STRF or STRK? Which Preferred Stock is the Real Deal?

by

Preferred Stock Smackdown: STRF or STRK?

Oh, the eternal conundrum: STRF or STRK? Which preferred stock offering will you choose? Well, darling, let me enlighten you.

What to know:

  • STRK and STRF are both preferred stocks. How thrilling.
  • STRF offers a fixed 10% cash dividend with no conversion feature. Because who needs options, anyway?
  • STRK offers an 8% dividend and a potential conversion to common stock. Ah, the thrill of possibly becoming a commoner!
  • Strategy is set to raise $711 million through the STRF sale, upsized from its initial $500 million target. Because who doesn’t love a good surprise?

Strategy is selling 8.5 million shares of STRF at $85 each, because who doesn’t love a good round number? The sale ends later Tuesday, and Strategy’s earlier preferred issuance, STRK, initially raised $563 million. The company is clearly on a roll!

A perpetual preferred stock sits between debt and common equity in the capital structure, like the awkward middle child. It typically offers dividends and greater price stability, making it appealing to investors seeking lower volatility and more predictable returns. Unlike owners of common stock, holders do not get voting rights. Ah, the joys of being a silent partner!

STRF pays a 10% annual dividend on a $100 stated amount, with payments made quarterly in cash. If Strategy misses a dividend, the amount compounds at an additional 1% a year each up to a maximum 18% dividend rate. Because who doesn’t love a good incentive?

Strategy may redeem all STRF shares if fewer than 25% of the original issuance remains or under certain tax events. In which case, shareholders would receive the liquidation preference plus any unpaid dividends. Oh, the thrill of possibly getting your money back!

Lower dividends from STRK

In contrast, STRK offers an 8% annual dividend based on its $100 liquidation preference. Though the effective yield declines as STRK’s price rises. Unlike STRF, STRK includes a conversion feature, allowing holders to swap their preferred shares into common stock at a 10:1 ratio if the common share price reaches $1,000. Because who doesn’t love a good game of chance?

While STRK may appeal to investors looking for a blend of yield and potential capital appreciation, STRF is clearly aimed at those prioritizing income and capital stability. To support these dividend payments, Strategy will rely on a combination of operational cash flow, proceeds from convertible debt offerings and at-the-market (ATM) share sales on the common stock. Ah, the thrill of possibly getting your money back!

Strategy also has an open ATM program in place for STRK, recently purchasing 130 BTC, and has about $3.57 billion remaining on its ATM capacity through the common stock. Because who doesn’t love a good ATM?

The company’s shares rose more than 10% on Monday, by which point it held 506,137 BTC. Ah, the joys of being a successful company!

Read More

2025-03-25 12:33