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Strategy’s preferred stock STRC, the dividend-paying stock that Michael Saylor sold at $100 to fund BTC buys, traded as low as $73.62 on the Nasdaq today. That was 26.4% below the $100 price the stock is meant to hold.
The slide came a day after a law firm announced a common plan to solicit interest in a potential class action against the company.
Strategy created STRC to trade at a stable $100 per share price but it hasn’t been able to withstand the selling pressure and growing distrust in Strategy’s management to restore confidence.
Both BTC and Strategy’s MSTR common stock hit a 52-week low today, along with STRC.
The law firm said it’s investigating claims “resulting from allegations that Strategy may have issued materially misleading business information to the investing public.”
It’s soliciting holders to join a prospective suit.
That’s not the same as a filed complaint nor a regulatory probe. To date, there’s no public information about any regulatory action against Strategy by the SEC.
Despite this, complaints against Saylor poured in on social media.
Some highlighted Strategy’s near-$14 billion unrealized loss, while pseudonymous skeptic Pledditor wrote, “He floods the timeline with AI-generated images of himself.”
Elsewhere, a proposed class action solicitation earned over 300,000 views, and data analytics firm Arkham asked, “Is STRC the next LUNA?”
Peter Schiff, meanwhile, claimed that MSTR is in a “death spiral.”
Strategy, the digital asset treasury company formerly known as MicroStrategy, designed STRC to sit at $100. It adjusts a variable dividend, now 11.5% annually, to keep the stock near $100, but its tactics are proving ineffective.
The company has hiked the rate seven times since launch and will likely hike it again for its upcoming semi-monthly dividends starting mid-July.
The framework is not holding the line. Roughly 105 million STRC shares trade against a notional value near $10.5 billion.
Today’s $73.62 low valued those shares around $7.7 billion.
That is, in other words, a market cap loss of nearly $2.8 billion below the $100 stated value Strategy aims to hold. Indeed, the stock lost over $700 million in market cap last night alone.
Despite alarming ads likening STRC to a high-yield bank account or money market, Strategy concedes in its own filings that it’s not required to hold any assets to back STRC.
Unlike a real bank account or money market, STRC has no FDIC nor SIPC insurance to protect against its declining value. Holders have no right to sell STRC back to Strategy for $100.
In order for STRC to trade for $100, they must find another buyer willing to pay that price. Today, those other buyers were bidding less than $74.
Strategy has spent nearly five years creating products like MSTR, STRC, and other stocks in order to buy BTC on leverage.
In addition to over $1 billion in expenses to operate the company over that period, Strategy spent $64.1 billion to buy BTC that is altogether worth just $50.5 billion today.
Since August 2020, it’s cost Strategy over $1 billion to lose $13.6 billion investing in BTC.
The BTC treasury is underwater, the losses are growing, but the STRC dividend bill is endless. Every STRC share sold near $100 created a perpetual obligation.
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