Strategy proposes daily dividend accrual for preferred stocks STRF, STRC, STRK, and STRD, aiming to enhance liquidity and reduce volatility.
Strategy Advocates for Daily Dividend Accrual
Bitcoin treasury firm Strategy has put forward a proposal for daily dividend accrual for its preferred stock classes: STRF, STRC, STRK, and STRD. This initiative, announced by executive chairman Michael Saylor, aims to have dividends accrue every calendar day, including weekends and holidays, with payments processed on the next business day.
The company filed a preliminary proxy on the same day, with a definitive version expected by October 5. Shareholders will vote on the proposal on October 28, and if approved, the transition for STRC will begin on November 1, while the other three stocks will switch on January 1.
Transition to Daily Payments
Currently, STRC has 24 record dates each year. Under the new plan, all four classes of stock will move to daily accruals, significantly increasing payment frequency for those that usually pay quarterly. President and CEO Phong Le noted that this change would enhance price stability and liquidity.
Saylor emphasized that reducing the duration of the financial instrument and increasing the frequency of adjustments can lead to lower volatility, which is beneficial for market participants. Historical data showed that STRC’s stock price dropped less before dividend payments after switching to semi-monthly payments, indicating a positive effect from increased payment frequency.
Potential Impact on Shareholders and Market
Strategy believes that the proposed changes will improve month-end valuations for fund managers and create a more stable option for institutional cash reserves. The preferred shares are crucial to the firm’s funding strategy, with recent actions including a $139 million acquisition of STRC and a halt in Bitcoin purchases to focus on liquidity. The firm has also raised $2 billion through stock sales and may sell up to $1.25 billion in Bitcoin to fulfill obligations. Last week, Strategy added $76 million to its Bitcoin holdings, nearing its peak from June.
