Author: Lesley
Source: MetaEra
In the history of financial innovation on Wall Street, few have been able to transform personal beliefs into corporate strategies and reshape the entire industry's financing model like Michael Saylor. The chairman of Strategy (formerly MicroStrategy) is driving an unprecedented financial experiment: replacing traditional equity and debt financing with perpetual preferred stock to continuously 'supply blood' for its aggressive Bitcoin accumulation strategy.
According to Bloomberg, since the beginning of this year, Strategy has successfully raised about $6 billion from the market through four rounds of perpetual preferred stock issuance, with the latest issuance of perpetual preferred stock 'Stretch' (STRC) amounting to $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 originally obscure business intelligence software company has leveraged such a massive capital structure solely based on its firm belief in Bitcoin. As of August 18, Strategy held 629,400 Bitcoins, with a total investment of $33.139 billion, valued at over $72 billion at current market prices.
Top 100 publicly traded companies holding Bitcoin globally (source: bitcointreasuries.net).
Notably, in the latest issuance of perpetual preferred stock, retail investors accounted for nearly a quarter—this is almost unimaginable in the traditional corporate preferred stock market. However, behind this financial engineering is a radical evangelist who once urged fans to 'sell a kidney to buy Bitcoin,' along with a retail army willing to follow his beliefs.
To understand this financial experiment that may reshape the landscape of the digital asset industry, we need to start from the beginning.
The story and mechanism of perpetual preferred stock.
Perpetual preferred stock is a hybrid financial security with no fixed maturity date, combining the income certainty of bonds with the perpetual characteristics of stocks. The issuing company does not need to repay principal but only needs to pay agreed dividends periodically, allowing companies to use investor funds indefinitely.
From an investor's perspective, purchasing perpetual preferred stock is equivalent to obtaining a 'perpetual interest right'—returns primarily come from ongoing dividend income rather than the repayment of principal at maturity as with traditional bonds.
The table below compares the differences between perpetual preferred stock, convertible bonds, and common stock across multiple key dimensions:
In summary, perpetual preferred stock is a 'third type of financing tool' that lies between debt and equity:
• For enterprises, it allows them to lock in funds long-term without repaying principal, alleviating cash flow pressure through flexible dividend arrangements while avoiding the equity dilution that comes with issuing common stock.
• For investors, although it ranks lower than debt in the capital structure, perpetual preferred stock usually offers higher and more secure returns, and has priority over common stock for repayment in company liquidation.
For this reason, it combines flexibility on the financing side with stable returns on the investment side, becoming an increasingly important option in corporate capital operations.
Although perpetual preferred stock provides Strategy with flexible financing options, its market volatility, liquidity, and structural risks cannot be ignored.
• Market volatility and liquidity risk: The volatility in Bitcoin prices directly affects Strategy's repayment and refinancing capabilities, and the burden of dividend payments increases with the scale of financing. According to Saylor's 'HODL' strategy, selling Bitcoin further limits the company's access to cash flow.
• Structural risks of the financing model: The dividend payments of non-cumulative perpetual preferred stock are at the discretion of the issuer, which may lead to refinancing difficulties when market confidence falters; excessive reliance on retail investors means that if retail enthusiasm wanes, attracting institutional investors becomes a challenge.
• Market bubbles and systemic risk: The crypto treasury company model may show signs of a bubble, and once market demand dries up, companies reliant on this financing model may face the risk of a funding chain break, leading to broader market volatility.
Since the beginning of 2024, Saylor has raised over $40 billion through stock and bond financing. This year, Strategy has raised approximately $6 billion through four rounds of perpetual preferred stock issuance. Saylor even claims that theoretically up to $100 billion to $200 billion could be raised. These four issuances demonstrate a clear strategic evolution and their respective market positioning.
Last month, Strategy launched STRC (Stretch), a floating-rate perpetual preferred stock aimed at providing stable pricing and high returns for yield-seeking investors looking for indirect Bitcoin investment. Each share of STRC, with a par value of $100, will pay monthly dividends, with an initial annual yield of 9%.
The core of Saylor's issuance of STRC (Stretch) is to highlight its accessibility. Unlike earlier tools he praised as innovative but too complex or volatile—unlike STRK, STRF, and STRD—STRC resembles a yield-enhanced savings account. By focusing on short-term investments and low price volatility, it eliminates the risks associated with long-term volatility while providing returns higher than bank deposits. By over-collateralizing with Bitcoin, it ensures that even during Bitcoin price fluctuations, the trading price of STRC can stay close to the $100 par value, thus offering investors a more stable and attractive investment option.
Why choose perpetual preferred stock? A fundamental shift in the business model.
As the bottlenecks of traditional financing models become apparent, perpetual preferred stock has become a key choice for Strategy's fundamental transformation against the backdrop of mNAV premium compression and the exploration of new funding sources.
1. Traditional financing models encounter bottlenecks: compression of the mNAV premium.
Strategy's perpetual preferred stock experiment originates from a real challenge: the compression of the mNAV premium.
The so-called mNAV premium refers to the phenomenon where the stock price of Strategy is consistently higher than its net asset value in Bitcoin. This premium was once the core of Saylor's 'financial magic'—the company could finance in the market at a price above the actual value of Bitcoin, achieving the effect of 'discounted Bitcoin purchases.' However, Brian Dobson, a Disruptive Technology Equity Research analyst at Clear Street, pointed out: 'The mNAV premium has compressed in recent weeks, and the management of Strategy is understandably concerned about creating too much dilution.'
This change forces Strategy to seek new financing paths. Traditional common stock issuances become inefficient when the mNAV premium narrows; the convertible bond market, although cheaper, excludes this important funding source of retail investors. The emergence of perpetual preferred stock is an inevitable choice under such constraints.
2. Discovering new funding sources: The 'faith-driven' model of retail investors.
More crucially, Saylor discovered an unprecedented financing opportunity: directly converting personal influence into corporate capital.
Michael Saylor currently has 4.5 million X Followers (source: X platform).
Michael Youngworth, Head of Global Convertibles and Preferred Strategy at Bank of America, admitted: 'As far as I know, no other company has leveraged retail enthusiasm like Strategy has.' In the latest STRC issuance, retail investors accounted for as much as 25%, which is almost unimaginable in the traditional corporate preferred stock market.
These retail investors 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 distinguishing Strategy from traditional enterprises.
3. Strategic transformation and upgrading: From equity financing to hybrid capital structure.
The introduction of perpetual preferred stock actually marks a fundamental shift in Strategy's business model.
Under the traditional model, Strategy relied on stock price increases to support its financing capabilities, but this model highly depended on market sentiment and Bitcoin price fluctuations. The new model creates a relatively stable 'intermediate layer' through perpetual preferred stock: preferred stock investors receive relatively certain dividend returns, common stock shareholders bear more volatility risk, and the company obtains perpetual funding with matched terms to hold Bitcoin, a perpetual asset.
This redesign of the capital structure allows Strategy to better cope with changes in market cycles. Even in the event of Bitcoin price drops and the disappearance of the mNAV premium, the company can still maintain its financing capabilities through perpetual preferred stock.
4. Ultimate goal: To create a $100 billion BTC 'credit' concept.
Saylor's ambitions extend far beyond this. He speculates that 'theoretically, $100 billion... even $200 billion could be raised,' aiming to create a large-scale 'credit' concept system based on Bitcoin as the underlying asset.
The core logic of this vision completely disrupts traditional corporate financing: no longer relying on the cash flow of products or services but instead constructing a self-reinforcing mechanism of 'holding Bitcoin → producing stock price premium → financing Bitcoin purchases → forming positive feedback loops.' Through perpetual preferred stock, convertible bonds, and other multi-layer financing tools, Strategy aims to transform volatile digital assets into stable income sources, utilizing the mNAV premium to achieve 'discounted Bitcoin purchases' arbitrage, forming a financial empire centered on Bitcoin.
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, during a Bitcoin downturn, an 8-10% perpetual dividend payment could become a heavy burden. Yuliya Guseva from Rutgers Law School bluntly stated that 'if market appetite dries up, this model will no longer be sustainable.' Saylor is betting the future of Strategy on whether digital assets can redefine the foundational rules of the modern financial system.
Conclusion: Innovation or risk?
Strategy's perpetual preferred stock experiment represents a significant innovation in the financing model of digital asset companies. Michael Saylor has cleverly combined 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 reconstruction of the relationship between enterprises and investors in the digital economy era. The traditional corporate value assessment 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, this experiment by Strategy has provided a replicable template for subsequent digital asset companies, and it has also sounded an alarm for regulators: as companies increasingly rely on retail sentiment and asset bubbles for financing, can traditional risk management frameworks still effectively protect investors' interests? The answer to this question will determine the future direction of the digital asset industry.
