Strategy’s junior preferred stock, known under the ticker STRD, has recorded unusual and positive behavior by showing significant tightening in its spread relative to Treasury bonds. This phenomenon, where the STRD credit spread narrows even as the price of Bitcoin struggles to hold, suggests robust institutional demand for the company’s high-yield instruments. Investors appear to be decoupling the volatility of the underlying asset from the company’s ability to pay.
During the week ended December 14, the company capitalized on this wave of confidence to execute a massive sale through its “at-the-market” (ATM) program. Strategy managed to raise $82.2 million by placing approximately one million shares of STRD. This figure represents the largest weekly issuance of preferred stock since its launch, far surpassing other financial instruments previously offered by the corporation led by Michael Saylor.
The spread between the yield of these shares and the U.S. 10-Year Treasury Note hit a new low of 8.12% last Friday. Although this margin widened slightly on Monday following Bitcoin’s retreat below $86,000, the general trend since mid-November has been one of steady contraction. This behavior indicates the market perceives an improvement in credit quality or, alternatively, is desperately seeking higher yields in an uncertain economic environment.
The Financial Strength Behind the Appetite for Risk
To reinforce the perceived safety of these instruments, Strategy established a strategic reserve of $1.44 billion in early December. This war chest is designed to cover more than 21 months of dividends, providing a substantial liquidity cushion that mitigates default risk. Furthermore, the continued accumulation of Bitcoin by the company has increased collateral on the balance sheet, offering tangible backing to preferred stock holders, regardless of short-term price fluctuations.
The yield disparity between the company’s different preferred stock series has become a focal point for financial analysts. Currently, STRD offers a yield premium of roughly 320 basis points over the STRF series, which is more senior in the capital structure. This yield gap does not necessarily reflect imminent default risk, but rather market dynamics based on positioning within the capital stack, according to firm executives.
Is the market underestimating risks associated with Bitcoin volatility?
Michael Saylor, Strategy’s executive chairman, has dismissed concerns about potential non-payment of dividends for the more junior offerings. According to his view, the option to not pay is not operationally viable for the company, suggesting the current risk premium is an opportunity for investors. The stated goal has been to build a structured yield curve, spanning from conservative income products to higher-risk exposures tied to the Bitcoin-centric balance sheet.
Historical ATM issuance data compiled by independent analysts confirms a drastic shift in investor preference toward the riskier, higher-yielding end of Strategy’s offering. While issuance previously rotated among various series like STRF and STRK, recent weeks have been dominated almost exclusively by STRD. This trend marks a clear evolution in market appetite, prioritizing effective yield over the theoretical safety of senior series during a time of global financial readjustment.
