Michael Saylor's Strategy Plans Stock IPO to Fund Bitcoin Buys, Operations

Strategy, formerly MicroStrategy, announced plans Monday to raise fresh capital by selling shares of preferred stock, with the proceeds earmarked for Bitcoin purchases and other operational expenses.

Operating as a "Bitcoin Treasury" company, Strategy is seeking  $250 million through an initial public offering of 2.5 million shares of its "10% Series A Perpetual Stride Preferred Stock” (STRD). 

The stock will be listed on the Nasdaq, with each share initially priced at $100, offering investors a 10% annual dividend yield, according to a recent filing.

"We intend to use the net proceeds from this offering for general corporate purposes, including the acquisition of Bitcoin and for working capital," Strategy wrote in its Monday preliminary prospectus, supplementing an earlier January 27 filing.

The STRD offering represents Strategy's third preferred stock issuance this year following its Strike (STRK) and Strife (STRF) offerings.

In March, the company increased the size of these offerings from $500 million to $723 million within days of their announcement. STRD's new shares have a 10% annual, non-cumulative cash dividend, payable quarterly, starting September 30.

Preferred stock, such as Strategy's STRD, STRF, and STRK offerings, refers to a hybrid "stake in a company, sold on exchanges like common stock," asset management firm Fidelity explains.

It combines bond-like features with stock ownership, giving holders priority over common shareholders for dividend payments and asset claims, but typically without voting rights.

However, these dividends are not guaranteed or cumulative, so if they're not declared in a given quarter, investors won't get paid or recoup missed payments later.

Strategy has so far accumulated over $61 billion worth of Bitcoin, currently valued at roughly $106,000 each, according to data from CoinGecko.

Strategy sees its Bitcoin stash as being "long-term holdings" with the expectation of accumulating more.

There's no "specific target for the amount of Bitcoin we seek to hold," Strategy wrote in its prospectus filing, adding that it would continue to "monitor market conditions" to know whether it needs to add more Bitcoin or engage in more financing to do so.

Still, Strategy warns that a sharp decline in Bitcoin’s market value could hurt its ability to meet financial obligations, citing the potential for a "significant decrease" in its holdings to have adverse effects.

The company also notes that even unrealized gains on its Bitcoin could cause it to "become subject to the corporate alternative minimum tax," a liability under the Inflation Reduction Act of 2022.

Edited by Sebastian Sinclair