MicroStrategy stock falls as bitcoin bet and STRC weaken

MicroStrategy shares dropped 4.8% on Tuesday, leaving the stock down more than 30% so far this year amid pressure on both its common shares and preferred securities.

The company holds about 847,363 bitcoin, roughly 4% of the total supply, with those holdings valued at more than $50 billion. MicroStrategy continued buying through the recent weakness, adding 520 coins at an average price of $67,068, which keeps its average purchase price near $75,651 per coin.

Investor concern has centered on MicroStrategy’s funding approach, which relies heavily on issuing common and preferred stock to finance bitcoin purchases. The firm does not generate operating income from its bitcoin holdings and has used equity and preferred offerings to fund acquisitions and dividend commitments.

Attention has focused on Stretch (STRC), a variable-rate preferred that pays an 11.5% dividend on a $100 face value. STRC slipped below par and was trading around $88 after briefly approaching $100 in late May. The security’s dividend-adjustment structure is designed to move pricing toward $100, but recent trading has tested that mechanism.

MicroStrategy reports about $15 billion of preferred stock outstanding, with STRC representing roughly $9 billion of the total. Preferred dividend obligations across those securities total about $1.7 billion a year, increasing the company’s reliance on external capital markets.

Bitcoin fell about 3% on Tuesday to near $62,000 and has dropped almost 20% over the past month, reducing the market value of MicroStrategy’s holdings. Market participants also pointed to leveraged positions tied to the preferred securities that may have amplified selling through margin-related unwinds.

To boost liquidity, the company added $300 million in cash recently, bringing cash reserves to about $1.4 billion, which MicroStrategy estimates provides roughly 10 months of coverage for current preferred dividend payments. Executives continue to maintain the strategy rests on bitcoin appreciation exceeding the cost of preferred dividends over time.

Benchmark analyst Mark Palmer wrote, “The term ‘peg’ implies the existence of a fixed exchange relationship. Stablecoins such as TerraUSD, USDC, and USDT were designed to maintain a defined value relative to another asset, typically the US dollar. STRC has no such obligation. MicroStrategy’s objective has been to support STRC’s trading at a level near $100, not to guarantee it.”