Summary
- Strategy's stock fell to a four-month low on Friday, with its leading preferred stock also declining.
- Analyst Mark Palmer from Benchmark-StoneX remarked that the drop in STRC is not a significant issue, suggesting the company could raise its dividend to boost demand.
- Following the announcement that Strategy sold 32 Bitcoin for $2.5 million this week, the firm’s Bitcoin holdings are currently valued at $13.7 billion below their purchase price.
The impact of the ongoing cryptocurrency downturn was felt by Strategy on Friday as the shares of the Bitcoin-acquiring company fell to their lowest point in four months, coinciding with Bitcoin's price dropping below $60,000.
The company's stock, based in Tysons Corner, Virginia, fell to as low as $114, marking the lowest price since early February, according to Yahoo Finance. However, it managed to recover slightly to $120 by the end of the trading day, although this still represented a nearly 7% decline.
Bitcoin's price dipped to $59,227, according to data from CoinGecko, reaching its lowest level since 2024, before climbing back to $60,311. This reflects a 5% decrease over the past 24 hours.
Under the leadership of co-founder and Executive Chairman Michael Saylor, the company faced criticism after it sold Bitcoin for the first time since 2022. This move was intended to “inoculate” the market against the idea that Strategy might reduce its holdings to facilitate dividend payments on its primary preferred stock.
The preferred stock, known as Stretch (STRC), which currently provides an 11.5% annual dividend paid monthly, experienced fluctuations on Friday. It fell by 3.6% to $93, moving further away from its intended $100 par value.
STRC has seen prices drop as low as $90.38 since its introduction last July as a means to raise funds for Bitcoin purchases. After its $2.5 billion IPO, STRC's market capitalization surged to $9.55 billion, alongside its ongoing expenses.
Although the decline in STRC may exert some pressure on the Bitcoin-acquiring company, Palmer noted that this decrease “isn’t a real concern for Strategy,” during a discussion with Decrypt on Wednesday, prior to the latest drop in preferred stock prices.
“The pullback in STRC is well within the range we’d expect,” he stated, recalling a similar situation last month when STRC fell to approximately $97 before rebounding to around $99 shortly thereafter.
Strategy has indicated that when STRC trades above its $100 par value, it plans to issue more preferred stock and increase its Bitcoin purchases. Conversely, when it trades below that value, the company has suggested that it could raise STRC’s dividend to stimulate demand.
“Its monthly rate-reset mechanism is designed specifically to return the price to par,” Palmer explained, adding that the dividend has remained steady over the past four months.
Other analysts have characterized Strategy's sale of 32 Bitcoin for $2.5 million as inconsequential in light of the company’s total Bitcoin holdings valued at $50.4 billion. However, this action stood in stark contrast to Saylor's long-held belief in a buy-and-hold strategy.
On Monday, when Strategy announced its Bitcoin sale, it disclosed that it had invested $63.9 billion in the digital currency since its transformation years ago. Reflecting earlier paper losses, the firm’s holdings were reported to be $13.7 billion underwater on Friday.
Amid pressures on its holdings last year, Strategy allocated $2.25 billion to ensure continued distributions on STRC. Nevertheless, the company reduced this reserve by 61% when it repurchased debt last month.