Sales Surge: STRF ‘upsized’ by 15% discount & 17% yield boost
This morning, Michael Saylor proudly announced that his company had increased its fundraising deal from $500 million to a whopping $722.5 million. However, to seal the deal, he sweetened the pot with improved terms for the STRF preferred stock dividend – details that were noticeably absent from his celebratory tweet.
To be precise, Strategy, the company formerly known as MicroStrategy, initially aimed to sell 5 million shares of STRF preferred stock at around their $100 liquidation preference. However, they ended up offering those shares at a 15% discount, priced at $85 each.
For those unfamiliar, liquidation preference is a safeguard for certain investors, giving them the right to get their initial investment back first – before common shareholders – if the company experiences a liquidity event such as a dividend payout, dissolution, or other distribution.
On top of the 15% discount on the liquidation preference, Strategy also committed to maintaining a 10% dividend rate, calculated on the original $100 per share value. This clever combination means investors are getting an even more attractive deal – effectively an 11.76% dividend rate due to their lower purchase price.
And there’s one more cherry on top: the liquidation preference for STRF shareholders starts at $100 and, get this, it won’t go down – it could even go up! If Strategy issues more STRF shares at higher prices later on, or if the STRF stock price on the Nasdaq climbs for a few weeks, these shareholders stand to gain an even greater liquidation preference.
An upsized round because of upsized generosity
Perhaps unsurprisingly, the net proceeds for Strategy from this offering are estimated to be around $711.2 million – significantly exceeding their initial $500 million target. However, this larger sum is directly tied to the enhanced deal terms: the improved position in the company’s capital structure and the increased dividend rate that attracted investors.
Strategy plans to use the majority of the funds raised from this preferred stock sale to its favorite pastime: buying even more Bitcoin (BTC).
Read more: Michael Saylor’s bitcoin announcements no longer seem to pump MSTR stock
Reactions to the announcement were a mixed bag. Some enthusiasts cheered it as a bullish sign for both the company and the price of Bitcoin. Peter Schiff, predictably, took to social media to mock the move. Meanwhile, others voiced concerns, wondering who would be left holding the bag if Bitcoin’s bear market slide continues.
Overall, critics certainly have grounds for concern, especially considering Strategy’s own multi-month bear market and the increasingly worrying losses on their recent Bitcoin investments. In fact, since reaching its all-time high in November, MSTR shares have plummeted by a significant 44%.
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