OK… what is MicroStrategy up to now?

MicroStrategy has announced their perpetual strike convertible preferred stock offering. Here’s what I know so far:

  • The stock is priced with a $100 liquidation preference and comes with an 8% dividend per year.
  • It’s listed as “non-rated” and will trade on NASDAQ under the ticker “STRK.”

This seems to be a hybrid type of preferred stock. On the surface, earning 8% annually sounds great, but MSTR itself is largely a Bitcoin vehicle… right?

I’m retired, so the idea of an 8% yield is tempting. But I’m concerned. Is this as good as it sounds, or is it just a way to enrich the founders? Anyone with experience or insights into this kind of offering? What risks should I be watching out for?

Just remember, this is preferred stock, not a bond. The 8% dividend isn’t guaranteed and can be reduced or suspended if the company decides to. Preferred shareholders are also behind bondholders and other creditors in bankruptcy proceedings, so in most cases, you’d be wiped out.

They can also pay the dividend in common stock instead of cash, which dilutes value. Personally, I’m not a fan of preferred stocks, and this one doesn’t change my mind.

@Cody

They can pay the dividend in common stock.

Wait, so if I bought 100 shares of STRK, does that mean I’d end up with 8 shares of MSTR by the end of the year? That sounds messy.

Zeke said:
@Cody
They can pay the dividend in common stock.

Wait, so if I bought 100 shares of STRK, does that mean I’d end up with 8 shares of MSTR by the end of the year? That sounds messy.

Yes, they could do that, but the bigger concern is whether they can maintain dividends at all. Companies often cut dividends during tough times, even if they’re healthy, to conserve cash. Since preferred dividends aren’t legally binding like bond payments, they’re the first thing to go if the company hits a rough patch.

Zeke said:
@Cody
They can pay the dividend in common stock.

Wait, so if I bought 100 shares of STRK, does that mean I’d end up with 8 shares of MSTR by the end of the year? That sounds messy.

So I dug into the prospectus, and this part raised a red flag for me:

“We expect to fund any dividends paid in cash on the perpetual strike preferred stock primarily through additional capital raising activities.”

That sounds a lot like they’re just borrowing from Peter to pay Paul. It’s giving me major Ponzi vibes… not saying it is, but still concerning.

Zeke said:
@Cody
They can pay the dividend in common stock.

Wait, so if I bought 100 shares of STRK, does that mean I’d end up with 8 shares of MSTR by the end of the year? That sounds messy.

Exactly. They’re just going to buy more Bitcoin with this money. They already hold a ton, so this just looks like an excuse to expand their stash. I was interested at first, but the more I read, the worse this feels.

As someone holding 360 shares of MSTR, I’ve learned a lot about their operations. Here’s the deal with STRK:

  • It’s aimed mostly at institutional investors.
  • Each share is priced at $100, and they’re issuing 2.5 million shares.
  • Dividends of $8 annually are paid in either cash or MSTR shares.

However, MSTR is heavily tied to Bitcoin. Their strategy relies on BTC prices staying high, and they fund dividends by issuing more debt or shares. This offering feels like another way to double down on Bitcoin investments. If BTC thrives, this might work out. If it tanks, though, STRK holders could lose big.

@Ming

They basically will always be worth $100, and they will yield $8 in cash or equivalent MSTR common shares.

That’s only true if Bitcoin holds steady. If BTC crashes or they suspend dividends, the value of these shares will plummet.

For anyone interested, here’s the prospectus link: Prospectus PDF.

I submitted an indication of interest (IOI) for the 1/30 offering, just for giggles.

What’s the downside?

The whole thing depends on Bitcoin. If BTC prices drop or the company faces liquidity issues, dividends could be suspended. It’s essentially a high-risk junk bond with a less secure yield. Plus, the $1,000 strike price means BTC has to triple in value for the convertible option to be worth anything.

I’m glad I sold. That company is all smoke and mirrors.

Noah said:
I’m glad I sold. That company is all smoke and mirrors.

Sold what? STRK hasn’t even started trading yet.

Noah said:
I’m glad I sold. That company is all smoke and mirrors.

Why were you holding it in the first place?

Noah said:
I’m glad I sold. That company is all smoke and mirrors.

I assumed they were building real products, not just funneling money into Bitcoin.

Feels like they’re just trying to get more Bitcoin out of this. If you’re into crypto, just HODL instead of jumping on this.

Why don’t they just call it what it is: a pyramid scheme?

Do you really think this has a secure dividend and you’ll get your money back? This screams high risk.