Strategy (MSTR.US) takes another shot! Preferred stock financing with an issuance rate of up to 10%

The Zhitong Finance App learned that Strategy (MSTR.US) announced plans to issue preferential shares worth 500 million US dollars. This batch of preferred shares is named “Strife,” and the coupon interest rate is 10%.

According to the company's statement, this batch of preferred shares, called Strife, will use a permanent and non-redeemable issuance structure, and the company will not be able to redeem such shares unless certain special conditions are met. This preferred stock is priced at $100 per share, and dividends are paid in cash. Individual investors can participate in this offering through Fidelity Investments, and it is expected that such stocks will be traded on the NASDAQ market under the stock code STRF in the future.

The Strife preferred shares issued this time will pay dividends in cash. In contrast, “STRK.US” (STRK.US), another batch of convertible preferred shares previously issued by the company, has a dividend yield of 8%. Currently, its market transaction price is about $86 (less than the face value of $100), the yield is about 9.3%, and the circulation scale is about 700 million US dollars. However, the upcoming Strife preferred shares are higher than existing STRK preferred shares in terms of debt repayment priority, but there are no equity converted to common shares.

Michael Saylor, chairman and controlling shareholder of Strategy, stated in an online investor briefing that Strife is a “unique high-yield fixed income preferred stock,” and pointed out that currently mainstream preferred stock ETFs, such as iShares Preferred & Income Securities (PFF.US), have a yield of about 6%, and the yield on preferred shares issued by many banks is also close to this level. Strife's preferred stock yields even surpass current junk bond ETFs (such as JNK) and leveraged loan ETFs (with a yield of about 7%), making them extremely attractive to investors.

Strategy currently holds around 500,000 bitcoins, with a market capitalization of nearly $41 billion. Although the company has large-scale Bitcoin assets, since its main software business is small and does not achieve profit based on GAAP (American Generally Accepted Accounting Principles), and there is no cash income from the Bitcoin holdings, the company is not measured by profitability in the traditional sense.

Michael Saylor emphasized that investors should pay attention to the company's asset coverage when evaluating newly issued preferred shares. Currently, the company's Bitcoin assets cover nearly 5 times the asset coverage ratio compared to about 8 billion US dollars of debt and preferred stocks that may exceed 1 billion US dollars. Saylor said that as the price of Bitcoin rises, the company's asset coverage increases, which will help improve investors' perception of this preferred stock.

Due to the lack of traditional profit coverage, the Strife preferred shares issued this time are not expected to receive a credit rating, and even if rated, they may be junk. Previously, Strategy received a Single B junk credit rating from Moody's, but that rating was withdrawn last year.