The Strategy’s STRC is outperforming major ETFs despite trading below $100
The Strategy’s STRC preferred stock has become the largest holding among the three largest US preferred stock ETFs, which collectively hold $756 million in protection as its price remains about 13% below its $100 value.
Summary
- STRC has become the largest holding of the three largest popular ETFs with $756 million invested.
- Institutional shares increased by 105% as retail ownership fell from 78% to 71%.
- The strategy is to issue more STRC and buy Bitcoin if the stock returns to $100.
Michael Saylor, founder and executive chairman of Strategy, disclosed that STRC now leads positions in BlackRock’s iShares Preferred and Income Securities ETF (PFF), Virtus InfraCap’s US Preferred Stock ETF (PFFA), and VanEck’s Preferred Securities ex Financials ETF (PFXF). In a July 24 post, Saylor described the placement as evidence that Strategy’s “digital credit” products are entering institutional portfolios.
These three funds provide investors with indirect exposure to STRC and preferred securities issued by established US companies. According to Saylor’s figures, their combined STRC position has reached $756 million, making the bond the largest individual holding in the portfolio.
Although demand for the ETF has increased, STRC closed at $86.89 on July 24, gaining 2.29% during the session before rising to $87.14 in after-hours trading, according to market data compiled by Yahoo Finance. Its closing price left the stock 13.11% below the $100 level the Strategy is designed to track.
Trading below the benchmark has become a key obstacle for Su because the company uses STRC sales to raise funds for Bitcoin purchases. The strategy could issue additional preferred stock near or above $100 and direct the proceeds to Bitcoin, but selling new stock at a steep discount would secure less cash per share and weaken the economy.
The demand for ETFs has raised institutional ownership
Strategy CEO Phong Le reported that the average STRC position held by institutions increased 105% to $3.5 million between March and July. At the same time, the share of retail investors fell from 78% to 71%, according to figures published in X.
“Institutions are coming,” wrote Le.
His calculations are correct as reports describe an increase in the average cost of the institution as 10%. Le’s post put the increase at 105%, indicating that the average position has doubled over a four-month period.
Institutional participation does not prove that every buyer expects STRC or Bitcoin to rise, according to Bitcoin critic Peter Schiff. In response to Le, Schiff argued that retail investors are likely to sell their positions at a loss while professional investors enter trades designed to profit from differences between the Strategy’s securities.
Schiff suggested that other funds were not buying STRC while shorting the Strategy’s common stock, MSTR, as a spread trade. Some buyers may have paired long STRC positions with short Bitcoin exposure, he added.
“None of those ads are betting,” Schiff wrote in his response.
The Strategy currently pays STRC holders an annual dividend of 12% in cash through two monthly payments. The company’s STRC information page says management adjusts the dividend every month to encourage the stock to trade at its $100 target value and reduce price volatility.
The higher premium on the preferred stock does not cover the discount. STRC’s 52-week range ranges from $71.25 to $100.42, while its July 24 closing price remained closer to the lower end of that range than equity.
The level of $ 100 controls the funding of Bitcoin for the Strategy
Le has directly linked some STRC issuances and Bitcoin purchases to preferred stock acquisitions. In a July interview, Strategy’s CEO said the company would resume issuing more STRC once it gets back on track.
“We will continue to build that. And yes, if the Stretch returns to the level, we will issue more. We will buy more Bitcoin,” Le said.
Under this funding model, the return to $100 would allow the Strategy to sell new STRC shares on more favorable terms and use the proceeds to add Bitcoin. Until the rebate closes, Le’s comments indicate the company has little incentive to expand the program.
The strategy has already shown how pressure on its preferred securities can affect its Bitcoin treasury. A July 6 filing showed that the company sold 3,588 BTC for $216 million to fund dividends on its digital debt holdings and to pay off debt. After the sale, Saylor reported that Strategy held 843,775 BTC and increased its holdings in US dollars to $2.55 billion.
And on July 6, Binance Stocks added STRC for local trading, according to an exchange announcement reported by crypto.news. The listing followed the launch of the perpetual futures linked to STRC and gave Binance users another way to trade the preferred security.
Binance said that fully paid-up securities lending will be available after the stock transaction is fully completed. While the listing adds another distribution channel for STRC, the stock’s continued discount shows that the ETF’s accumulation and increased trading access have not yet returned the $100 level needed to restart Bitcoin’s preferred share-sharing offering.
