An estimated 7,000 Bitcoins were purchased this week through Strategy’s (MSTR) perpetual preferred stock Stretch (STRC), underscoring how the high-yielding instrument has become a key engine behind the company’s Bitcoin accumulation.
But there are risks with this structure, according to Alexander Blume, CEO of Two Prime, an SEC-registered investment adviser focused on institutional Bitcoin income strategies and Bitcoin-backed loans.
“There’s no such thing as a free lunch,” Bloom said. “Products that pay more than 6% above Treasury bills certainly carry additional risk.”
Demand for preferred shares has surged as investors seek higher returns. STRC currently yields 11.5% and pays monthly cash distributions. Strategy describes the instrument as similar to a short-term high-yield savings vehicle, with an adjusted dividend rate that helps keep shares trading close to $100 par value while limiting price volatility.
This structure helps accelerate Strategy’s Bitcoin purchases. According to STRC.live, market estimates indicate that the company purchased more than 11,000 BTC in the past two weeks, bringing the total accumulation of the product since its launch to approximately 34,000 BTC.
Corporate interest is also starting to show. Asset manager Strive (ASST) recently disclosed a $50 million allocation to STRC, while digital credit company Apyx said it recently purchased an additional 200,000 STRC shares, bringing its total holdings to 255,000 shares.
Blume said STRC was a major focus at the recent Strategy World conference, highlighting how the product has become central to the company’s capital strategy.
“We’ve seen a handful of companies purchase STRCs,” Bloom said, adding that some of the activity so far appears to be symbolic or partnership-driven.
Blume also pointed to early efforts to build decentralized financial products on top of STRC, which were sometimes marketed as savings vehicles despite the volatility of the underlying asset.
STRC is expected to trade close to its $100 face value, but Blume said there’s no guarantee of that. He said a loss of confidence in a company, Bitcoin or the preferred stock itself could result in prices falling below face value and causing significant losses.
STRC has traded below its $100 face value on several occasions, prompting the company to raise its dividend to help push the stock price back to face value.
Bloom added that strong momentum, the availability of funds to cover interest payments and the need for high yields meant the structure was unlikely to face immediate problems.
