Author: Tao Zhu, Golden Financial

Abstract: On May 29, STRC fell to 97.11 USD, then rebounded and closed at 98.57 USD. After that, STRC primarily trended downwards, reporting 94.65 USD at the time of writing. For a preferred stock designed to trade around a par value of 100 USD for the long term, such a decline has indeed attracted market attention.

1. What is STRC?

According to the official Strategy website, Stretch (STRC) is a perpetual preferred stock issued by Strategy, currently offering an annual dividend yield of 11.50%, paid in cash on a monthly basis. The dividend rate for STRC is adjusted monthly, aiming to encourage the stock price to trade around its par value of 100 USD while reducing price volatility. STRC is listed on NASDAQ and can be traded on most mainstream brokerage platforms.

The term "preferred" refers to having higher priority than common stock in terms of dividends and liquidation. As a preferred stock issued by Strategy, STRC is positioned below bonds and above common stock. Specifically, the "preference" of preferred stock can be manifested in two aspects. First, preferred stock shareholders have priority in receiving dividend distributions over common stock shareholders, and in times of insufficient profits, preferred shareholders will also receive returns first. Secondly, in the event of bankruptcy, preferred shareholders have priority in compensation; compared to common stock, which may receive nothing in return, preferred stock may recover part of the principal.

STRC is essentially more like a "high-yield cash flow product" rather than a growth stock that seeks capital appreciation. Many investors purchase STRC primarily to obtain a yield of over 11%, rather than focusing on whether the stock price rises.

2. Why has STRC recently decoupled?

1. Decline in BTC price

Strategy's largest asset is Bitcoin, which is highly correlated with the price of BTC. In late May, the overall cryptocurrency market experienced a significant correction: the BTC price dropped from a monthly peak of nearly 82,000 USD to around 64,300 USD at the time of writing, a decline of 21.59%.

The rapid decline in BTC from its high led to a sell-off of risk assets, with Strategy's related products coming under pressure simultaneously.

2. Pressure from competitors

Another Bitcoin asset management company, Strive Asset Management (ASST), has adopted a different strategy. The company recently announced that its perpetual preferred security, SATA, will distribute dividends daily. Over the past two weeks, the price of SATA has remained stable around its par value of 100 USD, maintaining a dividend yield of about 13% even in the face of declining Bitcoin prices.

In the past three months, Strive's stock price has risen by approximately 110%, while MSTR has only increased by 12%, and Bitcoin has only risen by 8%. This divergence indicates that investors may prefer Strive's more robust balance sheet and the higher yield structure of its preferred stock.

Note: Strive was originally an asset management company established in 2022 and headquartered in Dallas, Texas. Initially, it primarily issued ETF funds and was known for its principle of "shareholder value maximization." Starting in 2025, Strive underwent a significant transformation, beginning to mimic Strategy's model—becoming a Bitcoin reserve company and issuing preferred stock.

Perhaps inspired by Strive's daily dividends, it has been announced that Strategy recommends changing the dividend distribution frequency for STRC from monthly to bi-monthly. If this proposal is approved and adopted, it is expected to shorten the reinvestment lag, enhance liquidity and market efficiency, and improve price stability.

This proposal requires joint voting from both MSTR and STRC shareholders, and it can only pass if both classes of shareholders vote in favor. According to the proposal timeline, voting began on April 28 and will conclude on June 8. If the proposal is approved, the first stock registration date under the new schedule will be June 30, with the first dividend payment date on July 15. Eligible voting shareholders must hold shares as of April 17.

3. Technical sell-off

Strategy hopes to maintain STRC near 100 USD in the long term. When STRC's price drops below 100 USD, many quantitative funds may interpret it as the market questioning the pricing mechanism of the product. Consequently, issues such as passive de-leveraging, technical stop-loss orders, and arbitrage exit might arise, leading to further declines.

3. Is there a default risk for STRC?

Currently, there is no evident default risk.

First and foremost, investors have focused on whether Strategy will eventually sell Bitcoin to pay off debts or distribute dividends, or whether it will continue to use funds raised from issuing securities to expand its Bitcoin holdings. Saylor responded on X: "Work is progressing smoothly."

On June 1, Strategy founder Michael Saylor confirmed that the dividend yield for its perpetual preferred stock, STRC, will remain unchanged at 11.50% until June 2026. STRC's dividends have not been reduced, suspended, or defaulted; everything is normal.

Secondly, Strategy still possesses a substantial Bitcoin reserve. With a reserve of 843,706 BTC, Strategy ranks at the top of the BTC treasury corporate list, holding 4.01% of the total supply of 21 million BTC. As long as BTC does not experience a prolonged collapse and the company's financing channels remain open, STRC's cash flow pressure is still manageable.

4. What do industry insiders think?

• Forbes points out: STRC was listed in July 2025, representing the largest IPO in the U.S. that year, raising 2.521 billion USD, with monthly dividend payments of about 80 to 90 million USD. By intentionally and publicly selling a small amount of Bitcoin to meet these obligations, Strategy indicates to rating agencies that it treats preferred stockholders as priority creditors. This credibility makes STRC more attractive. Increased demand for STRC means raising more funds, which in turn leads to more Bitcoin being purchased.

• Benchmark analyst Mark Palmer notes: "Investors should now view Strategy's Bitcoin holdings as a reliable backup plan for financing preferred stock dividends."

• Notable gold advocate and cryptocurrency critic Peter Schiff posted on X: "Most STRC investors may end up losing most of their funds because once Michael Saylor is forced to cancel the dividend distributions, STRC's price will ultimately crash. At that point, a large number of lawsuits will likely further exacerbate the issues faced by Strategy (MSTR). Those investors who suffered losses due to misleading promotions are expected to seek compensation through legal channels to recover their investment losses."

• The Motley Fool believes: First, the inflation impact on STRC should be monitored. Inflation poses a double threat: it erodes the real value of your 100 USD stock and also diminishes the value of the dividends you receive. Therefore, the longer you hold the stock, the more severe the inflation-related issues become. Secondly, Strategy can easily cut or delay dividends without incurring traditional debt defaults. Therefore, if the price falls below par value, new stock issuance will cease, and you will hold an asset with a yield below what was initially advertised, and the principal may be unrecoverable in the short term or even permanently.

Conclusion

STRC has recently fallen from around 100 USD to 94.65 USD, mainly influenced by factors such as the decline in Bitcoin price, competitive pressure, and technical sell-offs. Currently, there is no default risk for STRC, as the company continues to pay dividends at a level of 11.5% and maintains its position as a core financing tool.

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