Strategy (formerly MicroStrategy), the top Bitcoin accumulator, has announced that its new funding instrument, Strife (STRF), has gone live on the Nasdaq market.
By Godfrey Benjamin
Updated
3 mins read
Michael Saylor, the founder and Chairman of Strategy, has announced the launch of the firm’s “Series A Perpetual Strife Preferred Stock (STRF)” on Nasdaq. With STRF now live on the Nasdaq stock exchange, many expect increased visibility and liquidity for the new stock.
The positive trend surrounding Strife could also lift the market’s view on crypto-affiliates, possibly boosting the value of Strategy’s volatile common stock (MSTR).
The STRF stock is designed to raise capital for general corporate purposes, with a large amount kept for Bitcoin (BTC) acquisitions and operating capital. Strategy introduced the new stock to appeal to investors seeking lower volatility than MSTR.
This new instrument differs from Strategy’s earlier offerings regarding conversion, like the STRK preferred shares.
While STRK allows conversion into equity, Strife does not include conversion rights. Rather, the STRF stock’s dividends compound at an initial rate of 10% annually, strictly in cash, with no stock options or alternatives.
However, the dividend rate increases by 1% annually, up to a ceiling of 18% if the company defers payment. Notably, the board can withhold dividends entirely, meaning investors’ returns are far from guaranteed.
Strategy has offered to sell STRF shares at a liquidation price of $100 per share. Major financial institutions, including Morgan Stanley, Barclays, and Citigroup, are backing the new offering as underwriters.
Fidelity Investment is also involved in distributing the product to retail investors.
The contribution from these firms suggests confidence in Strategy’s ability to attract buyers despite the product’s unusual design.
The STRF stock is designed to provide BTC yield for MSTR investors, meaning Strategy will likely use the proceeds to buy more Bitcoin.
For context, Strategy, formerly known as MicroStrategy, is well-known for its aggressive Bitcoin purchases. The firm bought 6,911 BTC earlier this week to raise its total holdings to 506,137 BTC.
Despite the firm’s strong support for Bitcoin, many worry about Strategy’s new stock offering. The BTC yield could fall if the price of Bitcoin stagnates or declines, reducing the appeal of this hybrid security.
Strife’s asymmetric structure also raises questions about its appeal. Investors are particularly worried because the firm does not rely on operating revenue to fund dividends.
A prolonged Bitcoin bear market could also lead to a decline in MSTR’s stock price. This may indirectly affect STRF’s perceived stability as investors may lose confidence in the company’s Bitcoin-heavy balance sheet.
Recent filings indicate Strategy may raise new capital by selling additional common stock or other securities to meet payout obligations. Strategy reportedly held under $50 million in cash after the launch of its new stock, with its core software business continuing to post losses.
Covering cash dividends on hundreds of millions of preferred stock may require the sustained issuance of new instruments, which has heightened the dilution risk for existing shareholders.
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Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.