Assessing Strategy’s New Perpetual Stride Preferred Shares

Summary (Micro)Strategy’s Bitcoin purchases have dramatically slowed down so far in June. Through a $1 billion capital raise, Strategy has given the market a third preferred share option, Perpetual Stride Preferred Stock, for income investors with higher risk tolerance. STRD pays an effective yield of 11.3%, though dividend payouts are not mandatory. I still like STRF far better due to seniority and cumulative, mandatory payouts, but I think STRD is also worth a look. After purchasing Bitcoin ( BTC-USD ) at a blistering clip for much of April and May, Strategy ( MSTR ) has slowed down the company’s purchases of BTC during the month of June. Through June 11th, Strategy has reported buying just 1,750 BTC at a total cost of $185 million: Reported Periods (Strategy, Author’s Chart) For just about any other company in the public equity markets, $185 million in just a couple of weeks would be significant. But for Strategy, this is perhaps underwhelming, given the company has averaged about $4 billion per month going back to September. What is also interesting, in my view, is that both of the announced purchases have come with funding through Strategy’s preferred stock offerings via the MicroStrategy Incorporated 10.00% SER A PERPETUAL STRIFE PFD STK ( STRF ) and MicroStrategy Incorporated 8.00% SERIES A PERPETUAL STRIKE PFD ( STRK ) rather than through the company’s common stock. Simultaneous to these preferred share-driven BTC acquisitions, Strategy announced the offering and pricing of a third perpetual preferred share, this latest one is the Perpetual Stride Preferred Stock ( STRD ). In this article, I’ll detail how STRD is different from Strategy’s previous two preferred share offerings and assess whether income investors should consider adding STRD to their portfolios. STRD Offering Details On June 6th, Strategy announced the offering of 2,500,000 shares of STRD perpetual preferred shares with a yield of 10%. Subsequent to the offering, Strategy sold 11,764,700 shares at an offering price of $85 per share. The STRD offering raised $1 billion for the company, with expected net proceeds of $979.7 million after underwriting commissions. Like the two other perpetual preferred shares, STRD has a liquidation preference of $100. Which means the effective yield on STRD would actually be closer to 11.3% at the closing price of $88.35 on June 11th assuming Strategy declares the dividend and pays shareholders. That last point is the critical difference between STRD and both STRK/STRF. Comparison of Strategy Preferred Stocks Unlike STRK and STRF, STRD is not a mandatory dividend. This makes STRD the riskiest of the three offerings, but it’s a terrific way to raise capital from Strategy’s vantage, since it isn’t dilutive to common stockholders. The latter of which saw shares outstanding grow by over 50% year over year as of the quarter ended March, with even more dilution through the ATM to fund BTC purchases subsequent to Q1. Still, assuming Strategy wants to ever be able to raise capital again in this market, I would expect the company to declare the STRD dividend each quarter. The breakdown of the key differences between the shares as I see it is below: Share Comparison STRD STRF STRK Coupon 10% 10% 8% Cumulative? No Yes Yes Mandatory Dividend? No Yes Yes MSTR Convertible? No No 10:1 Preferred Seniority Rank 3 1 2 Liquidation Preference $100 $100 $100 Share Price Close as of 6/11/25 $88.35 $104.70 $106.72 Effective Yield 11.32% 9.55% 7.50% Source: Strategy From where I sit, Strategy has actually done a pretty incredible job of creating preferred share structures that appeal to different investor types. All of these preferred shares are ultimately backed by the company’s Bitcoin on the balance sheet. But one need not believe in the future price appreciation of BTC to find these shares appealing. Given the seniority rank of STRF compared to the other preferred stocks, I view STRF as the lowest-risk and most suitable for income investors. The shares have a mandatory dividend that are cumulative. Meaning, if Strategy misses a payment, STRF shareholders are still owed the payout. Since STRF is not convertible to MSTR shares, the upside in STRF is more limited than that of STRK in the event Bitcoin rallies significantly and drags MSTR with it. But even at a 9.55% effective yield, STRF is quite attractive given Strategy’s collateralization ratio. STRK is perhaps more suitable for investors who care less about the effective yield and more about the total return of the shares. At a $1,000 MSTR share price, STRK becomes interesting on the capital appreciation potential given the 10:1 convertibility to the common stock. However, purely as an income product, I think STRK is less appealing than STRF due to the seniority rank and lower effective yield. STRD is perhaps the most interesting preferred stock of the three offerings because it’s the highest risk and currently has the highest yield. For income investors who like sure things, I’d probably avoid this one. But for income-investors who have a higher risk-tolerance, I think STRD is worth a look. The biggest reason for that – aside from Strategy’s collateralization ratio – is that the market has already taken the more senior preferred shares above liquidation preference. So the effective yields when buying those funds on secondary are actually lower than the 10% and 8% coupons from the offering. Thus, if you still want a Strategy preferred that yields 10%, STRD is your only option currently. Can Strategy Actually Pay These Shareholders? Ultimately, the investment case for any of these preferred stock shares lies in the ability Strategy has to actually pay shareholders back. At current Bitcoin price levels, my view is that there is low risk in holding these shares today. However, that view is predicated on the notion that Strategy exhibits a willingness to lock in some of the company’s unrealized Bitcoin gains and pay its preferred share dividends with the proceeds of those sales. Even if Strategy stops raising capital through the preferred instruments going forward, the company has an annualized coupon obligation of over $300 million based on my calculation of the combined outstanding shares: Preferred Payouts STRK STRF STRD Shares 11,306,243 9,412,070 11,764,700 Annual Coupon Obligation $90,449,944 $94,120,700 $117,647,000 Source: Strategy filings, Analyst’s calculations Of course, Strategy could simply not pay the $118 million STRD dividends over the next 12 months. But again, I think doing so would irreparably damage the company’s ability to raise capital. My view is it’s essentially a mathematical certainty that Strategy will have to start selling Bitcoin to pay these preferred obligations. Keep in mind, the company’s software business loses money and cannot support these preferred share payouts. Data by YCharts After a gross profit of $326 million on a trailing twelve-month basis, Strategy’s bottom-line goes negative when factoring in the combined $392 million on SG&A and R&D expenses. So again, Strategy cannot pay these dividends from the operations of the software business. The company either has to keep raising from new investors to pay the old ones (there is a word for this) or it has to realize gains in BTC appreciation. My vote is the latter. Major Risk Of course, the risk here is that Strategy is one of the biggest BTC holders in the market at this juncture. If the company starts selling, investment demand through the spot ETF products could sour and Strategy could take the market down essentially by itself. But given the current market value of Bitcoin, I think longing STRD is worth the risk given Strategy has $11.5 billion in convertible debt and preferred share obligations against $63 billion in Bitcoin holdings. Closing Summary In my opinion, STRF is hands-down the best choice for income-focused investors who want a high-yield offering with some margin of safety. With STRF, the dividends are mandatory, cumulative, and are senior to the other two offerings. Meaning, if Bitcoin goes into a deep bear market and Strategy is forced to sell BTC to make preferred payments, STRF shareholders are paid back before STRK and STRD shareholders. While STRD is clearly the riskiest of the three offerings because there is no guarantee of any dividends at all, I do expect Strategy to pay them and believe the market will bring STRD shares more in line with the liquidation preference of $100 as it did with both STRK and STRF; each of which now trade at premiums to liquidation preference. Thus, at a share price currently trading under $89, I think STRD is somewhat easy to justify on the potential price appreciation alone. As I noted in my last coverage of MSTR, I’m personally long STRF. I am now also long STRD to a smaller degree. My approach to STRD is quite simple; I’m long the shares at $88 and plan to sell closer to $95-96. At that point, I’d entertain rolling proceeds into STRF for the mandatory payment. I remain of the view that Strategy’s Bitcoin flywheel could have devastating consequences in a Bitcoin bear market, and I view STRF shares as insurance against my BTC position. The price of that insurance is the spread between Bitcoin capital gains that I may miss out on and the 11% effective yield at my STRF cost basis.

Source: Seeking Alpha