Strategy’s STRC Still Lags Below $100 Target, Analyst Warns of $4B Bitcoin Sale Scenario

Key highlights:

• Strategy’s preferred stock fell to around $88, nearly 11% below its $100 target price.
• The company has now paused new STRC issuances, limiting its source of capital used to buy more Bitcoin.
• Arca’s CIO suggested that Strategy may need to sell $3 billion to $4 billion worth of BTC.

Strategy’s STRC stock has continued to trade below its $100 target.  This has raised concerns that Michael Saylor's firm may have to sell more Bitcoin to continue buying the token without incurring further financial losses.

As of press time, the stock is trading around $88, well below its target price of $100. The decline has drawn a lot of attention from the market because the firm uses STRC as one of its main tools to raise capital for BTC purchases.

 

The stock, officially known as Variable Rate Series A Perpetual Stretch Preferred Stock, was designed to trade close to $100. When it trades above that level, Strategy can issue new shares and use the funds to buy more Bitcoin. 

However, with the preferred stock now trading far below its target, the company has paused new issuances through the program. This temporarily limits one of its main BTC funding mediums.

Why STRC matters for Strategy’s Bitcoin plan

The Bitcoin treasury company currently holds about 846,842 BTC. This represents nearly 4% of the coin’s total supply. Strategy has been maintaining its purchases of the coin despite the market downturn since the October crash.

Earlier this month, the company changed STRC’s dividend structure from monthly payments to semi-monthly payments after receiving shareholder approval. The company hoped the new adjustments would help attract investors and support the stock price.

Its dividend yield currently sits around 11%, and Strategy could increase that payout if it wants to boost demand for the stock.

However, its continuous decline raised an uproar among investors. The treasury firm’s common shares, MSTR, have also fallen sharply, dropping more than 30% in the last month. This was while it was underperforming Bitcoin during the same period.

Analysts debate whether more Bitcoin Sales could follow

In May, Strategy surprised the market by selling 32 BTC for $2.5 million to help meet dividend obligations. This was the company’s first Bitcoin sale since it started its treasury in 2022.

After this sale, the Michael Saylor company revealed a $1.1 billion cash reserve it had established to cover future dividends and debt payments. However, some experts believe more difficult decisions would need to be made if the shares continue to trade this low.

Arca Chief Investment Officer Jeff Dorman said in an X post that Strategy may eventually need to sell between $3 billion and $4 billion worth of Bitcoin or additional company stock to boost STRC back to its $100 target.

It is also worth noting that not everyone agrees. Some analysts argue that the shares decline is more of a pricing issue than a sign of financial trouble. They reiterated that the product was designed for this kind of change, and in due time, it will adjust through dividend changes when market conditions improve.

Meanwhile, Bitcoin critics like economist Peter Schiff seem to have found their voice. Schiff claimed that STRC investors may actually have grounds to sue the company if they believe the risks were not clearly explained. 

He also questioned whether the stock’s structure can continue working if prices keep falling, stating that the firm’s structure is flawed.

“The financial house of cards Saylor built is collapsing. MSTR 's per-share discount to its Bitcoin holdings is soaring, STRC is tanking, and Bitcoin itself is breaking down,” Schiff said. “Soon, Saylor will trade in his orange tie for an orange jumpsuit.”