What is $STRF?

• Research suggests $STRF is a perpetual preferred stock by Strategy, offering a 10% annual dividend tied to Bitcoin acquisition.
• It seems likely that dividends start June 30, 2025, and are cumulative, potentially escalating to 18% if unpaid.
• The evidence leans toward risks including Bitcoin volatility and dividend uncertainty, with mixed market reactions.
• It appears unique due to its high yield and adjustable liquidation preference, with no voting rights for holders.

What is $STRF?

$STRF is a perpetual preferred stock issued by Strategy, a publicly traded company listed on Nasdaq (MSTR; STRK). It was unveiled as part of a public offering registered under the Securities Act of 1933, with plans to offer 5,000,000 shares. Unlike common stock, $STRF does not grant voting rights but offers a fixed 10% annual dividend, payable quarterly in arrears starting June 30, 2025. These dividends are cumulative, meaning if not paid, they accumulate at an initial rate of 11% per annum, escalating by 100 basis points per period, with a maximum of 18% per annum. The stock’s liquidation preference starts at $100 per share but adjusts daily based on the last reported sale prices over the previous 10 trading days. The primary use of proceeds is for general corporate purposes, including the acquisition of Bitcoin and working capital, reflecting Strategy’s ongoing commitment to its Bitcoin strategy.

How It Works

$STRF operates as a hybrid security, combining elements of equity and debt. Here’s a breakdown of its mechanics:

• Dividends: Holders receive a 10% annual dividend, paid quarterly on March 31, June 30, September 30, and December 31, beginning June 30, 2025, if declared by Strategy’s board. If dividends are unpaid, they accumulate at an escalating rate, starting at 11% and potentially reaching 18% per annum.
• Redemption: Strategy can redeem all (not less than all) shares if outstanding shares fall below 25% of the originally issued amount or under certain tax events, at a cash amount equal to the liquidation preference plus accumulated unpaid dividends.
• Repurchase Rights: In case of a fundamental change (e.g., merger, acquisition), holders can require Strategy to repurchase their shares at the stated amount plus unpaid dividends.
• Liquidation Preference: Initially $100 per share, this adjusts daily based on the stock’s trading price over the previous 10 days, offering a dynamic valuation mechanism.

This structure provides investors with a steady income stream while allowing Strategy to raise capital without diluting common shareholders’ voting power, a strategy that has drawn both praise and scrutiny.

Brief History of the Project and Team

Strategy, originally MicroStrategy, was founded in 1989 by Michael Saylor, Sanju Bansal, and Thomas Spahr, initially focusing on business intelligence (BI) software. The company’s pivot to Bitcoin began in August 2020, with Saylor, now Executive Chairman, leading the charge to adopt Bitcoin as the primary treasury reserve asset. This move transformed Strategy into the largest corporate Bitcoin holder, with holdings reaching 499,226 BTC by March 2025. Saylor’s vision has positioned Strategy as a pioneer in corporate cryptocurrency adoption, with previous capital-raising efforts like the STRK preferred stock offering in February 2025. The $STRF offering is a continuation of this strategy, leveraging the company’s software expertise and Bitcoin focus to innovate in financial markets.

Project’s Features

$STRF stands out due to its unique design, tailored to the DeFi landscape:

• High Dividend Yield: Offering a fixed 10% annual dividend, which is notably high compared to typical preferred stocks, especially in a low-interest-rate environment.
• Cumulative Dividends with Escalation: Unpaid dividends accumulate at increasing rates, providing a safeguard for investors, with a potential escalation to 18% per annum.
• Adjustable Liquidation Preference: Unlike traditional preferred stocks, $STRF’s liquidation preference adjusts daily based on market prices, creating a dynamic valuation mechanism.
• No Voting Rights: Preserves control for common shareholders, aligning with Strategy’s governance structure.
• Perpetual Nature: Lacks a maturity date, making it a long-term investment vehicle.
• Tied to Bitcoin: Proceeds fund Bitcoin acquisitions, directly linking investor returns to Strategy’s Bitcoin strategy, a feature rare among preferred stocks.

These features position $STRF as a hybrid instrument, offering the stability of preferred stock with the growth potential tied to Bitcoin, a combination that is uncommon in traditional finance.

Project’s Risks

While $STRF offers attractive features, it is not without risks, particularly given its ties to the volatile cryptocurrency market:

• Bitcoin Volatility: Strategy’s financial health is heavily dependent on Bitcoin’s price, which has seen swings of over 80% in past years, such as the 2022 crash. This volatility could strain the company’s balance sheet and affect dividend payments.
• Dividend Uncertainty: Dividends are not guaranteed and require board approval, though they are cumulative. If Strategy faces financial difficulties, missed payments could escalate to 18% per annum, increasing financial pressure.
• Liquidity Risks: The offering structure, with potential incremental share issuance, may limit marketability, especially in a volatile market, potentially affecting investors’ ability to sell.
• Interest Rate Sensitivity: As a fixed-income-like instrument, $STRF may be sensitive to rising interest rates, which could depress its market value.
• Credit Risk: In liquidation, preferred stockholders rank below creditors and bondholders, meaning recovery is not assured in bankruptcy scenarios.
• Regulatory Risks: Changes in cryptocurrency regulations, such as potential restrictions on corporate Bitcoin holdings, could impact Strategy’s operations and, by extension, $STRF’s value.

These risks highlight the need for investors to carefully assess their risk tolerance, especially given the high stakes tied to Bitcoin’s performance.

What Makes This Project Unique?

$STRF distinguishes itself in the financial landscape through several unique attributes:

• Bitcoin-Focused Financing: Few companies tie preferred stock offerings directly to cryptocurrency acquisition, making $STRF a pioneer in this space.
• High Yield with Escalation: The 10% dividend rate, with potential escalation to 18%, is rare for preferred stocks, offering a significant income stream.
• Adjustable Liquidation Preference: This dynamic feature, adjusting based on market prices, is uncommon and ties the stock’s value to its trading performance, unlike static preferred stocks.
• Non-Dilutive for Common Shareholders: By issuing preferred stock, Strategy raises capital without diluting voting rights, preserving control for existing shareholders.
• Perpetual and Cumulative: The lack of maturity date and cumulative dividend structure provide long-term income potential, with built-in protections for missed payments.

Compared to traditional preferred stocks, $STRF’s direct link to Bitcoin and innovative features make it a novel instrument, appealing to investors seeking exposure to both fixed income and cryptocurrency growth.

Project’s Governance

As a Nasdaq-listed company, Strategy adheres to standard corporate governance practices, which extend to $STRF:

• Board of Directors: Overseen by a board that includes Michael Saylor as Executive Chairman, responsible for strategic decisions, including dividend declarations for $STRF.
• Shareholder Rights: Common shareholders have voting rights, while $STRF holders, as preferred stockholders, do not, aligning with typical preferred stock structures.
• Regulatory Compliance: Strategy must comply with SEC regulations and Nasdaq governance standards, ensuring transparency and accountability.
• Transparency: The company provides regular financial reports, press releases, and investor relations materials, such as the official announcement for $STRF at Strategy Press Release, keeping stakeholders informed.

While $STRF holders lack voting rights, they benefit from Strategy’s robust governance framework, which is critical for maintaining investor confidence.

Outlook

Current Status

As of March 20, 2025, Strategy’s $STRF offering is in the proposal stage, announced on March 18, 2025, and subject to market conditions. The company aims to raise $500 million through 5,000,000 shares, with the offering backed by major financial institutions like Morgan Stanley, Barclays, Citigroup, and Moelis. Strategy continues its Bitcoin acquisition strategy, holding 499,226 BTC, valued at billions, and has faced mixed market reactions, with some analysts praising the innovation and others questioning financial sustainability.

Potential for the Future

The future of $STRF hinges on several factors:

• Growth Potential: If Bitcoin’s price continues to rise, Strategy’s holdings could appreciate significantly, potentially boosting $STRF’s value indirectly. For instance, Bitcoin’s recent surge past $100,000, driven by institutional adoption, could benefit Strategy’s balance sheet.
• Dividend Sustainability: The high 10% dividend yield, translating to approximately $50 million annually if fully subscribed, may strain cash flows, especially if Bitcoin prices decline, as seen in the 2022 crash of over 80%.
• Market Sentiment: Analysts are divided, with some likening the strategy to historical hedge fund calamities due to its reliance on Bitcoin, while others see it as a creative financing approach. The offering’s success will depend on investor appetite for high-yield, Bitcoin-tied instruments.

Overall, $STRF’s future outlook reflects Strategy’s commitment to Bitcoin but faces scrutiny over long-term financial stability, particularly in a volatile crypto market.

Factsheet

Conclusion

$STRF represents a bold intersection of traditional finance and DeFi, offering a high-yield, perpetual preferred stock tied to Bitcoin acquisition. Its unique features, such as adjustable liquidation preference and cumulative dividends, cater to investors seeking income and exposure to cryptocurrency growth. However, risks like Bitcoin volatility and dividend uncertainty require careful consideration. As Strategy continues its Bitcoin-focused strategy, $STRF’s success will depend on market conditions and investor confidence, making it a fascinating case study in the evolving DeFi landscape.