Key Information:
- Strategy has recently utilized sales of its STRK and STRF preferred shares to fund Bitcoin purchases, bypassing common stock dilution.
- Analyst Jeff Walton emphasized the increasing effective dividend yields of these preferred stocks, which have thrived alongside steady U.S. Treasury yields.
For the last fortnight, Strategy opted against its at-the-market (ATM) equity program associated with common shares for acquiring Bitcoin.
This tactic leverages the minimal premium between the share price and its multiple net asset value (mNAV), which effectively allows raising funds for Bitcoin without affecting current shares’ stakes.
Disclaimer: The analyst mentioned here possesses shares of Strategy (MSTR).
When the share price is close to the actual Bitcoin asset value, utilizing common shares via ATM ceases to be beneficial. Such offerings are only useful when conducted at a substantial premium.
The company’s recent 1,045 BTC acquisition was covered via both preferred share ATM programs: STRK contributed 59.18%, while STRF offered 40.82%. Past performance shows STRK has achieved strong lifetime returns of 35% and STRF brought back 24%, allowing Strategy to continue accumulating Bitcoin while still protecting common stock holders’ interests.
Analyst Jeff Walton remarked that even with the effective dividend yield of both preferred stocks falling from approximately 10%, U.S. Treasury yields remained relatively stable at 4.5%. This trend is linked to the stock price increase, drawing attention to these preferred shares when rate stability is observed.
Should the common stock price escalate notably past twice its mNAV, Strategy may resume issuing common shares via ATM, having room for additional issuance at a premium. The ATM for common stocks predominantly funds dividend commitments for the preferred shares but allows for flexibility during positive market conditions.
