BlockBeats News, June 27th, Farside Investors published an analysis of Strategy (MSTR) preferred stock STRC, stating that the so-called price stabilization mechanism of STRC is fundamentally unstable. The product was issued at a price of $100 and was designed with a mechanism to push the price towards $100: if STRC falls below $100, the company can increase dividends to raise the price; if it goes above $100, dividends can be lowered to lower the price. If investors believe that the credit risk of Strategy is increasing, the price of STRC should fall. If the company then raises the dividend rate, it may further weaken the company's credit position, leading to a "death spiral." Additionally, the dividend is determined by the company itself and is not an automatic stabilizing system, creating greater uncertainty for investors evaluating STRC.

From basic financial logic, issuing perpetual instruments with an 11.5% yield to purchase Bitcoin is a bad trade. Even if Bitcoin's long-term average annual growth rate reaches 10%, plus long-term inflation of 5%, Bitcoin may still be very successful, but it may not necessarily cover the 11.5% annual cost. If the price of Bitcoin undergoes a temporary decline, the company may need to sell BTC at a low point to pay interest, resulting in a net loss. Assuming the STRC dividend remains at 11.5% and calculated at an 8% discount rate, its fair value is $144, significantly higher than the $100 issue price. Under this assumption, issuing STRC is a bad trade for Strategy, but investing in STRC may be a good investment. However, STRC is not a fixed-rate perpetual bond; Strategy has the right to lower the dividend by 25 basis points monthly until the SOFR rate (currently around 3.6%). Considering this right, the estimated value of STRC is around $55.

STRC is currently around $75, about 25% below the $100 target. The price stabilization mechanism is currently not in effect, and the company has not responded by increasing the dividend. This means that the mechanism has largely failed, and there is no clear reason for STRC to return to $100 in the future. If the market expects Strategy to gradually reduce the dividend to SOFR, STRC should approach $55. The most likely short-term option for Strategy is to maintain an 11.5% dividend and temporarily ignore the STRC discount issue by issuing new shares or selling Bitcoin to continue paying the dividend. However, they believe this is only delaying the problem. If the company truly wants to address the issue, there are mainly two realistic choices: either start buying back STRC or completely abandon the price stabilization mechanism and lower the dividend to SOFR. Buying back STRC may be the most likely outcome, but the company may take some time to succumb to the pressure and face reality.