Strategy Plans $500 Million Share Issuance for Bitcoin Acquisitions

Strategy, a prominent Bitcoin holder, has announced plans to raise additional capital through the issuance of 5 million shares of its Series A Perpetual Strife Preferred Stock (STRF). The offering, subject to regulatory approval and market conditions, aims to generate funds for corporate operations, including Bitcoin acquisitions and general expenses. This move follows Strategy's previous plans to raise $21 billion through its Strike (STRK) preferred stock.

Strategy's Bitcoin reserves have recently expanded to 499,226 BTC, with an estimated value exceeding $41 billion, making it the largest public holder of Bitcoin. Each STRF share carries a $100 liquidation preference and offers a fixed annual dividend rate of 10%. Dividends can be distributed in cash, Class A common stock, or a combination of both, with quarterly payments expected to begin on June 30, 2025, pending board approval. If dividends are not paid on schedule, additional compounded dividends will be paid, with the rate starting at 10% and increasing by 100 basis points annually, capping at 18% per annum if outstanding dividends remain unpaid.

Strategy retains the right to redeem STRF shares under specific conditions, such as if the outstanding shares fall below 25% of the total issuance or if regulatory or tax-related events occur. The announcement has sparked concerns within the crypto community about Strategy's financial health. Critics, including Simon Dixon, have warned that the firm's commitment to a 10% perpetual dividend poses significant financial risks, especially given its reliance on a Bitcoin-based balance sheet and the lack of sufficient dollar revenue. Dixon drew parallels to the collapse of Long-Term Capital Management, suggesting that nationalization might be an option for the US government if Strategy faces financial distress.

Pseudonymous Bitcoin analyst WhalePanda echoed similar concerns, describing the offering as desperate and highlighting the financial strain of a 10% dividend on a $500 million raise, which translates to $50 million in annual payouts—a sum the company may not have. BitMEX Research also pointed out a clause in the STRF prospectus that allows the board or a committee to choose not to pay accumulated dividends for any reason, raising doubts about whether Class A MSTR shareholders will ever receive a dividend payment.