Strategy seeks vote on daily dividends for preferred stocks
Strategy's board has approved a plan to move its four preferred stocks, including STRC, to daily dividend payments, with shareholders set to vote on 28 October.
Key points
- Strategy's board approved the proposal on Thursday, per a Friday SEC filing
- Shareholders will vote at a virtual special meeting on 28 October
- STRC would pay first under the new schedule, expected 2 November
- STRF, STRK and STRD would follow in January, with first payments expected 4 January
- STRC fell to an intraday low of $71.25 on 26 June and has since recovered to about $98.41
Strategy is asking shareholders to approve a change that would move its four preferred stocks, including STRC, to daily dividend payments. The company's board approved the proposal on Thursday, according to a Friday filing with the US Securities and Exchange Commission. Shareholders are scheduled to vote on the amendments at a virtual special meeting on 28 October. The plan would not change the dividend rates or the total amount paid.
Under the proposal, each calendar day would become a dividend record date, with the corresponding payment made on the next business day. STRC would move to the new schedule first, with its initial daily dividend payment expected on 2 November. STRF, STRK and STRD would follow in January, with their first payments under the daily schedule expected on 4 January. The amendments would take effect after Strategy files updated certificates governing the preferred stocks with the state of Delaware.
The move follows fellow Bitcoin treasury company Strive, which moved its SATA preferred stock to daily dividend payments and became the first public company to adopt the model. Strive announced in May that SATA would begin paying dividends every business day from 16 June at a 13% annual rate, and said it had eliminated its outstanding debt in the first quarter. Unlike Strive's business-day schedule, Strategy's proposal would make every calendar day a record date, payable on the following business day.
Vote set for October
Strategy holds 846,000 Bitcoin, while Strive holds 26,355 Bitcoin, according to BitcoinTreasuries.NET. Strategy has described its preferred securities as digital credit, designed to generate income from a capital structure built around its Bitcoin treasury. STRC, a key part of that strategy, has seen significant price swings this year. In June it fell sharply below its $100 stated amount, hitting an intraday low of $71.25 on 26 June, according to Yahoo Finance data.
Speaking on Natalie Brunell's Coin Stories podcast earlier this week, Strategy CEO Phong Le attributed the decline to more leverage entering the market for STRC than the company had anticipated. He said some investors borrowed against Bitcoin at lower rates to buy STRC and capture the spread between their borrowing costs and STRC's dividend yield. When Bitcoin's price fell, those investors faced pressure to add collateral or sell STRC, according to Le.
Le said the company did not expect the amount of leverage that came into the system, calling it a lesson learned. He said Strategy is seeking to prevent another such unwind by maintaining a strong US dollar reserve and having a policy that allows it to repurchase STRC when it trades below its $100 stated amount. He also said the company wants to attract more long-term holders, particularly institutional investors.
Strive led the way
STRC has since recovered to about $98.41, close to Strategy's stated goal of keeping the security between $99 and $100. It currently carries a 12% variable annual dividend rate. The shareholder vote will decide whether the daily payment schedule takes effect for all four preferred stocks.
