Author: Lesley, MetaEra
In the history of financial innovation on Wall Street, few have been able to transform personal beliefs into corporate strategy like Michael Saylor, thereby reshaping the financing model of an entire industry. The chairman of Strategy (formerly MicroStrategy) is driving an unprecedented financial experiment: replacing traditional equity and debt financing with perpetual preferred shares to continuously 'supply blood' for its aggressive Bitcoin accumulation strategy.
According to Bloomberg, this year, Strategy has successfully raised approximately $6 billion from the market through four rounds of perpetual preferred share issuance, with the latest round of perpetual preferred shares 'Stretch' (STRC) reaching a scale of $2.5 billion. Michael Saylor described STRC as Strategy's 'iPhone moment,' emphasizing its potential to open a scalable and low-volatility capital market access channel for the Bitcoin treasury.
This previously obscure business intelligence software company has leveraged its firm belief in Bitcoin to pry open such a massive capital lever. As of August 18, Strategy holds 629,400 Bitcoin, with a total investment of $33.139 billion, valued at over $72 billion at current market prices.
Top 100 publicly listed companies holding Bitcoin (source: bitcointreasuries.net)
More remarkably, in the latest issuance of perpetual preferred shares, retail investors accounted for nearly a quarter—something almost unimaginable in the traditional corporate preferred stock market. However, behind this financial engineering is a radical evangelist who once urged fans to 'sell kidneys to buy Bitcoin,' along with a retail army willing to follow his beliefs.
To understand this financial experiment that could reshape the landscape of the digital asset industry, we need to start from the beginning.
The story and mechanism of perpetual preferred shares
Perpetual preferred shares are a hybrid financial security with no fixed maturity date, combining the yield certainty of bonds with the perpetual characteristics of stocks. The issuing company does not need to repay principal but only pays agreed dividends regularly, allowing it to use investor funds indefinitely.
From an investor's perspective, purchasing perpetual preferred shares is akin to obtaining a 'perpetual income right'—returns mainly come from continuous dividend income rather than the principal recovery of traditional bonds.
The table below compares the differences between perpetual preferred shares, convertible bonds, and common stocks across several key dimensions:
In summary, perpetual preferred shares are a 'third type of financing tool' that lies between debt and equity:
For companies, it allows them to lock in funds long-term without the need to repay principal, alleviating cash flow pressure through flexible dividend arrangements while avoiding equity dilution from common stock issuance;
For investors, although positioned lower than debt in the capital structure, perpetual preferred shares typically offer higher and more secure returns and receive priority over common stock in company liquidation.
It is precisely for this reason that it combines flexibility in financing with stability in investment returns, becoming an increasingly important option in corporate capital operations.
Although perpetual preferred shares provide Strategy with a flexible financing method, their market volatility, liquidity, and structural risks cannot be ignored.
Market volatility and liquidity risks: The volatility of Bitcoin prices directly affects Strategy's ability to repay and refinance, while the burden of dividend payments increases as the scale of financing grows. According to Saylor's 'HODL' strategy, selling Bitcoin further restricts the company's channels for obtaining cash flow.
Structural risks of the financing model: The dividend payments of non-cumulative perpetual preferred shares are at the discretion of the issuer, which may lead to refinancing difficulties when market confidence wavers; excessive reliance on retail investors, if their enthusiasm wanes, will become a challenge for attracting institutional investors.
Market bubbles and systemic risks: The crypto asset treasury company model may show signs of a bubble; once market demand dries up, companies relying on this financing model may face the risk of a funding chain break, leading to more widespread market volatility.
Since the beginning of 2024, Saylor has cumulatively raised over $40 billion through equity and bond financing. This year, Strategy has raised approximately $6 billion through four rounds of perpetual preferred share issuances. Saylor even claims that it could theoretically raise as much as $100 billion to $200 billion. These four issuances demonstrate a clear evolution in strategy and their respective market positioning.
Last month, Strategy launched STRC (Stretch), a floating-rate perpetual preferred share designed to provide stable pricing and high returns for yield-seeking investors looking for indirect Bitcoin investment. Each STRC with a face value of $100 will pay monthly dividends, with an initial annualized yield of 9%.
The core of Saylor's issuance of STRC (Stretch) is to highlight its accessibility. Unlike the tools he once praised as innovative but overly complex or volatile—unlike STRK, STRF, and STRD, STRC is more like a yield-enhancing savings account. It eliminates the risks associated with long-term volatility by focusing on short-term investments and low price fluctuation while providing higher returns than bank deposits. By using Bitcoin as excess collateral, it ensures that even with Bitcoin price fluctuations, the trading price of STRC can remain close to the $100 face value, thus providing investors with a more stable and attractive investment choice.
Why choose perpetual preferred shares? A fundamental shift in the business model
As bottlenecks in traditional financing models become apparent, perpetual preferred shares have become a key choice for Strategy's fundamental transformation of its business model in the context of mNAV premium compression and the exploration of new funding sources.
1. Traditional financing models encounter bottlenecks: compression of the mNAV premium
Strategy's experiment with perpetual preferred shares stems from a real challenge: the compression of the mNAV premium.
The so-called mNAV premium refers to the phenomenon where Strategy's stock price is consistently higher than its Bitcoin net asset value. This premium was once the core of Saylor's 'financial magic'—the company could finance at prices above the actual value of Bitcoin, achieving the effect of 'buying Bitcoin at a discount.' However, Brian Dobson, a disruptive technology equity research analyst at Clear Street, pointed out, 'The mNAV premium has compressed in recent weeks, and Strategy's management is understandably concerned about creating too much dilution.'
This change has forced Strategy to seek new financing paths. The efficiency of traditional common stock issuance is greatly reduced when the mNAV premium narrows; although the convertible bond market has lower costs, it excludes individual retail investors, a crucial source of funding. The emergence of perpetual preferred shares is an inevitable choice under these constraints.
2. Discovering new funding sources: the 'faith-driven' model of retail investors
More critically, Saylor has identified an unprecedented financing opportunity: directly converting personal influence into corporate capital.
Michael Saylor currently has 4.5 million followers on X (source: X platform)
Michael Youngworth, Head of Global Convertibles and Preferred Strategy at Bank of America, candidly stated, 'To my knowledge, no company has utilized retail enthusiasm like Strategy before.' In the latest STRC issuance, retail investors accounted for as much as 25%, which is nearly unimaginable in the traditional corporate preferred stock market.
These retail investors have adopted a 'faith-driven' investment model towards Strategy, providing the company with a relatively stable source of funding. Compared to institutional investors, they are less affected by short-term market fluctuations and are more willing to accept higher risk premiums. This unique investor structure has become an important competitive advantage that distinguishes Strategy from traditional enterprises.
3. Strategic transformation and upgrading: from equity financing to a hybrid capital structure
The introduction of perpetual preferred shares actually marks a fundamental shift in Strategy's business model.
Under the traditional model, Strategy relied on stock price increases to support its financing capacity, but this model is highly dependent on market sentiment and Bitcoin price fluctuations. The new model creates a relatively stable 'intermediate tier' through perpetual preferred shares: preferred stock investors receive relatively certain dividend returns, common stock shareholders bear more volatility risk, while the company gains perpetual funding with matched terms to hold Bitcoin as a perpetual asset.
This redesign of the capital structure allows Strategy to better cope with changes in market cycles. Even in the case of Bitcoin price declines and the disappearance of the mNAV premium, the company can still maintain its financing capacity through perpetual preferred shares.
4. Ultimate goal: creating a $100 billion BTC 'credit' concept
Saylor's ambitions go far beyond this. He speculates, 'Theoretically, it could raise $100 billion… even $200 billion,' aiming to create a large-scale 'credit' concept system anchored by Bitcoin.
The core logic of this vision completely disrupts traditional corporate financing: no longer relying on cash flows from products or services, but instead constructing a self-reinforcing mechanism of 'holding Bitcoin → generating stock price premium → financing to purchase Bitcoin → forming a positive feedback loop.' Through multi-layer financing tools such as perpetual preferred shares and convertible bonds, Strategy seeks to transform volatile digital assets into stable income sources, leveraging mNAV premiums to achieve 'buying Bitcoin at a discount' arbitrage, thus forming a Bitcoin-centric financial empire.
However, this financial experiment is fraught with risks. If successful, Bitcoin could transition from a speculative asset to a widely accepted financial collateral. But as short-seller Jim Chanos warns, an 8-10% perpetual dividend payment could become a heavy burden when Bitcoin declines. Yuliya Guseva from Rutgers Law School bluntly stated, 'If market appetite dries up, this model will no longer be sustainable.' Saylor is betting on whether digital assets can redefine the fundamental rules of the modern financial system with the future of Strategy.
Conclusion: Innovation or risk?
Strategy's experiment with perpetual preferred shares represents a significant innovation in the financing model for digital asset enterprises. Michael Saylor cleverly combines personal influence, market sentiment, and digital asset investment through financial innovation, creating an unprecedented path for corporate development.
From a more macro perspective, Strategy's experiment represents a fundamental restructuring of the relationship between enterprises and investors in the digital economy era. The traditional corporate valuation system—based on cash flow, profitability, and balance sheets—has completely failed here, replaced by a new value creation mechanism based on asset appreciation expectations and market sentiment. This is not only a financial innovation but also an extreme test of the boundaries of modern corporate theory.
Regardless of the final outcome, Strategy's experiment has already provided a replicable template for subsequent digital asset enterprises and has also sounded an alarm for regulators: as corporate financing increasingly relies on retail sentiment and asset bubbles, can traditional risk management frameworks still effectively protect investor interests? The answer to this question will determine the future direction of the digital asset industry.
