Michael Saylor, chairman of the largest public Bitcoin treasury company, Strategy (formerly MicroStrategy), is embarking on what could be his most daring financial venture yet: the introduction of perpetual preferred stock as a new funding mechanism.
The perpetual preferred stock, branded “Stretch,” offers a unique financial structure—these securities do not mature and can even defer dividend payments, providing flexibility for the issuer while potentially unsettling investors.
The Stretch offering features variable-rate dividends and lacks voting rights, positioning it as neither conventional debt nor typical equity. Saylor believes this could provide the company with the necessary capital to continue acquiring Bitcoin.
This ambitious plan aims to establish a “BTC Credit Model,” where Bitcoin underpins a new stream of income. Saylor envisions the potential to raise “$100 billion… even $200 billion” if demand for these securities is strong.
As Michael Youngworth from Bank of America noted, this retail-driven approach is unique in the corporate preferred market, which is typically dominated by investment-grade institutions.
However, there are concerns about the sustainability of this model. The perpetual preferreds require ongoing, substantial dividend payments, which could be a challenge given that Bitcoin itself does not generate income.
Strategy’s CEO, Phong Le, has framed this shift as a way to create a more resilient capital structure, particularly in light of the challenges faced during the 2022 “crypto winter.”
Critics like short-seller Jim Chanos have labeled these instruments as “crazy” for institutions to buy, given their non-cumulative nature and the issuer’s discretion over dividend payments.
When writing, Bitcoin trades at $117,260, retracing over 5% from the recently achieved $124,400 all-time high earlier in the week. Year-to-date, the market’s leading crypto is up 101%.
Featured image from DALL-E, chart from TradingView.com
