Strategy's Chief Executive Plans Shift to Preferred Stock for Bitcoin Acquisitions

Strategy's Chief Executive Plans Shift to Preferred Stock for Bitcoin Acquisitions

Strategy's CEO Phong Le reveals the firm plans to pivot from common stock issuance toward preferred stock offerings for Bitcoin purchases, while dismissing interest in buying rival Bitcoin treasury companies.

According to CEO Phong Le, Strategy, a Bitcoin treasury firm, plans to increasingly rely on preferred stock offerings to fund its Bitcoin acquisitions, marking a departure from its previous approach of selling common stock.

"We will start to transition from equity capital to preferred capital," Le stated during an appearance on Bloomberg's "The Close" program on Wednesday.

Known as Stretch (STRC), Strategy's perpetual preferred stock was introduced in July and targets investors seeking consistent returns through an annual dividend exceeding 11%.

The company's fourth perpetual preferred stock offering, STRC was created specifically to fund Bitcoin (BTC) acquisitions. This approach serves as a substitute for issuing additional common shares, which would otherwise dilute the value of existing stock.

Le acknowledged that the preferred stock product will require "take some seasoning" along with marketing efforts to convince investors of its merits, though he expressed confidence that "throughout the course of this year, we expect Stretch to be a big product for us."

STRC reaching $100 threshold could trigger new Strategy offerings

At Wednesday's close of trading, STRC returned to its par value of $100 for the first time since the middle of January, an achievement Le described as the "story of the day."

The preferred stock had fallen below $94 during the earlier part of this month when Bitcoin plummeted beneath $60,000, but with STRC now back at par — the threshold Strategy has established as its floor — the firm could resume issuing new shares to finance additional Bitcoin acquisitions.

Over the past 24 hours, Bitcoin has remained relatively unchanged, hovering around $66,800, a decline from its intraday peak above $68,000.

Acquiring rival Bitcoin treasuries would be a "distraction," says CEO

Industry analysts have cautioned that the cryptocurrency treasury sector is growing increasingly saturated as multiple firms vie for a limited pool of investors, resulting in situations where some companies' digital asset holdings exceed the market value of the companies themselves.

Under these circumstances, certain analysts have suggested that rival treasury companies might consider purchasing undervalued competitors to acquire Bitcoin at discounted prices, but Le indicated that Strategy has no appetite for such acquisitions.

"I think in any new market, whether it be electric cars or AI or SaaS software, you want to focus on your core product," Le explained. "I think it would be a distraction to go buy, at a discount to net asset value, another digital asset treasury company."

Trading concluded on Wednesday with Strategy (MSTR) shares declining more than 5% to close at $126.14.