Strategy to request investor consent for daily dividend distributions on preferred shares
The company is introducing daily dividend payments across its preferred stock portfolio, beginning with STRC's transition to the new payment structure in November.
Strategy is pursuing shareholder consent to transition its quartet of preferred stocks, which includes STRC, toward a daily dividend distribution model while maintaining their existing dividend rates and aggregate payout amounts unchanged.
According to a filing submitted to the US Securities and Exchange Commission on Friday, the company's board of directors greenlit the proposal on Thursday. A virtual special meeting has been scheduled for Oct. 28, when shareholders will cast their votes on these amendments.
Should the measure gain approval, every calendar day would be designated as a dividend record date, with payments distributed on the subsequent business day. STRC is slated to transition to this new framework initially, with the first daily dividend distribution anticipated for Nov. 2.
The remaining preferred stocks—STRF, STRK and STRD—would implement the new schedule in January, with their inaugural daily payments projected for Jan. 4. These amendments would become operative once Strategy submits updated certificates for the preferred stocks to Delaware state authorities.
Strategy adopts approach pioneered by Strive for daily distributions
The proposal from Strategy emerges months after Strive, another Bitcoin treasury company, transitioned its SATA preferred stock to a daily dividend payment structure, establishing itself as the inaugural public company to implement this model.
In May, Strive disclosed that SATA would commence distributing dividends on each business day starting June 16 at an annual rate of 13%, while simultaneously announcing the elimination of all outstanding debt during the first quarter.
Strategy's proposed framework differs from Strive's business-day approach by designating every calendar day as a record date, with dividends payable on the next available business day.
According to BitcoinTreasuries.NET, Strive maintains a position of 26,355 Bitcoin, while Strategy's holdings total 846,000 BTC.
Strategy's chief executive attributes STRC decline below $100 to leverage
Though Strive established the precedent for daily dividend payments among public companies, Strategy originated what the company terms "digital credit," which consists of preferred securities engineered to produce income through a capital structure centered on the company's Bitcoin holdings.
STRC, a central component of Strategy's digital credit approach, has experienced substantial price volatility throughout this year. The stock plummeted well beneath its $100 stated value in June, reaching an intraday nadir of $71.25 on June 26, based on data from Yahoo Finance.
During an appearance on Natalie Brunell's Coin Stories podcast earlier this week, Phong Le, Strategy's CEO, explained that the downturn resulted from greater-than-anticipated leverage entering the STRC market. According to Le, certain investors secured loans against their Bitcoin holdings at reduced rates to purchase STRC, profiting from the differential between their borrowing expenses and STRC's dividend yield.
As Bitcoin's valuation declined, investors who had utilized their holdings as collateral encountered pressure to either contribute additional collateral or liquidate their STRC positions, Le explained.
We did not expect the amount of leverage that came into the system. And so that's a lesson learned, next time around.
According to Le, Strategy aims to avert similar unwinding events by preserving substantial US dollar reserves and implementing a policy enabling the company to buy back STRC when trading occurs below its $100 stated value. He further emphasized the company's objective to draw more long-term stakeholders, with particular focus on institutional investors.
STRC has subsequently rebounded to approximately $98.41, approaching Strategy's stated objective of maintaining the security's price between $99 and $100. The security presently features a 12% variable annual dividend rate.