PiCK
Strategy Spends $950 Million Buying Preferred Stock Over Two Months as STRC Nears $100 Par
Summary
- Strategy bought about 9.96 million shares of its preferred stock, Stride (STRC), for $950 million over the past two months.
- Stride has risen from around $70 to the high $90s, putting a recovery of its $100 par value within reach.
- About $765 million of the roughly $950 million used to buy Stride came from proceeds from common-stock sales, and that dynamic is seen as part of the reason the common stock has fallen 60% over the past year.
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Strategy, the world’s largest corporate holder of Bitcoin, has spent $950 million buying back its own preferred stock over the past two months.
Bloomberg reported on Sept. 16 that Strategy bought about 9.96 million shares of Stride (STRC) for $950 million between July 20 and Sept. 13. That was about 18% of total Stride trading volume during the period.
Stride is a perpetual preferred stock that Strategy has issued since the second half of last year to help finance Bitcoin purchases. Chairman Michael Saylor has said he wants to make Stride a sustainable financing instrument.
Still, Stride fell to around $70 after Strategy sold part of its Bitcoin holdings in June. The stock has since climbed into the high $90s on the back of Strategy’s large-scale purchases, putting it within sight of regaining its $100 par value.
Restoring Stride to par is central to Strategy’s funding strategy. If the stock trades well below $100, issuing new preferred shares becomes more burdensome for existing shareholders, making it harder to use the instrument for fundraising.
The problem is that much of the money used to support Stride came from common-stock sales. Bloomberg reported that about $765 million of the roughly $950 million Strategy spent on Stride purchases after July 20 came from proceeds of common-stock sales or cash raised primarily from those sales. That accounted for about 80% of the total.
That context also helps explain why Strategy’s common stock has fallen nearly 60% over the past year. “Right now, Strategy is selling common stock to buy Stride, not Bitcoin,” Alexander Blume, chief executive officer of Two Prime, told Bloomberg.
