Author:Azuma,Odaily Planet Daily
Strategy's preferred stock, STRC, is in a state of ongoing "de-pegging."
U.S. stock market data shows,since May 15th, STRC has gradually deviated from its target par value of $100. The discount has intensified significantly recently, hitting a low of $83.26 during yesterday's session and closing at $88.59, over 11% below its target par value.
For a common stock, an 11% drop might not be a big deal. But for STRC, the sustained deviation from the $100 target par value signifies a serious challenge to the core design objective of this product.
Because in Strategy's initial design, STRC was crafted as an income-oriented security intended to trade around its $100 par value, not a highly volatile speculative asset. The widening gap between market price and target par value is prompting more and more investors to re-examine the logic behind this product.
More importantly, as Strategy continues to expand its Bitcoin reserve, STRC has gradually grown into the company's most important fundraising channel.In a sense, the market's pricing of STRC not only reflects investor sentiment towards a preferred stock but also reflects market confidence in Strategy's entire capital operation model.
STRC: The Engine of Strategy's Capital Flywheel
To understand the severity of this de-pegging, we must first clarify STRC's product structure and its unique anchoring mechanism.
STRC is an innovative financial derivative tool launched by Strategy in 2025.Unlike Strategy's common stock MSTR, STRC is positioned as a perpetual preferred stock with a fixed target par value ($100) and relatively stable dividend yield, making its nature closer to a fixed-income security.
- Odaily Note: Strategy founder Michael Saylor recently revealed that STRC was designed with the assistance of AI.
In Strategy's balance sheet expansion loop, STRC is not just an ordinary financing tool; it is currently the strongest engine of Strategy's capital flywheel.
Before introducing STRC, Strategy primarily relied on issuing convertible notes and directly issuing common stock to raise funds for Bitcoin purchases. However, both models have limitations—convertible notes are constrained by maturity dates and debt leverage caps, while frequent common stock issuances dilute existing shareholder equity.
The emergence of STRC perfectly solved this pain point, and its core utility in Strategy's strategy is mainly reflected in two dimensions:
- Unlimited "At-the-Market" (ATM) Offering Program: As long as STRC's market price remains stable at or above $100, Strategy can continuously issue new STRC shares through the ATM mechanism in the secondary market, raising fiat currency.
- Purchasing Power Without Equity Dilution: As a perpetual preferred stock, STRC has no statutory maturity and principal repayment pressure, and it lacks the voting rights and residual asset distribution rights of common stock. This means Strategy can create billions in fiat purchasing power out of thin air without diluting MSTR shareholder equity or increasing rigid debt interest, and deploy it entirely into acquiring more Bitcoin.
Through the closed loop of "Issue STRC ➡️ Raise Fiat ➡️ Buy BTC ➡️ Increase Company Net Assets ➡️ Boost STRC Credibility," Strategy successfully built what seems like an infinitely repeatable capital flywheel.
However,the crucial prerequisite for this flywheel to operate smoothly is that STRC must be maintained around its $100 par value. Once the market price falls significantly below $100, according to the ATM fundraising terms and market arbitrage logic, Strategy will no longer be able to effectively absorb funds from the market using discounted preferred shares, and its entire capital magic will effectively grind to a halt.
In its initial design, to ensure STRC's secondary market price would consistently align with the $100 target par value, Strategy introduced a "monthly dynamic dividend rate adjustment" mechanism. Simply put, when STRC's market price is below $100, Strategy can increase the dividend rate to enhance the product's attractiveness; when the price is above $100, it can lower the dividend rate—in theory, through continuous dividend rate adjustments, STRC should be able to trade long-term around $100.
But now,even though Strategy has raised the dividend to a high level of 11.5% and changed the payment frequency from monthly to bi-monthly, STRC's "de-pegged" state has not been effectively corrected... Why is this?
The Reason for De-pegging: Confidence, Confidence, and Confidence
The ineffectiveness of dividend corrections means the market is pricing in risks that go beyond STRC's yield itself. Based on current market discussions, risk concerns are mainly manifested at two levels.
First are the surface-level technical factors.Some market participants believe the recent decline is largely due to concentrated selling pressure from deleveraging arbitrage capital.
Over the past year, STRC has traded consistently around $100, attracting a large amount of yield-oriented arbitrage capital. This type of capital often uses leverage to amplify returns, earning dividend income while profiting from the price convergence to par value. However, as STRC broke below $100 and continued to weaken, some leveraged accounts began hitting risk control limits, forcing them to sell their holdings. This price drop, in turn, triggered more leveraged capital to unwind positions, ultimately forming a chain reaction.In this process, selling pressure self-reinforces, causing STRC's decline to far exceed normal supply-demand changes.
But explaining the current market performance solely with leverage unwinding seems insufficient.For many investors, a deeper concern lies in Strategy's liquidity reserve situation.
Earlier this month, J.P. Morgan published a research report pointing out that Strategy has an annual dividend obligation of approximately $1.7 billion. At the current cash reserve level, the cash on hand is only sufficient to cover about 6.3 months of preferred stock dividend payments. This has sparked market concerns about Strategy's promised future liquidity coverage capability.
In response, Strategy provided a completely different explanation. The company officially stated in an X post that, if its massive Bitcoin reserve is taken into account, it is sufficient to cover 32 years of dividend payments.
However, the problem is that these two statements are actually based on different premises. J.P. Morgan focuses on Strategy's cash position, while Strategy's calculation implies a crucial assumption—if necessary, the company can obtain funds by selling Bitcoin.
This precisely touches the market's most sensitive spot. Earlier this month, Strategy sold part of its Bitcoin holdings for the first time. Although the sale was only 32 BTC, and the company packaged it as an "active market desensitization test," mentioning that "more will be bought back in the future," this move still caused a significant shock to the market. The reason is that for the past few years, Strategy and its founder Michael Saylor have been conveying a core narrative to the market—Bitcoin is a long-term strategic reserve asset, and the company will obtain operational funds through capital market financing, not rely on selling Bitcoin.
Therefore, when the market saw Strategy actually sell Bitcoin for the first time, it inevitably sparked greater concern—if financing conditions tighten in the future, will Strategy need to rely further on selling Bitcoin to fulfill its dividend obligations? If the answer is not an absolute 'no,' then investors must reassess the risk level of related securities.
From this perspective, behind the persistently "de-pegged" STRC, the market is, in fact, reassessing the robustness of Strategy's entire capital structure.
Strategy's Buying Power Could Turn into Selling Pressure
For Strategy, the biggest impact of STRC's sustained de-pegging is the weakening of its financing function.
Over the past few years, Strategy's ability to continuously expand its Bitcoin reserve has been based on the logic of obtaining funds from the capital market by issuing stocks, convertible notes, and preferred shares, and then using those funds to acquire more Bitcoin. STRC is precisely Strategy's most important financing tool. When it trades long-term below its $100 target par value, it signals that the market is demanding higher risk compensation, and Strategy's financing ability will thus enter a state of temporary paralysis.
Going forward, STRC's re-pegging situation may become an important indicator for the market to observe Strategy's risk status.If STRC remains in a discounted state for an extended period, causing its financing capacity to remain constrained, and Strategy's cash reserves continue to deplete, then market concerns about Strategy potentially needing to sell more Bitcoin in the future to meet dividend payments are bound to intensify.
Once this expectation strengthens, its impact will no longer be limited to STRC itself. As one of the most important marginal buyers in the Bitcoin market over the past few years, Strategy's financing ability and accumulation pace have profoundly influenced market supply-demand expectations. If Strategy's buying power turns into selling pressure, it could exert unimaginable downward pressure on Bitcoin.
