Strategy's bitcoin-buying preferreds come with a growing dividend bill
Perpetual preferreds have contributed to the accumulation of 135,979 bitcoin, Fidelity says. Every new share also adds to the payouts, and Strategy's latest week paired a $193 million buyback with just 267 bitcoin.
By Jennifer Walsh ·
Why it matters: Preferred-funded bitcoin buying depends on those shares trading near par, so a slump in them could shrink a real source of bitcoin demand.
For information only, not investment advice. Prices delayed.
Perpetual preferred stock has become a new pipe feeding bitcoin demand. As of Oct. 5, these bitcoin-focused preferreds had contributed to the accumulation of 135,979 bitcoin, more than 0.5% of total supply, Fidelity Digital Assets said in research published Oct. 20. Fidelity puts the market at about $12 billion, a sliver of a global fixed-income market of roughly $150 trillion.
"Perpetual preferreds have brought bitcoin to income investors, a group that ETFs never reached," StoneX analyst Mark Palmer told CoinDesk. The catch for issuers like Strategy ($MSTR) and Strive ($ASST) is that every new share adds to the dividend bill. By Fidelity's own description, the model only works if bitcoin's appreciation outpaces the cost of the yield.
That tension showed up in Strategy's latest weekly update. Michael Saylor posted on X on Oct. 19 that the company repurchased $193 million of its STRC preferred stock while acquiring just 267 bitcoin, and raised its repurchase program to $3.0 billion. Strategy held 848,517 bitcoin as of Oct. 18, he said.
"Buybacks can reduce future dividend costs, but they compete with bitcoin purchases for capital today," CoinShares head of research James Butterfill told CoinDesk. He said STRC, which pays a variable dividend currently around 12%, raised $7.5 billion this year through late July. He also said Strategy has already sold some bitcoin to fund preferred dividends.
Palmer also called the demand "reflexive": preferred-funded buying keeps going only while the securities trade at or near par. Two Prime CEO Alex Blume pointed to STRC briefly falling into the $70 range in late June as a sign of how volatile they can be.
ETFs are still the bigger channel. Bitwise's Ryan Rasmussen expects them to remain the larger source of demand, with preferreds a "second tailwind" for yield investors. Fidelity notes spot bitcoin ETPs gathered 888,185 bitcoin in their first year.
Strategy shares closed at $146.01, up 0.14%, and Strive at $28.97, down 0.21%, as of Oct 23, 4:00 PM ET.
Sources
- Perpetual Preferred Stock: The Newest Demand Catalyst in Bitcoin, Fidelity Digital Assets
- Michael Saylor post on Strategy's STRC repurchase and bitcoin holdings, Michael Saylor (@saylor) on X
- Strategy, Strive face balancing act between bitcoin buying and preferred stock dividends, CoinDesk
Tags: bitcoin · buybacks-dividends · analysts