Strategy CEO Phong Le attributed the sharp decline in STRC, the company's $9.3 billion preferred stock, to an underestimation of leverage flowing into the security. The preferred stock lost approximately 25% of its value, falling to about $75 in late June before recovering to trade near $99.
STRC is structured to trade near its $100 face value and pays a 12% annual dividend. Le explained that the stock's stability attracted leveraged investors who borrowed against Bitcoin at roughly 6% to capture STRC's higher yield. When Bitcoin prices fell, these loans came under pressure, forcing borrowers to either deposit additional Bitcoin collateral or sell their STRC holdings. The forced selling accelerated the price decline.
"We did not expect the amount of leverage that came into the system," Le said in an interview. He noted that traders later accumulated STRC between $75 and $90, and that he purchased shares himself during that period.
Strategy's Response and Buyback Plan
In late June, Strategy announced a framework including cash reserves, buyback authorizations, and provisions to sell Bitcoin if needed. The company began repurchasing STRC shares in late July.
Rather than increasing the dividend further, Le said Strategy opted for buybacks. He noted that earlier dividend increases to 12% had not supported the stock price, and raising payouts would reduce cash reserves and negatively impact common shareholders. Buybacks reduce future dividend obligations instead.
Strategy's dollar reserve now holds approximately $5.1 billion, which Le stated covers roughly three years of dividend payments. These funds are designated exclusively for preferred dividends and interest on Strategy's convertible debt.
Outlook and Shareholder Implications
Le said institutional ownership of STRC has grown to approximately 30% from 20%, and he expects the stock to return to $100 as long-term holders replace leveraged traders. He emphasized that 95% of his compensation is tied to MSTR share price performance and encouraged investors to adopt a three-year investment horizon.
STRC's next dividend payment is scheduled for October 15 for shareholders of record as of September 30.
