MicroStrategy Plans to Issue More Perpetual Preferred Stock: What It Means for MSTR

MicroStrategy, now referred to as Strategy, plans to increase its issuance of perpetual preferred stock, called "Stretch," to mitigate investor concerns regarding the high volatility of its common stock (MSTR), which closely tracks Bitcoin's price swings. CEO Phong Le stated that while BTC's volatility causes MSTR to see outsized gains and sharper declines, Stretch is engineered to protect investors seeking digital capital access without that volatility, offering a variable dividend currently set at 11.25%.

Strategy is actively marketing Stretch, expecting it to become a major funding product, transitioning from relying primarily on common equity capital to preferred capital. This shift is crucial as the company's traditional funding model faces pressure; MSTR shares are trading below the net asset value (mNAV) of its Bitcoin holdings, meaning new common stock issuance risks diluting shareholders. By leaning on preferred stock, Strategy aims to sustain its Bitcoin acquisition strategy while limiting dilution risk associated with discounted common stock sales.

However, increasing reliance on preferred shares introduces higher fixed dividend obligations. This move reshapes the company's risk profile by adding financial commitments that could pressure the balance sheet if Bitcoin remains volatile, though it attempts to insulate common shareholders from direct dilution.

(Source：BeInCrypto)