Self-identified as a Bitcoin development company, Strategy (formerly MicroStrategy) announced on March 20 the issuance of permanent preferred shares with the code STRF. A total of 8,500,000 shares will be issued, significantly higher than the previously estimated 5 million shares, but still at a discounted price of $85, with the transaction expected to be completed by March 25.
The newly launched STRF, while classified as permanent preferred shares and appearing to have equity characteristics, is in fact aimed at the bond market with a valuation of up to 300 trillion. The conditions are as follows:
- Code: STRF
- Issuance Price: $85
- Face Value (also Redemption Price): $100
- Interest Rate: Annualized 10%, with quarterly payments on March 31, June 30, September 30, and December 31, with the first payment scheduled for June 30, 2025.
- Compounded Dividends: If the current dividend is not paid, the unpaid portion will accumulate as “compounded dividends,” and the annual interest rate will increase by 100 basis points (1%) each quarter on top of the original 10%, with a maximum rate of 18% per annum.
Typically, the issuance of corporate convertible bonds is limited and targeted at professional investors. However, with the issuance of STRF, Strategy plans to have it listed on the secondary market, allowing any investor with a brokerage account to purchase it. The issuance price, around $100, allows investors to easily invest in small amounts, which is indeed a clever strategy!
However, this product has no maturity date, meaning there is no guarantee of repayment of principal at a fixed moment, which marks a difference from traditional bonds. Additionally, the discounted issuance price of $85 raises the original 10% dividend to 11.8%, making the yield quite attractive.
Note: The 10% dividend is calculated based on a $100 investment, thus yielding $10 annually. If the investor’s cost is $85, the yield becomes 10÷85=11.8%.
Investors should be reminded that dividends from U.S. stocks are subject to a 30% tax rate, which will reduce the actual yield to approximately 7% to 8%.
After the completion of the transaction on March 25, STRF is expected to enter secondary market trading by the end of the month.
Strategy’s convertible preferred shares STRK, issued at a discounted price of $80 at the end of January, reached a peak of $100.25. However, following a decline in Bitcoin prices and the subsequent introduction of the higher-yielding STRF, the stock price has recently hovered around $85. Its first dividend payment is also scheduled for April 1.
Investing in cryptocurrencies involves high risks; their prices may be highly volatile, and you could lose your entire principal. Please assess the risks carefully.