MicroStrategy’s Preferred Stock STRC Progresses as Bitcoin Investments Continue

Peter Schiff has noted that MicroStrategy’s preferred stock, Stretch (STRC), is nearing its $100 par value, demonstrating a recovery. However, he emphasizes that the company has lost an important funding channel that previously supported its Bitcoin acquisitions.

Despite this setback, MicroStrategy has continued investing in Bitcoin, utilizing funds acquired from recent sales of common stock to facilitate its latest transactions.

Buybacks and Bitcoin Gains Contribute to STRC’s Recovery

During an episode of his podcast aired on October 2, Schiff, known for his critical stance on Bitcoin, mentioned that STRC is trading at approximately $99.4—a recovery that has taken him by surprise.

Schiff attributes the stock’s upward movement to MicroStrategy’s regular STRC buybacks coupled with a recent rally in Bitcoin prices, which may have bolstered investor confidence or prompted some short covering.

Earlier this year, the preferred stock price dipped to around $75, which CEO Phong Le attributed to unexpected leverage issues within the company.

Referencing Executive Chairman Michael Saylor, Schiff expressed concerns that this rebound has not reestablished the critical funding avenue previously available to MicroStrategy.

“There’s no way that he’s going to be able to start selling more Stretch; that means he’s not going to be able to raise money to really start buying more Bitcoin,” Schiff said.

According to Schiff, while MicroStrategy has sufficient cash reserves to sustain STRC dividends for a limited period, it lacks the necessary mechanisms to pursue further Bitcoin acquisitions.

Saylor, on the other hand, has highlighted a reduction in stock volatility, noting that STRC’s 30-day historical volatility was recorded at 9% as of October 2, lower than the 10% volatility for the SPDR S&P 500 ETF (SPY).

Common Stock Has Primarily Supported Bitcoin Purchases Since May

Recent filings from MicroStrategy corroborate Schiff’s claims, indicating that the company last issued STRC via its at-the-market program between May 11 and 17, which generated approximately $1.95 billion.

Since then, the remaining capacity for STRC has consistently been reported at around $17.51 billion across all filings, signaling no additional shares have been issued.

Following a hiatus in Bitcoin purchasing during the summer, where the company sold crypto to fund dividends and buybacks, MicroStrategy resumed its acquisitions in late August, relying primarily on alternative funding sources.

In its latest activities, the company sold class A common stock (MSTR) to acquire 4,603 BTC that week, followed by an additional 1,665 BTC late in September. Additionally, $75.7 million was drawn from its USD Cash reserves to buy 950 BTC.

The proceeds from common stock sales have been reallocated to repurchasing STRC shares, with $103.5 million utilized for this purpose between September 21 and 27.

As of September 27, MicroStrategy reported a substantial USD Reserve of $5.02 billion, intended to support preferred dividends and debt interest obligations.