → generating stock price premiums → financing to buy Bitcoin → forming a positive feedback loop." Through multi-layered financing tools such as perpetual preferred stock and convertible bonds, Strategy aims to transform volatile digital assets into stable income sources, leveraging the mNAV premium to achieve "buying Bitcoin at a discount" arbitrage, thereby forming a financial empire centered around Bitcoin.
However, this financial experiment is fraught with risks. If successful, Bitcoin could transition from a speculative asset to a widely accepted financial collateral. But as short-seller Jim Chanos warns, an 8-10% perpetual dividend payment could become a heavy burden when Bitcoin prices fall. Yuliya Guseva from Rutgers Law School bluntly stated, "If market appetite dries up, then this model will no longer be sustainable." Saylor is betting the future of Strategy on whether digital assets can redefine the foundational rules of the modern financial system.
Conclusion: Innovation or Risk?
Strategy's perpetual preferred stock experiment represents a significant innovation in the financing model for digital asset companies. Michael Saylor has cleverly combined personal influence, market sentiment, and digital asset investment through financial innovation, creating an unprecedented path for corporate development.
From a broader perspective, Strategy's experiment signifies a fundamental restructuring of the relationship between companies and investors in the digital economy era. The traditional corporate valuation system—based on cash flow, profitability, and balance sheets—has completely failed here, replaced by a new value creation mechanism based on asset appreciation expectations and market sentiment. This is not only a financial innovation but also a limit test of the boundaries of modern corporate theory.
Regardless of the final outcome, Strategy's experiment has already provided a replicable template for subsequent digital asset companies, while also sounding an alarm for regulators: as corporate financing increasingly relies on retail sentiment and asset bubbles, can traditional risk management frameworks still effectively protect investor interests? The answer to this question will determine the future direction of the digital asset industry.
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