Strategy is seeking shareholder approval to convert four preferred stocks, including STRC, to daily dividend payments without changing their dividend rates or total annual payments.
The company's board approved the proposal on Thursday, with shareholders scheduled to vote on the amendments at a virtual special meeting on October 28, according to a US Securities and Exchange Commission filing.
Under the new structure, each calendar day would become a dividend record date, with corresponding payments made on the next business day. STRC would transition first, with its initial daily dividend payment expected on November 2. STRF, STRK, and STRD would follow in January, with their first payments under the daily schedule expected on January 4.
Following Strive's Lead
Strategy's proposal comes months after fellow Bitcoin treasury company Strive moved its SATA preferred stock to daily dividend payments, becoming the first public company to adopt the model. Strive announced in May that SATA would begin paying dividends on business days starting June 16 at a 13% annual rate.
Unlike Strive's business-day schedule, Strategy's proposal makes every calendar day a record date, with dividends payable on the following business day. According to BitcoinTreasuries.NET, Strive holds 26,355 Bitcoin compared with Strategy's 846,000 BTC.
STRC Price Volatility and Leverage Concerns
STRC, a key component of Strategy's digital credit strategy, experienced significant price swings in 2024. The stock fell below its $100 stated amount in June, hitting an intraday low of $71.25 on June 26.
Strategy CEO Phong Le attributed the decline to higher-than-anticipated leverage in the STRC market. Investors borrowed against Bitcoin at lower rates to purchase STRC and capture the spread between borrowing costs and the stock's dividend yield. When Bitcoin's price fell, leveraged investors faced pressure to add collateral or sell STRC positions.
Strategy is implementing measures to prevent similar market disruptions, including maintaining strong US dollar reserves and implementing a repurchase policy when STRC trades below its $100 stated amount. The company also aims to attract long-term institutional investors.
STRC has recovered to approximately $98.41 and currently carries a 12% variable annual dividend rate.
