STRF or STRK? Comparing Strategy Preferred Stock Offerings
The STRF share sale is scheduled to close on Tuesday, with net proceeds for Strategy expected to be approximately $711 million.
James Van Straten | Edited by Sheldon Rebeck on March 25, 2025, 9:30 UTC
What you need to know:
- STRK and STRF are preferred shares.
- STRF provides a fixed 10% cash dividend with no conversion option, while STRK offers an 8% dividend with potential conversion into common shares.
- Strategy aims to raise $711 million in the STRF sale, exceeding its original target of $500 million, with the offering set to close later Tuesday.
Disclaimer: The analyst who wrote this article owns shares of Strategy (MSTR).
US-based Strategy (MSTR), which has made buying Bitcoin (BTC) part of its core corporate strategy, recently expanded its financial products by issuing a second series of Series A perpetual preferred shares, adding new items to its growing line of capital markets products.
The company is offering 8.5 million shares of a new offering called Strife (STRF) at $85 a share, which would net $711.2 million in Bitcoin. That's more than the initial $500 million it planned to raise. The sale is set to close later Tuesday. Strategy's previous preferred offering, Strike (STRK), initially raised $563 million.
In the capital structure, perpetual preferred shares occupy an intermediate position between debt and common equity, typically providing dividends and greater price stability. This makes them attractive to investors seeking lower volatility and more predictable returns. Unlike common shareholders, preferred shareholders do not have voting rights.
STRF pays a 10% annual dividend on a $100 par value, with payments made quarterly in cash. If Strategy misses a dividend, the amount increases by an additional 1% per year to a maximum dividend rate of 18%, creating an incentive to pay on time.
Strategy may buy back all STRF shares if less than 25% of the original issue remains on the market or upon certain tax events, in which case shareholders will receive a liquidation preference plus any unpaid dividends. In addition, in the event of a “fundamental change,” holders have the right to require the company to buy back their shares at a specified amount plus any accrued dividends.
STRK Dividend Cut
In contrast, STRK offers an 8% annual dividend based on its $100 liquidation preference, although the effective yield declines as the price of STRK rises. Unlike STRF, STRK includes a conversion feature that allows holders to exchange their preferred shares for common shares at a 10:1 ratio if the common share price reaches $1,000, providing an opportunity for equity growth. This means the new issue functions more like a fixed-income security, making it the less volatile of the two options.
While STRK may appeal to investors seeking a combination of income and potential capital appreciation, STRF is clearly targeted at those who value income and capital stability. To support these dividend payments, Strategy will rely on a combination of operating cash flow, proceeds from convertible debt offerings, and at-the-market (ATM) sales of shares.
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