STRD: MicroStrategy's 10% Preferred Stock as a Bitcoin-Backed Yield Play

In a world of historically low bond yields and volatile equity markets, investors are increasingly turning to hybrid instruments that blend income generation with exposure to high-growth assets. MicroStrategy's newly launched 10.00% Series A Perpetual Stride Preferred Stock (STRD) offers precisely this: a fixed-income instrument tied to Bitcoin's price appreciation through the company's unprecedented Bitcoin treasury. While not without risks, STRD represents a compelling asymmetric opportunity for investors seeking both yield and asymmetric upside in a crypto-soaked economy.

The STRD Offering: Yield Meets Bitcoin Exposure

MicroStrategy, now rebranded as Strategy, has long positioned itself as the “world's largest Bitcoin Treasury Company,” with over 534,741 bitcoins (as of April 2025) representing nearly all its assets. The STRD offering—priced at $85 per share with a 10% annual dividend—is the latest in a series of preferred stock issuances (STRK, STRF, STRD) designed to fund Bitcoin purchases while providing investors with steady income.

The key differentiator of STRD is its non-cumulative dividend structure. Unlike traditional preferred stocks, dividends are not guaranteed and depend on quarterly board approval. This creates uncertainty but also aligns investor incentives with MicroStrategy's financial health. If Bitcoin's price rises, the company's balance sheet strengthens, reducing the likelihood of dividend cuts. Conversely, a prolonged Bitcoin slump could pressure both the stock price and dividend sustainability.

Bitcoin Exposure Mechanics: How STRD Investors Win

STRD holders gain indirect Bitcoin exposure through MicroStrategy's treasury. Proceeds from the offering—$980 million before fees—are earmarked for Bitcoin purchases, directly increasing the company's holdings. As Bitcoin's price rises, the value of MicroStrategy's assets grows, supporting both equity and preferred stock valuations.

Crucially, STRD offers no voting rights or equity upside, but this trade-off is offset by:
1. No custody risk: Investors avoid the logistical and security challenges of holding Bitcoin directly.
2. Fixed income floor: The 10% dividend provides a baseline return, even if Bitcoin stagnates.
3. Perpetual structure: No maturity date means no redemption risk from MicroStrategy unless it chooses to buy back shares at a premium (e.g., during a “tax event” or if shares fall below 25% of the original issuance).

Risks: Dividends, Dilution, and Bitcoin Volatility

While STRD's yield-plus-Bitcoin thesis is appealing, risks are significant:
- Dividend Volatility: The non-cumulative dividend creates income uncertainty. MicroStrategy's software business has seen 5 years of declining revenue, relying instead on Bitcoin appreciation to fund operations. A sustained Bitcoin price drop below ~$70,000 could force dividend cuts or asset sales, creating a downward spiral.
- Dilution Pressure: To fund Bitcoin purchases, MicroStrategy frequently sells common shares via at-the-market (ATM) programs. For example, in April . 2025, it sold 1.76 million shares to raise $555 million for Bitcoin buys. This dilutes equity holders and could depress the stock price, indirectly affecting preferred stock liquidity.
- Bitcoin Price Sensitivity: STRD's value is tied to Bitcoin's price swings. A 20% Bitcoin drop could erase years of dividend income. The recent $5.9 billion unrealized loss in Q1 2025 (due to Bitcoin's dip to $84,000 from purchase highs of $94,922) underscores this risk.

Why STRD Still Offers Asymmetric Upside

Despite these risks, STRD's structure provides asymmetric risk-reward:
- Upside: If Bitcoin reaches $100,000 (a price it briefly hit in 2021), MicroStrategy's holdings would surge to over $53 billion, potentially driving STRD's liquidation preference higher. The perpetual structure also avoids maturity-driven price fluctuations.
- Downside: While dividend cuts are possible, MicroStrategy's $38 million cash reserves and $2.03 billion ATM equity program provide liquidity buffers. Preferred shareholders rank ahead of common shareholders in liquidation, offering a margin of safety.

Investment Considerations for STRD

• Ideal for: Aggressive income investors willing to tolerate Bitcoin volatility. STRD's 10% yield outperforms most fixed-income alternatives and offers a leveraged Bitcoin play without derivatives.
• Avoid if: You cannot stomach Bitcoin's price swings or MicroStrategy's dilution risks.
• Monitor:
• Bitcoin's price and adoption trends (e.g., corporate treasury demand, regulatory clarity).
• MicroStrategy's liquidity and debt management (e.g., refinancing its 12% Bitcoin-backed loan).
• Dividend announcements and board commentary on Bitcoin strategy.

Conclusion: A High-Risk, High-Reward Yield Play

STRD is not for the faint-hearted. Its 10% yield and Bitcoin-linked upside make it a compelling hybrid instrument, but investors must weigh this against dividend uncertainty and dilution risks. For those with a long-term Bitcoin thesis and a tolerance for volatility, STRD offers a unique way to capitalize on Bitcoin's growth without holding the asset directly. Just ensure you can stomach the ride.

Final Note: As always, consult with a financial advisor before making investment decisions. Cryptocurrency and leveraged corporate instruments carry unique risks.