An estimated 7,000 bitcoins were purchased this week through Strategy’s (MSTR) Stretch Perpetual Preferred Stock (STRC), underscoring how quickly the high-yielding instrument has become a key driver of the company’s bitcoin accumulation.
But the structure carries risks, according to Alexander Blume, CEO of Two Prime, an SEC-registered investment advisor that focuses on institutional bitcoin yield strategies and bitcoin-backed loans.
“There is no such thing as a free lunch,” Blume said. “A product that yields more than 6% over Treasuries must carry additional risk.”
Demand for preferred shares has increased as investors seek higher returns. STRC currently yields 11.5% and pays monthly cash distributions. Strategy described the instrument as resembling a short-term, high-yielding savings instrument, with an adjusted dividend rate to help keep the shares close to their $100 par value while limiting price volatility.
The structure helped accelerate Strategy’s bitcoin purchases. Market estimates suggest that the company has purchased over 11,000 BTC in the past two weeks, bringing the total accumulation through the product to around 34,000 BTC since it went live, according to STRC.live.
Corporate interest is also starting to emerge. 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 portfolio to 255,000 shares.
Blume said STRC was a major topic at the recent Strategy World conference, highlighting how central the product has become to the company’s capital strategy.
“We’ve seen a small number of companies buying STRC,” Blume said, adding that some of the activity so far appears tokenistic or partnership-driven.
Blume also highlighted early efforts to create decentralized financial products on top of STRC, sometimes marketing them as savings instruments despite the volatility of the underlying asset.
STRC is designed to trade at a par value of $100, but Blume said that is not guaranteed. A loss of confidence in the company, in bitcoin or in the preferred shares themselves could cause the price to fall below par and cause significant damage, he said.
STRC has repeatedly traded below its par value of $100, prompting the company to increase the dividend to help bring shares back toward par value.
Blume added that strong momentum, available funding for interest payments and demand for high-yielding securities mean the structure is unlikely to face immediate problems.
