Simply put
- Strategy has seen a significant rise in preferred stock activity, particularly a notable increase in floating rate preferred issuance.
- A recent research note highlights that the company raised about $704 million through its new Euro-denominated preferred IPO, allowing for the purchase of approximately 6,890 BTC.
- Decrypt reported that the company’s model can keep adding Bitcoin per share as preferred stock funds expand, even while premiums are tightening.
According to a report from TD Cowen, Strategy’s Bitcoin accumulation model held steady despite last week’s fluctuations, with issuance activity ramping up as the firm’s implicit Bitcoin premium dropped.
The investment bank observed that the strategy is acquiring Bitcoin at an accelerated rate, buoyed by interest in both new euro-denominated preferred shares and floating rate preferred shares.
TD Cowen analysts noted, “What surprised us was the increase in floating rate preferred stock issuance amid a significant decline in Bitcoin prices. We think this strategy remains an appealing option for those looking to gain Bitcoin exposure.”
In a research note published Monday, analysts Lance Vitanza and Jonathan Navarrete confirmed their investment rating and set a price target of $535 for Strategy’s common stock.
The strategy is described as representing a new type of company, aiming to align with the market’s interest in volatility and returns, while providing an effective leverage base for Bitcoin as the first publicly traded Bitcoin treasury company.
Utilizing preferred stock lets Strategy raise capital without issuing common shares right away, while the variable rate stretch preference offers an adjustable dividend, helping maintain trading near par. This setup ensures stable funding that the company can directly convert into Bitcoin, allowing for continued purchases with lesser dilution.
The memo pointed out that the firm exceeded capital-raising expectations, quickly investing it in Bitcoin and continuing to generate earnings per share in BTC, despite falling Bitcoin and stock prices. Based on TD Cowen data, the strategy injected roughly $704 million into the new euro-denominated preferred IPO, acquiring about 6,890 BTC.
Meanwhile, Strategy’s shares experienced a noteworthy decline on Monday, falling to as low as $189.53 before closing at $195.42.
This downturn is aligned with a broader “risk-off rotation,” which, according to Bitwise analysts, pushed Bitcoin lower to levels not seen since April, consequently leading to drops in major tokens and tech stocks. The market seems to be adjusting its expectations for liquidity.
Observers note that recent issuance trends reveal the underlying mechanics of the strategy rather than just reacting to short-term market changes.
Ryan Yun, a senior analyst at Tiger Research, stated, “The strategy caters to yield-oriented investors seeking lower volatility than common stocks. This structure looks sustainable as the company can flexibly adjust dividend rates to manage issuance.”
When asked if Strategy can keep generating BTC returns per share as premiums tighten, Yun expressed confidence, stating that returns come from purchasing Bitcoin with non-dilutive capital, such as preferred stock. He described these returns as “critically accretive” compared to operating independently of the market premium of common stock.
