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Shares of Strategy (previously known as Microstrategy), the bitcoin-accumulation firm founded by Michael Saylor, fell sharply on Tuesday and were on track for their lowest close in more than two years.
The stock dropped 4.8% in afternoon trading and is now down more than 30% this year, reflecting renewed pressure across both its equity and preferred securities.
The decline comes as concerns build around the company’s funding model, which relies heavily on issuing equity and preferred stock to finance continued bitcoin purchases.
Strategy currently holds 847,000 bitcoin, roughly 4% of the total supply, with total holdings valued at over $50 billion.
The company continues to accumulate bitcoin despite market weakness, recently purchasing 520 coins at an average price of $67,068, bringing total holdings to 847,363 bitcoin acquired at roughly $75,651 each.
Preferred stock weakness undermines funding strategy
Investor anxiety has intensified around Strategy’s preferred securities, particularly its variable-rate preferred known as Stretch (STRC).
The instrument, which pays an 11.5% dividend on a $100 face value, has fallen below par and was trading around $88 on Tuesday after briefly reaching near $100 in late May.
The weakness is significant because the structure is designed to trade close to $100 through monthly dividend adjustments.
However, recent declines have raised doubts about the effectiveness of that mechanism and its ability to support future issuance.
The preferred stock decline also affects Strategy’s ability to raise new capital.
With pricing well below par, issuing additional shares becomes more challenging and potentially dilutive.
Preferred dividend payments across the structure now total about $1.7 billion annually, according to company data, while Strategy has about $15 billion of preferred stock outstanding, with Stretch accounting for roughly $9 billion of that total.
Benchmark analyst Mark Palmer addressed recent concerns, writing that STRC had been affected by market dynamics rather than a structural breakdown:
“The term ‘peg’ implies the existence of a fixed exchange relationship. Stablecoins such as TerraUSD, USDC, and USDT were designed to maintain a defined value relative to another asset, typically the US dollar. STRC has no such obligation. Strategy’s objective has been to support STRC’s trading at a level near $100, not to guarantee it,” he wrote.
Bitcoin volatility and leverage concerns add pressure
The broader weakness in Strategy’s structure has been compounded by a decline in bitcoin prices, which fell about 3% on Tuesday to around $62,000 and are down nearly 20% over the past month.
The company generates no operating income from bitcoin and relies on capital markets to fund both purchases and preferred dividend obligations.
Recent volatility has raised concerns about the sustainability of that model, particularly as annual preferred dividend payments approach $1.7 billion.
Strategy has taken steps to strengthen liquidity, recently increasing cash reserves by $300 million to $1.4 billion, providing roughly 10 months of dividend coverage.
However, this has not been enough to stabilize sentiment, and shares of both the common and preferred stock continue to decline.
Analysts also noted that leveraged positions tied to the preferred may have amplified the selloff, with margin-related unwinding adding pressure to already weak trading conditions.
Despite criticism, Strategy maintains that its approach assumes bitcoin will appreciate at a faster rate than the cost of preferred dividends, allowing equity issuance to generate long-term value.
So far, however, falling bitcoin prices and rising funding costs have challenged that thesis.
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