STRC falls below $97 after MicroStrategy sells 32 BTC

MicroStrategy sold 32 Bitcoin between May 26 and May 31 to fund dividends on its Variable Rate Series A Perpetual Stretch Preferred Stock, known as STRC. After the sale, STRC shares traded below $97, under the $100 par value that allows the company to issue new preferred shares and convert proceeds into Bitcoin.

The 32 BTC sale is small relative to MicroStrategy’s total holdings of 843,706 BTC. Company filings show the preferred program has been a primary source of capital for Bitcoin purchases this year. STRC carries an 11.50% annual dividend and is structured to trade near $100 so the company can sell shares at par and immediately deploy cash into Bitcoin.

During the most recent reporting period, no new STRC shares were issued while the preferred traded below par. Instead, MicroStrategy sold 801,994 shares of its common stock, MSTR, in the same week, generating about $128 million in net proceeds. Filings also show the company holds roughly $900 million in cash reserved to cover dividends and interest.

Company executives have described selling Bitcoin as a last resort. In this instance, a small portion of the Bitcoin holding was sold to meet STRC dividend obligations after the preferred dropped below the $100 level. The board maintained the STRC dividend at 11.50% for June and left billions of dollars of capacity available for future preferred issuance.

Market commentary included warnings about the funding mechanism. One user wrote: ‘Below $100, STRC can’t fund new BTC purchases. MSTR is also depressed. That leaves one option to cover $1.7B/year in obligations: Sell Bitcoin.’ Another post read: ‘THE STRC PARTY IS OVER … It wont peg to $100 and therefore Saylor wont be able to use it to raise. It may not peg for a while… This is one of the reasons Bitcoin is dumping.’

Bitcoin traded near $67,252 on June 3, below MicroStrategy’s reported average purchase price of $75,702, leaving the treasury below cost on paper. With STRC under par, MicroStrategy has relied more on common-stock sales and cash reserves to meet short-term obligations.

How long STRC remains below $100 will affect whether the company resumes issuing preferred shares at par to fund additional Bitcoin purchases. Company filings indicate there remains capacity to issue more STRC in the future, but issuance has paused while the preferred trades under par and market conditions remain volatile.