MicroStrategy’s Preferred Stock Grows to $15.5B While Dividend Yield Hits 11.5%
MSTR•MicroStrategy’s preferred stock expanded to $15.5 billion by May 26, carrying an 11.5% dividend yield and $1.5 billion in annual payments. These developments followed a $1.5 billion repurchase of convertible senior notes, reducing debt from $8.2 billion to $6.7 billion while tightening capacity to fund dividend obligations.
1. Arca CIO’s Warning on Capital Structure
Jeff Dorman, CIO of Arca, criticized MicroStrategy’s capital structure for carrying roughly $15 billion of preferred stock obligations that yield 11.5% and cost $1.5 billion annually, arguing that recent actions have constrained liquidity for dividend and debt servicing.
2. Convertible Notes Repurchase
MicroStrategy repurchased $1.5 billion of 0% convertible senior notes due 2029 for about $1.38 billion, reducing outstanding debt from $8.2 billion to $6.7 billion at an 8% discount, using cash raised earlier to buffer default risk.
3. Preferred Stock Growth and Dividend Costs
The company issued $2.0 billion of Variable Rate Series A Perpetual Stretch Preferred Stock and $84 million of common stock, driving preferred outstanding up from $13.5 billion on May 5 to $15.5 billion by May 26 and increasing dividend yield from 9% to 11.5%.
4. Management’s Response and Reserve Plans
Management defends the preferred structure as durable, citing 43 years of dividend coverage at flat Bitcoin prices and a 2.3% annual appreciation breakeven, while planning to shift to semi-monthly dividends and rebuild its $871 million USD reserve over time.
