Disclaimer: The analyst who wrote this piece owns shares of MicroStrategy (MSTR).
MicroStrategy (MSTR) has undoubtedly positioned itself at the forefront of innovative capital-raising strategies, particularly in its pursuit of substantial Bitcoin (BTC) acquisitions. Recently, under the leadership of Executive Chairman Michael Saylor, the company has initiated a new chapter in this journey with its perpetual preferred stock offering, known as STRK.
Preferred stock, which occupies a unique position between equity and debt on the corporate balance sheet, is attracting significant attention. It provides investors with the regular income typically associated with bonds, while simultaneously granting them an ownership stake in the company.
Prominent MicroStrategy analyst Ben Werkman highlighted the appeal of preferred stock among institutional investors, underscoring its absence of maturity risk, alongside stable yields and the potential for equity upside. Werkman states, “I could see a scenario where [the preferred stock] starts taking some of the convertible bond space for fixed income accumulation due to the lack of any point in time maturity risk.” He further asserts that preferred stock could prove to be significantly more accretive than any convertible offerings or share sales to date.
These sentiments were echoed by Jeff Park, head of alpha strategies at Bitwise Investments, who characterized MicroStrategy’s preferred stock offering as one of the most compelling securities currently on the market. Park remarked, “STRK is a near-perfect instrument. It provides investors with two avenues for success: firstly, a decline in interest rates will significantly enhance the principal value, and secondly, should MicroStrategy’s stock appreciate, investors possess a valuable in-the-money (ITM) option to convert, allowing them to either own a higher volatility asset or sell directly.”
The iShares Preferred and Income Securities ETF (PFF)—the largest U.S. preferred stock ETF, boasting approximately $15 billion in assets under management—includes major corporations such as Boeing (BA), Wells Fargo (WFC), and Citigroup (C) as its principal holders.
As anticipation builds, the final pricing terms for this new security will be completed and announced following the market’s closure on Thursday. It is clear that MicroStrategy’s strategic moves are not just about capital growth, but rather a carefully curated approach to leverage market trends and investor interests in a rapidly evolving financial landscape.
