TLDR Tech / Crypto
What to Do About STRC?
MicroStrategy's STRC perpetual preferred shares, issued at $100 with an 11.5% yield, carry a discretionary price-stability mechanism through which management adjusts the coupon to push the price toward par, but the mechanism is unstable by design: perceived credit deterioration triggers a dividend increase that further strains the balance sheet, risking a self-reinforcing downward spiral. MicroStrategy can reduce the coupon by 25 bps monthly down to the SOFR rate (now approximately 3.6%) without penalty, so fair value analysis places STRC near $55 rather than the $100 issue price, and the instrument already trades around $75, a 25% discount to target. With Bitcoin needing to outpace an 11.5% cost of capital to justify the issuance, and the stability mechanism showing no sign of activation despite the persistent discount, there are two probable outcomes: a buyback at a price balancing legal exposure and shareholder value, or full abandonment of the mechanism with a rate cut to SOFR.
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