Strategy, the corporate entity known for its aggressive Bitcoin accumulation strategy, has injected fresh capital into its digital asset treasury through a new round of preferred stock sales. The company raised over $206 million by issuing its Stretch preferred stock, designated as STRC. This capital deployment enables the acquisition of approximately 2,536 Bitcoin at an average price of $81,471 per coin. The move underscores the firm's continued reliance on equity-based financing to expand its holdings.
The latest funding round follows a strategic pause in acquisitions that coincided with the release of first-quarter earnings. During the earnings period, the company reported a $12.7 billion net loss driven by unrealized markdowns on its Bitcoin portfolio under new accounting standards. Despite the reported loss, management indicated that the pause was temporary and that the company remains committed to its long-term accumulation goals.
Michael Saylor, the executive chairman of Strategy, addressed investor concerns regarding the company's liquidity and dividend obligations. He clarified that the company may selectively sell Bitcoin in the future to fund dividend payments on its STRC preferred stock. Saylor emphasized that such sales would be part of standard capital management and would not represent a fundamental shift in the company's strategy to remain a net buyer of Bitcoin.
Why Is The SEC Being Asked To Investigate STRC Marketing?
The issuance of STRC has drawn sharp criticism from financial commentator Peter Schiff, who has called for a U.S. Securities and Exchange Commission investigation into the company's marketing practices. Schiff argues that Strategy's promotion of STRC as a suitable investment for retirees seeking low-risk income violates antifraud rules. He contends that the product's high volatility and dependence on Bitcoin price action make it unsuitable for conservative investors.
Schiff characterizes STRC as a classic centralized Ponzi scheme because it lacks organic earnings to support its distributions. He asserts that the company relies on fresh capital inflows and the sale of Bitcoin holdings to sustain payouts to preferred shareholders. According to Schiff, this structure exposes investors to the risks of a non-yielding asset while disguising it as a stable income vehicle.
The economist suggests that retirees who purchased the stock based on conservative marketing language may have grounds for future lawsuits if losses materialize. He distinguishes his critique of STRC from his long-standing criticism of Bitcoin itself, labeling the former a centralized mechanism run by the company rather than a decentralized network.
How Do Executives Defend The Preferred Stock Model?
In response to the regulatory scrutiny, Saylor has defended the STRC model by distinguishing it from a pyramid scheme. He compares the company's approach to a developer business model that leverages market liquidity to support its operations. Saylor asserts that Strategy maintains sufficient liquidity to absorb large transactions without causing significant price impact on its Bitcoin holdings.
The STRC instrument is structurally designed to trade near a $100 par value, with variable dividend payouts that adjust based on market conditions. Yields increase when the stock trades below par to attract investors, and decrease when the price is at or above the target, allowing capital to be redirected toward Bitcoin purchases. The stock currently yields 11.5 percent annually, reflecting strong market participation in this financing vehicle.
Strategy has also proposed shifting STRC dividends from monthly to semi-monthly payments to enhance liquidity and price stability. This adjustment aims to reduce reinvestment lag and support the stock's price target. CEO Phong Le has described STRC as an innovation that combines the upside of a Bitcoin-backed security with the stability of a traditional credit product.
What Is The Impact On Bitcoin Holdings And Analyst Views?
Strategy has resumed Bitcoin acquisitions following the brief pause, purchasing an additional 535 Bitcoin for approximately $43 million between May 4 and May 10. The company's total holdings now stand at 818,869 Bitcoin, with an average cost basis of $75,540 per coin. At current prices above $81,000, the company's holdings are in profit, with total acquisition costs reaching approximately $61.86 billion.
The latest acquisition was funded primarily through at-the-market sales of the company's common stock and its perpetual preferred stock. This funding strategy allows the company to acquire Bitcoin without issuing traditional debt that requires maturity dates. The company has outlined a capital plan targeting $84 billion in funding through equity and convertible notes by 2027.
TD Cowen has raised its price target for Strategy to $395, citing the company's shift toward STRC issuance as a more capital-efficient method for Bitcoin accumulation. The analyst firm noted that this structural change reduces dilution pressure on common shareholders and improves the company's BTC Yield metric. TD Cowen projects Bitcoin could reach $140,000 by the end of 2026, with quarterly purchases of approximately $4 billion.
The introduction of STRC has also expanded access for international investors, with 21Shares launching a Strategy Yield ETN on the London Stock Exchange. This product provides UK investors with fee-free access to the high-yield preferred shares, which are backed by the company's massive Bitcoin holdings. The listing represents a significant evolution from the company's earlier strategy of using common share issuance to fuel Bitcoin buys.