MicroStrategy launches 2.5 million perpetual preferred share offering called STRK
The largest corporate holder of bitcoin will offer 2.5 million shares of MSTR’s Series perpetual strike preferred stock.Perpetual preferred stock doesn’t have a maturity date or a mandatory redemption timeline; instead, it pays fixed dividends indefinitely as long as the issuing company remains operational.
Business intelligence company MicroStrategy on Monday officially launched its previously announced convertible preferred stock offering available to institutional investors and select retail investors.
Called STRK, MicroStrategy will offer 2.5 million shares of MSTR's Series perpetual strike preferred stock. The perpetual strike preferred stock will have a liquidation preference of $100 per share and accumulate cumulative dividends at a fixed rate that will be determined at the pricing of the offering, according to the press release. Regular dividends on the perpetual strike preferred stock will be payable quarterly if declared by MicroStrategy’s board of directors.
MicroStrategy intends to use the net proceeds from the offering for general corporate purposes, including acquiring bitcoin. Earlier today, the company said it purchased another 10,107 BTC for approximately $1.1 billion. The company now holds 471,107 BTC, worth over $46 billion.
Unlike bonds, perpetual preferred stock does not have a maturity date or a mandatory redemption timeline; instead, it pays fixed dividends indefinitely as long as the issuing company remains operational. MicroStrategy's perpetual strike preferred stockholders can convert their shares into class A common stock at certain times and under specific conditions. If they do, they may receive cash instead of fractional shares.
MicroStrategy also has the option to buy back all outstanding preferred stock for cash if the total value drops below 25% of the original issued amount or if certain tax events occur. The redemption price will match the stock’s liquidation value, plus any unpaid dividends, and in some cases, may be based on recent market prices.
If a major company event, known as a "fundamental change," occurs, stockholders can require MicroStrategy to repurchase their shares. The buyback price will be equal to the stock’s liquidation value plus any unpaid dividends.
Being able to convert into common shares provides these preferred stock investors with elements of volatility and optionality that they don't often see, Benchmark senior equity analyst Mark Palmer wrote in a Jan. 6 note to clients.
"These securities, in essence, would offer preferred investors a unique proposition: an embedded, indefinite call option on a company whose value is largely tied to a highly volatile cryptocurrency," Palmer stated.
Speaking on Jan. 13 during a Benchmark-hosted investor meeting in Orlando, MicroStrategy co-founder and executive chairman Michael Saylor noted the company is aiming to offer investors "both returns and volatility at factors of 1.5x those of bitcoin itself."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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