MicroStrategy Urged to Halt Bitcoin Buys as STRC Trades 16% Below Par
MSTR•MicroStrategy's perpetual preferred shares trade about 15% below $100 par value, pressuring its funding model that underpins Bitcoin purchases. Analyst projects $2.8B in reserves required to restore 24 months of dividend coverage, noting cash reserves have fallen to $1.4B despite the firm's 847,363 BTC holdings worth roughly $53B.
1. Preferred Shares Discount Pressures Funding
MicroStrategy’s variable-rate perpetual preferred stock is trading near $84, about 16% below its $100 par value, causing the effective yield to exceed 13% and increasing the company’s financing costs through its preferred share vehicle.
2. Reserves Shortfall and Dividend Coverage
Analysts calculate the firm needs approximately $2.8 billion in cash reserves to rebuild 24 months of dividend coverage against its $1.2 billion in annual obligations, while current reserves have fallen to about $1.4 billion.
3. Bitcoin Treasury Losses Highlight Liquidity Risks
The company’s Bitcoin treasury of 847,363 BTC was acquired for about $64.1 billion and is now valued near $53 billion, representing an unrealized loss close to $11 billion and raising doubts about its capacity to cover dividend and debt commitments without further equity issuance.
