Strategy Taps Preferred Shares for Bitcoin Buys, Avoiding Common Stock Dilution
Strategy (MSTR) has shifted its funding approach in recent weeks, opting to raise capital through sales of its perpetual preferred shares—STRK and STRF—instead of issuing new common stock, as it continues to add to its bitcoin (BTC) holdings.
The move reflects a strategic response to narrowing premiums between Strategy’s share price and its modified net asset value (mNAV), or the difference between its market capitalization and the value of its bitcoin holdings. With the stock trading closer to its underlying asset value, using the at-the-market (ATM) program for common shares has become less attractive, as dilution would provide little benefit unless shares trade at a meaningful premium.
In contrast, issuing preferred stock allows Strategy to raise funds without impacting common equity holders. The company’s most recent bitcoin acquisition—1,045 BTC—was financed entirely through preferred stock offerings: 59.18% from the STRK ATM and 40.82% from STRF.
Both preferred classes have performed strongly, returning 35% (STRK) and 24% (STRF) since inception, providing an appealing funding channel while preserving long-term upside for common shareholders.
According to analyst Jeff Walton, another factor driving investor interest in these preferreds is their declining effective dividend yields, which have fallen from near 10% despite stable benchmark U.S. 10-year Treasury yields hovering around 4.5%. As the market price of the preferreds rises, their yields fall—a bond-like behavior that adds appeal in the current interest rate environment.
Should Strategy’s common stock trade at a substantial premium—particularly above 2x its mNAV—the company may resume using its common stock ATM program. For now, however, the preferred stock offerings provide a more efficient and less dilutive capital-raising mechanism.
While the common stock ATM is still the primary tool for covering dividend obligations on the preferred shares, Strategy retains the flexibility to tap preferred stock ATMs for that purpose depending on market dynamics
