Microstrategy’s Preferred Stock Hits $15.5B with 11.5% Dividend Yield
STRC•Jeff Dorman warns Microstrategy's $15.5B preferred stock now carries $1.5B in annual dividends after the company issued an extra $2B of preferred in the past weeks. Preferred yield climbed from 9% to 11.5% while convertible note principal fell from $8.2B to $6.7B after a $1.5B repurchase at an 8% discount.
1. Capital Structure Warning
Jeff Dorman warns that the company’s $15.5 billion in Variable Rate Series A Perpetual Stretch Preferred Stock carries roughly $1.5 billion in annual dividends, creating rising financing costs and pressuring cash flows for bitcoin and preferred shareholders.
2. Recent Debt Buyback and Preferred Issuance
On May 26, the company repurchased $1.5 billion of 0% convertible senior notes due 2029 at an 8% discount, reducing outstanding principal from $8.2 billion to $6.7 billion, while issuing $2.0 billion of new preferred stock and $84 million of common shares to acquire 24,869 bitcoin.
3. Management’s Defense
Executives maintain the preferred structure offers 43 years of dividend coverage if Bitcoin growth remains at 0% and requires only 2.3% annual BTC appreciation to sustain payments. They also plan to shift dividends to semi-monthly payments and rebuild an $871 million USD reserve to support preferred dividends and interest on debt.
