Strategy Utilizes Preferred Stocks for Capital Raise Amid Narrowing Share Premium
Key Points on Strategy (MSTR) Funding Approach
- Strategy has not used its at-the-market (ATM) equity program for common shares to fund bitcoin purchases.
- The company chose to utilize ATM programs for two perpetual preferred stocks instead.
- This decision is influenced by the narrowing premium between the share price and the company's multiple net asset value (mNAV).
- Issuing common shares via ATM is less appealing when the share price is close to bitcoin's asset value.
- Recent purchase of 1,045 BTC was funded through proceeds from STRK (59.18%) and STRF (40.82%) offerings.
- Preferred stocks have yielded strong lifetime returns: 35% for STRK and 24% for STRF.
- Analyst Jeff Walton noted declining effective dividend yields for STRK and STRF, which enhances their attractiveness despite stable Treasury yields.
- Strategy may resume common stock ATM usage if share prices significantly exceed twice the mNAV.
- The common stock ATM primarily funds dividend obligations but preferred stock ATMs can also be utilized based on market conditions.