Key Takeaways:
Strategy's bitcoin-buying engine stalled after its STRC preferred shares closed at $88.59, the longest stretch below $100 par since the instrument launched in July 2025.
Strategy paused the at-the-market issuance of its STRC preferred shares after the stock hit an intraday low of $82.50 and closed at $88.59 on record volume, halting the primary funding channel for its bitcoin purchases.
"Strategy has temporarily halted the STRC ATM program while shares trade below par value, removing the mechanism that converts preferred equity into bitcoin," Jeff Dorman, chief investment officer at Arca, said. He assigned a 70% probability that the company would resort to selling MSTR common shares at dilutive prices.
Volume surged to 10.7 million shares Thursday, more than triple the typical daily turnover of 3.4 million. The STRC security, which carries a 12.9% dividend yield with monthly recalibrations, has now traded below its $100 par value for its most extended period since the July 2025 launch. MSTR common shares fell 4% to $112.53, extending a monthly decline of about 31%.
The funding freeze threatens Strategy's ability to maintain its bitcoin accumulation pace. The company holds roughly $35.2 billion in unencumbered bitcoin against a $40.4 billion equity market capitalization, according to Dorman's calculations, implying MSTR trades at 1.15 times modified net asset value. With bitcoin at about $63,850 — below Strategy's average acquisition price — the company faces a narrowing set of options to restart its capital engine.
Three Paths Forward for Strategy's Funding Model
Dorman outlined three scenarios for resolving the STRC crisis. His base case, assigned 70% probability, involves Strategy gradually selling modest quantities of MSTR common shares at dilutive prices. He said this approach provides STRC investors "a glimmer of hope" while preserving most bitcoin reserves, though MSTR equity "would get hammered."
His secondary forecast, weighted at 25%, calls for more aggressive intervention: liquidating $3 billion to $4 billion in bitcoin holdings. Dorman said this would "buy a ton of time" and benefit STRC holders, despite creating short-term headwinds for bitcoin prices.
The third alternative — what Dorman called the "nuclear" option at 5% probability — would see Strategy suspending dividend payments on its preferred securities. That could leave preferred shareholders recovering just 30 to 40 cents on the dollar and potentially exclude Strategy from capital markets indefinitely, though it would eliminate roughly $1.7 billion in annual cash obligations.
Insider Sales and Bitcoin's Slide Add Pressure
Director Jarrod Patten sold about $9 million in MSTR shares over the past three months, including a transaction this week that netted roughly $200,000 from exercising and selling 1,500 Class A shares. CEO Phong Le, CFO Andrew Kang, and former EVP Wei-Ming Shao also sold millions of dollars in MSTR equity earlier this year.
Strategy already breached its bitcoin-only policy in late May, selling 32 bitcoin for about $2.5 million to cover STRC dividend obligations — the first such sale since it began accumulating the cryptocurrency in 2022. Market maker QCP estimated the company has roughly 7.5 months of liquidity remaining to fund preferred dividend payments.
TD Cowen maintained its Buy rating on MSTR with a $400 price target, characterizing Strategy as evolving from a leveraged bitcoin vehicle into what it described as a "bitcoin capital markets platform." The bank noted that Strategy may prioritize reserve reconstruction and preferred stock stabilization over fresh bitcoin acquisitions during challenging market conditions.
This article is for informational purposes only and does not constitute investment advice.
