STRC reclaims key price level after months below par
Strategy’s STRC perpetual preferred equity returned to its $100 par value during Wednesday’s U.S. trading session. This marks the first time since mid-January that the instrument has reached this important threshold.
I think this development matters because STRC trading at or above par allows the company to resume what they call at-the-market offerings. These ATM offerings are basically a way for Strategy to raise funds for buying more bitcoin. The company is, after all, the world’s largest corporate holder of bitcoin.
The connection between STRC and bitcoin’s price movements
Looking back, STRC last hit the $100 level on January 16. At that time, bitcoin was trading near $97,000. But then things changed. Bitcoin retreated significantly, dropping to around $60,000 by February 5. During that decline, STRC dipped too, hitting a low of $93 before starting its recent recovery.
Now bitcoin hovers around $67,500, and STRC has managed to climb back to par. It’s interesting how these two move together, though not perfectly in sync.
How STRC works as an investment instrument
STRC is positioned as a short-duration, high-yield credit instrument. Currently, it offers an 11.25% annual dividend that gets distributed monthly. Strategy adjusts this rate monthly to help manage volatility and encourage trading near the $100 par value. They recently increased it to the current 11.25% yield.
Perhaps the monthly reset mechanism helps keep the instrument attractive to investors even when bitcoin prices fluctuate. It creates a sort of balancing act between yield and price stability.
Common stock faces pressure despite STRC recovery
While STRC showed strength, Strategy’s common stock didn’t fare as well on Wednesday. MSTR shares slid about 5% to close at $126. This happened even as bitcoin maintained its position around $67,500.
The divergence between the preferred equity and common stock performance raises questions. Maybe investors view these instruments differently, or perhaps there are other factors affecting the common stock that don’t impact STRC in the same way.
What’s clear is that Strategy now has the green light to resume funding bitcoin acquisitions through ATM offerings. This could mean more bitcoin added to their already substantial holdings. But whether this happens immediately or gradually remains to be seen.
The company’s approach of using debt-like instruments to fund cryptocurrency acquisitions continues to draw attention. Some see it as innovative, others as risky. Either way, the return of STRC to par value represents a significant milestone in their funding strategy.
