The former MicroStrategy is now just known as Strategy (NASDAQ: MSTR). Despite being the largest corporate Bitcoin holder in the world, Strategy’s new capital structure (and its financing of Bitcoin purchases) is becoming more difficult to easily assess. This structure is also becoming more leveraged to the success of a never-ending rise in the price of Bitcoin.

Tactical Bulls addressed a scenario in late February (2025) where MicroStrategy could lose access to the capital markets. That has not yet happened, but the current financing is now looking more and more unique. At that time, here were the key stats with Bitcoin under $90,000 at that time:

• held approximately 499,096 bitcoins
• aggregate value of approximately $33.1 billion
• average purchase price of $66,357 per bitcoin

Strategy’s newest endeavor is a launch of a $500 million issue of 10% perpetual preferred stock that has been dubbed Strife and it will trade under its own “STRF” stock ticker. The pricing is due out any time by underwriters Morgan Stanley, Barclays, Citigroup and Moelis. Unlike most preferred securities, the offering will be available for individual investors rather than just institutional and accredited investors.

This preferred issue of 5 million shares is expected to price at $100 per share and its 10% dividends will be paid in cash.

MicroStrategy’s existing preferred stock issue, dubbed Strike with the “STRK” ticker, is a convertible issue that can be turned into common shares. That was originally set as an at-the-money (ATM) offering that could eventually be up to $21 billion.

STRF is deemed to be senior to STRK — and it is not convertible. It will not have a traditional credit rating. STRK pays an 8% yield at issue price, but the down trend in Bitcoin has taken its price under $90 and has moved its yield to above 9%.

Michael Saylor is nothing short of creative in his bitcoin bullish views. His public pitch for investors during prior stock sales (with all proceeds used to buy Bitcoin, and working capital) has been that issuing additional stock is accretive rather than dilutive — meaning that the additional share float increases the overall value rather than decreasing the value. Saylor has since referred to Strife as a unique high performance fixed-income preferred that will have a higher yield than most junk bond ETFs and leveraged-loan ETFs.

Where both Strike and Strife get very interesting for future holders, particularly in the newest issue without a conversion feature, is that Strategy’s earnings are completely not the same as in traditional earnings. Its software business is quite small and is not profitable under GAAP (generally accepted accounting principles).

Saylor’s pitch to investors also points toward asset coverage as a means to evaluate the new preferred issue. Its debt was roughly $8.2 billion on last look, and we now assume over $1 billion in preferred shares that are senior to its common shares.

Strategy’s press release showed that it intends to use the net proceeds from this preferred offering for general corporate purposes — including the acquisition of bitcoin and for working capital. These are the mechanics of this issue:

The perpetual strife preferred stock will accumulate cumulative dividends at a fixed rate of 10.00% per annum on the stated amount. Regular dividends on the perpetual strife preferred stock will be payable when, as and if declared by Strategy’s board of directors, out of funds legally available for their payment, quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on June 30, 2025. Declared regular dividends on the perpetual strife preferred stock will be payable solely in cash. In the event that any accumulated regular dividend on the perpetual strife preferred stock is not paid on the applicable regular dividend payment date, then additional regular dividends (“compounded dividends”) will accumulate on the amount of such unpaid regular dividend, compounded quarterly. The compounded dividend rate applicable to any unpaid regular dividend that was due on a regular dividend payment date will initially be a rate per annum equal to 10% plus 100 basis points; provided, however, that, until such regular dividend, together with compounded dividends thereon, is paid in full, such compounded dividend rate will increase by 100 basis points per annum for each subsequent regular dividend period, up to a maximum dividend rate of 18% per annum.

Strategy’s new preferred shares will offer yet another creative way for Bitcoin bulls to play the greatest digital game ever invented. That said, imagine what happens if Bitcoin’s price were to plummet. At that point, Strategy might have to engage in routine sales of its prized Bitcoin holdings at a loss just to pay the preferred holders in perpetuity… or does it? The press release noted:

Strategy will have the right, at its election, to redeem all, but not less than all, of the perpetual strife preferred stock, at any time, for cash if the total number of shares of perpetual strife preferred stock then outstanding is less than 25% of the total number of shares of the perpetual strife preferred stock originally issued in the offering and any future offerings, taken together. In addition, Strategy will have the right to redeem all, but not less than all, of the perpetual strife preferred stock if certain tax events occur. The redemption price for any perpetual strife preferred stock to be redeemed will be a cash amount equal to the liquidation preference of the perpetual strife preferred stock to be redeemed as of the business day before the date on which Strategy sends the related redemption notice, plus accumulated and unpaid regular dividends to, but excluding, the redemption date.

If an event that constitutes a “fundamental change” under the certificate of designations governing the perpetual strife preferred stock occurs, then holders of the perpetual strife preferred stock will have the right to require Strategy to repurchase some or all of their shares of perpetual strife preferred stock at a cash repurchase price equal to the stated amount of the perpetual strife preferred stock to be repurchased, plus accumulated and unpaid regular dividends, if any, to, but excluding the fundamental change repurchase date.

Paying dividends on the current assets will not be a problem if Bitcoin remains firm or if the price of Bitcoin rises. But if creative high-yield financing persists with higher and higher financial demands by investors, and if Bitcoin simultaneously plunges, Strategy’s liquidity and valuation may become a much harder issue to swallow for new and existing investors alike.

Strategy’s stock closed up 7.4% at $304.23 on Wednesday. Its 52-week range is $101.00 to $542.99 and its public market cap was last seen at almost $77 billion.