Strategy’s Saylor Acknowledges ‘Volatility Test’ as STRC Hits New Low on Bitcoin Weakness

Strategy’s flagship preferred stock tumbled again on Friday when U.S. markets opened, setting another record low as Bitcoin lingered below the $60,000 mark.

After the opening bell, the dividend-paying product known as Stretch (STRC) swiftly fell to a new low of $71.25 before firming to $75.30, a nearly 0.5% decrease on the day, according to Yahoo Finance. That marked a nearly 25% decline from the level at which STRC is engineered to trade.

The preferred stock’s recent weakness has intensified focus on the Bitcoin-buying firm’s capital structure, with analysts calling on Strategy Executive Chairman and co-founder Michael Saylor to shore up more cash to withstand the company’s recurring costs.

In an X post, Saylor acknowledged that “volatility tests every capital structure,” while emphasizing that the company remains focused on the leading digital asset by market cap, “disciplined capital allocation, credit quality, and long-term value creation.”

Over the past week, Bitcoin’s price has fallen roughly 5% to $60,130, a slight recovery compared to a 21-month low of $58,188 on Thursday, according to CoinGecko. The period has been marked by intense outflows from exchange-traded funds and a looming options expiry, with $10.6 billion worth of positions drawing closer to settlement on Deribit.

On Thursday, Andy Baehr, managing director of asset management crypto trading firm GSR, told Decrypt that market observers are trying to clock Strategy’s cash burn as STRC’s volatility tests the faith of swaths of investors who bought the product likened to a bank account.

“They suspect that Michael Saylor has painted himself into a corner, and that his tablets of commandments may crumble,” he said. “I reckon that most [STRC] buyers did not sign up for a 25% drawdown. They came for yield.”

In less than a year, Strategy has issued more than $10 billion worth of STRC, resulting in what CryptoQuant described this week as ballooning costs. The company had $2.25 billion to manage dividends and debt in January, but since then, its cash cushion has worn relatively thin.

The South Korean analytics platform noted that, as Strategy’s stash of Bitcoin trades underwater, any sales beyond its liquidation of 32 Bitcoin announced earlier this month could crystalize losses for common shareholders and erode shareholder value.

The company’s stock fell as low as $82.33 before momentarily turning positive on the day. At $85.80 apiece, the company’s shares had ticked up roughly 0.5% on Friday.

At Bitcoin’s recent price, Strategy’s stockpile of 847,363 BTC was worth close to $51 billion, or around $13.1 billion underwater. 

Nic Carter, founding partner of investment firm Castle Island Ventures, posited in an X post on Thursday that Strategy will need to hike STRC’s dividend for an eighth time since its introduction, assessing the product through the lens of a junk bond investor.

Although STRC currently offers an 11.5% annual dividend, the implied yield becomes higher for investors as it drifts further away from its $100 par value. At its current level, investors are essentially demanding more than 15% returns to gain exposure to the product.

“Because the structure is unsustainable and requires the perpetual monetization of the common equity, which is trading near par,” he added, “it will continue to trade at a discount unless Strategy hikes the yield on STRC to the appropriate range, which is 15-20% in my opinion.”