Strategy’s STRC Preferred Shares Plummet: Key Funding Concerns Arise
Strategy’s preferred shares, known as STRC, have recently hit a record low, trading significantly below their US$100 (AU$142) liquidation preference. This decline disrupts a crucial funding channel for the company’s Bitcoin acquisition strategy, raising concerns among investors and analysts alike.
On Thursday, STRC reached an intraday low of US$82.53 (AU$117.19) before closing at US$88.59 (AU$125.80), representing a steep 13% drop below its par value. Launched in July 2025, the STRC shares were intended to maintain a close connection to the US$100 benchmark through adjustable dividends, with the capital primarily channelled towards purchasing Bitcoin. However, the widening gap has caused the effective yield on these shares to soar above 12.9%, leading to a halt in the at-the-market share issuance. This development may slow the capital-raising mechanisms essential for bolstering Strategy’s Bitcoin treasury.
This decline has reignited scrutiny from critics, including prominent figures like Peter Schiff, who has labelled STRC a "classic centralized Ponzi," claiming that the structure depends heavily on constant capital raising or liquidating Bitcoin to meet its obligations. Additional scepticism has come from crypto trader DonAlt, who queried why STRC was behaving as if it were a Ponzi scheme.
Bitcoin Acquisition Activity Declines
The challenges facing STRC coincided with a marked slowdown in Bitcoin purchases. In the week ending 8 June, Strategy acquired 1,550 BTC for US$101 million (AU$143.42 million), followed by an additional 1,587 BTC for US$100 million (AU$142 million) the following week, bringing total holdings to 846,842 BTC. These acquisitions were significantly smaller compared to earlier this year. In April, the company made headlines by acquiring 34,164 BTC for US$2.54 billion (AU$3.61 billion) in a single week, and another 24,869 BTC were purchased in May for approximately US$2.01 billion (AU$2.85 billion).
In an effort to meet its dividend obligations, Strategy also disposed of 32 BTC for about US$2.5 million (AU$3.55 million) in June. While this sale was minor in relation to its vast holdings, it underscored that cash requirements could necessitate Bitcoin sales during less favourable funding conditions.
Mixed Analyst Perspectives
Interestingly, not all analysts view the downturn in STRC as indicative of fundamental weaknesses in Strategy’s approach. Jesse Myers, head of Bitcoin strategy at The Smarter Web Company, suggested that the slump may primarily arise from unwinding leveraged positions rather than a reflection of the company’s core stability. Additionally, analyst Scott Melker noted that as dividends are determined by the US$100 (AU$142) liquidation preference, investors acquiring STRC at discounted rates effectively benefit from higher yields.
As the situation unfolds, Strategy’s challenges with STRC raise important questions about the sustainability of its funding model. The ability to maintain capital flow and effectively manage Bitcoin acquisitions will be critical for the company’s future. Investors will be watching closely as Strategy navigates these hurdles while aiming to reaffirm confidence in its long-term Bitcoin investment strategy.
