The one metric investors are overlooking in Michael Saylor’s Strategy
Increased preferred-equity issuance and surging STRC trading volumes are reshaping how Strategy’s common stock trades.
What to know:
- Amplification, defined as debt plus preferred equity divided by bitcoin reserves, has risen to 33%, meaning a growing layer of senior claims sits ahead of equity, reducing the buffer for MSTR holders.
- Trading of the STRC preferred stock has surged from low single digits to 20% of MSTR volume.
- Higher amplification and the growing STRC activity make the structure harder to manage, increasing downside sensitivity and reliance on equity issuance, which can weigh on performance versus bitcoin.
Investors have tended to focus on the price of bitcoin and the multiple to net asset value (mNAV) premium when evaluating the company. But if amplification, currently about 33%, increases, it may become the dominant driver of risk.
At the top of Strategy’s capital structure is convertible debt, about $8.25 billion outstanding, the most senior claim. Below that are a number of preferred stocks, including STRC, STRK, STRD and STRF, with roughly $10.3 billion in notional value, according to the MSTR dashboard. At the bottom sits common equity, MSTR, which absorbs all residual upside and downside.
STRC has been designed to become the primary vehicle for bitcoin accumulation for the company. Senior to equity and junior to debt, STRC pays an 11.5% annual dividend, distributed monthly in cash.
