Michael Saylor Introduces Perpetual Preferred Stock for Bitcoin Funding
Michael Saylor, chairman of Strategy (formerly MicroStrategy), is introducing perpetual preferred stock named "Stretch" as a new funding mechanism to acquire Bitcoin. This move aims to replace traditional methods like common stock sales and convertible bonds, which have contributed to the company's $75 billion Bitcoin assets.
Saylor's Bitcoin Credit Model
- The "Stretch" securities do not mature and can defer dividend payments, offering flexibility.
- They feature variable-rate dividends and lack voting rights, distinguishing them from conventional debt and equity.
- Saylor plans to retire billions in convertible notes over four years, relying more on preferred offerings for funding.
- The goal is to establish a "BTC Credit Model," potentially raising up to $200 billion if demand is strong.
High-Yield Risks
- Strategy has raised approximately $6 billion this year through four perpetual preferred offerings.
- The latest $2.5 billion tranche is one of the largest capital raises in the crypto space this year.
- Concerns exist about sustainability due to ongoing dividend payment requirements amidst Bitcoin's lack of income generation.
- Saylor’s strategy also addresses limitations in the convertible market that exclude retail investors.
- Experts warn that high yields (8% to 10%) could become burdensome during market downturns.
- Critics label these instruments as risky due to their non-cumulative nature and issuer discretion over dividends.
As of now, Bitcoin trades at $117,260, down over 5% from its recent all-time high of $124,400, yet up 101% year-to-date.