On August 1st, Strategy (Nasdaq: MSTR) Executive Chairman Michael Saylor confirmed that the Stretch dividend rate for STRC—the company's Series A variable-rate perpetual preferred shares—will remain at 12.00% through August 2026. STRC shares were issued in July 2025 with a 9% rate and have since risen due to seven consecutive monthly increases, reaching 12% for reset dates starting July 1, 2026.
The increases occur via a "ratchet" mechanism, meaning the dividend rate rises by 0.5% each time the STRC price falls below $95, and once triggered, the increase cannot be reversed even if the price recovers. Strategy reviews the rate monthly to return the STRC price to its $100 par value and reduce volatility—a mechanism the company relies on to issue new STRC shares under its "at-the-market" (ATM) program and raise fresh capital to purchase Bitcoin.
STRC is one of several preferred share instruments alongside STRK, STRF, and STRD issued by Strategy to fund Bitcoin acquisitions without as significant dilution to common shareholders as issuing additional MSTR shares would cause. Strategy has also moved STRC to a semi-monthly dividend payment schedule, with the first semi-monthly payment occurring on July 15, 2026, replacing the single monthly payment investors received since its July 2025 launch.
Still Below Par
The mechanism has not worked as intended. On July 31, STRC shares closed at $89.46, slightly below the previous close of $89.50, keeping the shares roughly 10–11% below par even at their highest-ever dividend rate. In June, shares hit a low of $71.25 and have not traded at par since mid-May.
Competition has increased pressure: preferred securities from rival company Strive (SATA) offer approximately 13% yield with daily dividend payments and no underlying debt, which diverted investor demand away from STRC even before June's price slump. The spread between the two securities has widened to one of the largest on record: SATA shares trade near their $100 par value, while STRC shares lag significantly behind that level.
The sustained discount has forced Strategy to suspend issuing new STRC securities under its ATM program, limiting the company's ability to further increase its Bitcoin holdings using this specific funding channel.
STRC's difficulties this year reflect Bitcoin's own volatility. The preferred shares have historically moved in tandem with Bitcoin's price, and weakness in the underlying asset has made it difficult for Strategy (Nasdaq: MSTR) to keep STRC's price near par even at a record-high dividend rate.
Multiple Warnings
Analysts at Onramp Bitcoin have warned that the ratchet structure carries long-term risk as it only moves in one direction; CEO Michael Tanguma noted:
"A capital structure that only weathers volatility by adding permanent liabilities is a structure with a limited number of cycles."
On June 25th, law firm Rosen Law Firm began investigating whether Strategy can sustain preferred dividend payments if Bitcoin's price remains below the company's approximate average cost basis of $75,651. In addition to concentration risk, retail investors own roughly 83%, or about $8.8 billion, of STRC shares outstanding—analysts note this group is more prone to panic selling during downturns than institutional holders.
Strategy has built financial buffers to mitigate these concerns. The company has a liquidity reserve covering approximately 26 months of dividend and interest obligations, following the late-June adoption of a "Digital Credit Capital Framework," which authorized a $2 billion buyback of preferred and common shares alongside a Bitcoin monetization program.
This program allows Strategy to sell Bitcoin when management deems it advantageous, with proceeds directed to reserves, dividend payments, and share buybacks, though the company has emphasized it has no obligation to sell.
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