IS STRC THE NEXT LUNA?
Short answer - not quite.
STRC has depegged. It’s down to $76.2, approximately 25% below par. Michael Saylor has $1.4 Billion to pay STRC dividends, but will he be able to keep the stock alive?
STRC is a perpetual preferred stock which pays dividends of 11.5%, at par value of $100 per share.
There are 104.89M shares of STRC which, at an 11.5% dividend rate, costs Strategy $1.2 Billion per year to maintain.
Strategy had $1.4B in USD reserves as of Monday this week.
Crucially: Strategy does not legally have to pay these dividends. If Strategy gets in trouble, Saylor does not have to prioritise STRC shareholder dividends.
Unlike Terra LUNA, Saylor cannot “get liquidated” if STRC falls in value.
The price of STRC simply reflects the market’s view of how likely Saylor is to continue paying dividends.
If it looks like Strategy won’t be able to raise capital and pay dividends, investors may sell STRC, but Saylor is not forced to spend money keeping the price up.
So why is STRC down now?
Investors may have sold STRC because they believe Saylor is unlikely to pay future dividends, will have trouble raising capital in the future, or potentially to chase returns in other stocks.
Will this kill Strategy?
No. But it may hurt them in the long run. To keep STRC afloat, Saylor needs to keep paying $1.2 Billion per year in dividends.
If MSTR investors realize their money is just being used to pay back earlier shareholders, they may buy less MSTR in future.
Source: arkham
Short answer - not quite.
STRC has depegged. It’s down to $76.2, approximately 25% below par. Michael Saylor has $1.4 Billion to pay STRC dividends, but will he be able to keep the stock alive?
STRC is a perpetual preferred stock which pays dividends of 11.5%, at par value of $100 per share.
There are 104.89M shares of STRC which, at an 11.5% dividend rate, costs Strategy $1.2 Billion per year to maintain.
Strategy had $1.4B in USD reserves as of Monday this week.
Crucially: Strategy does not legally have to pay these dividends. If Strategy gets in trouble, Saylor does not have to prioritise STRC shareholder dividends.
Unlike Terra LUNA, Saylor cannot “get liquidated” if STRC falls in value.
The price of STRC simply reflects the market’s view of how likely Saylor is to continue paying dividends.
If it looks like Strategy won’t be able to raise capital and pay dividends, investors may sell STRC, but Saylor is not forced to spend money keeping the price up.
So why is STRC down now?
Investors may have sold STRC because they believe Saylor is unlikely to pay future dividends, will have trouble raising capital in the future, or potentially to chase returns in other stocks.
Will this kill Strategy?
No. But it may hurt them in the long run. To keep STRC afloat, Saylor needs to keep paying $1.2 Billion per year in dividends.
If MSTR investors realize their money is just being used to pay back earlier shareholders, they may buy less MSTR in future.
Source: arkham