STRC’s preferred stock has fallen as much as 17% below its $100 value, prompting Arca Chief Investment Officer Jeff Dorman to argue that selling billions of dollars in Bitcoin may be the company’s best way to ease pressure on its capital structure.
Summary
- Jeff Dorman says selling $3–4 billion in Bitcoin could help stabilize STRC’s struggling STRC preferred stock.
- Dorman gives a 70% chance that Strategy continues to sell MSTR shares rather than reduce Bitcoin holdings.
- QCP and Peter Schiff separately raised concerns about equity financing, fundraising costs, and investor risks.
According to Dorman’s June 18 X post, STRC’s recent decline has left the Strategy facing tough choices as investors question the sustainability of its preferred stock holdings. The preferred security fell to a low of $82.53 on June 18 before recovering to close at $88.59, which remains below par.
Describing the situation as the latest phase of the “MSTR pickle,” Dorman said management must decide whether to take direct action to restore confidence in STRC or continue to operate under a structure that leaves many parts of the company exposed to uncertainty.
Selling Bitcoin can buy the Strategy more time
In Dorman’s opinion, the most effective solution would involve selling between $3 billion and $4 billion of Bitcoin. Giving a 25% chance of that outcome, he said such a move would provide more flexibility, support STRC holders, and address concerns surrounding the preferred stock without materially changing the company’s long-term Bitcoin strategy.
While Dorman acknowledged that Bitcoin’s massive selloff could weigh on the stock in the short term, he argued that it would buy the company valuable time and ease pressure on its capital structure.
His most likely situation, however, points elsewhere. Dorman gave a 70% chance to Strategy continuing its current approach of selling small amounts of MSTR stock at what he described as unattainable levels.
Under that outcome, he said STRC investors would retain some hope of a recovery while Bitcoin holdings remain unchanged, although common shareholders could face further declines.
The comments come as the investigation surrounding Strategy’s financial model continues to intensify. As reported by crypto.news, Peter Schiff recently accused Strategy founder Michael Saylor of misleading investors who bought STRC after it was promoted as a yield-generating investment.
Schiff argued that retirees and income-oriented investors could have grounds for legal action if the risks associated with the security were not adequately disclosed. He also warned that the stock’s decline could make future fundraising more expensive if investors start looking for higher yields to buy more STRC shares.
Equity obligations remain among the concerns
In addition to the stock sale and Bitcoin disposal, Dorman offered a 5% chance of what he called a “nuclear option” involving the elimination of payments associated with preferred securities.
According to Dorman, the move could leave preferred shareholders receiving only 30 to 40 cents on the dollar while shutting Su out of the capital markets. At the same time, he said the company would eliminate an annual cash commitment of about $1.7 billion.
Various concerns about liquidity have resurfaced in recent weeks. Earlier, market maker QCP estimated that the Strategy’s cash flow could support preferred dividend payments for about seven and a half months.
QCP added that if the existing funding channels are not so attractive, the company may need other sources of capital, in which Bitcoin sales may be one available option.
Along with those concerns, Dorman challenged the Strategy’s valuation. Based on his calculations, the company holds about $35.2 billion in unsecured Bitcoin securities against an equity market capitalization of about $40.4 billion, leaving MSTR trading at about 1.15 times the value of its total assets.
Given those figures, Dorman argued that MSTR should be trading below net asset value and warned that the stock could continue to fall unless Bitcoin stages a strong recovery. Even then, he said any increase would depend on Strategy avoiding further reductions in dividends, asset sales, or future fundraising activities.
