Strategy’s STRC tops major ETFs despite trading below $100

Strategy’s STRC preferred stock is the largest holding of the three major U.S. preferred stock ETFs, with a combined total of $756 million in securities, even though the price is still about 13% below its $100 par value.

Michael Saylor, co-founder and executive chairman of Strategy, revealed that STRC currently leads the portfolio of BlackRock’s iShares Preferred Income Securities ETF (PFF), Virtus InfraCap’s U.S. Preferred Stocks ETF (PFFA), and VanEck’s Preferred Securities ex Financials ETF (PFXF). In a July 24 X post, Saylor said the listing was evidence that Strategy’s “digital credit” products were making their way into institutional investor portfolios.

The three funds provide investors with indirect exposure to STRC alongside preferred securities issued by established U.S. companies. Their combined STRC positions total $756 million, making the security the largest individual holding in their respective portfolios, according to Saylor’s statistics.

Despite the increased demand for the ETF, STRC rose 2.29% in after-hours trading to $87.14 in after-hours trading, and closed at $86.89 on July 24, according to market data shown by Yahoo Finance. At the close, the stock was 13.11% below the $100 level, which was the strategy’s target.

Trading below par is a key constraint for Strategy as the company uses STRC sales to raise funds to purchase Bitcoin. This strategy could issue additional preferred stock near or above $100 and direct the proceeds to Bitcoin, but selling the new stock at a deep discount would result in less capital per share, weakening the economics of the deal.

Institutional ownership rises due to ETF demand

Strategy CEO Phong Le reported that the average STRC position held by financial institutions increased by 105% to $3.5 million between March and July. Over the same period, retail ownership fell from 78% to 71%, according to figures published by Le in X.

“The institution is coming,” Lee wrote.

His numbers correct reports that put the average institutional ownership increase at 10%. Le’s post lists the growth rate as 105%, which means the average position has more than doubled in four months.

According to Bitcoin critic Peter Schiff, the participation of institutional investors does not prove that all buyers expect either STRC or Bitcoin to rise. In response to Lee, Mr. Schiff argued that while professional investors were trading with the intention of profiting from the differences between Strategy’s securities, individual investors may have sold their positions at a loss.

Mr. Schiff suggested that some funds may have bought STRC while shorting Strategy’s common stock, MSTR, as a spread trade. Other buyers may have combined long STRC positions with short Bitcoin exposure, he added.

“None of these trades are bullish bets,” Schiff wrote in his response.

Strategy currently pays STRC holders a 12% annual dividend in cash through two monthly payments. The company’s STRC information page states that management adjusts the dividend rate monthly to encourage the stock to trade near its $100 par value and to reduce price volatility.

High dividends on preferred stocks have not ended their discounts yet. STRC’s 52-week range is $71.25 to $100.42, but the July 24 closing price is still closer to the low end of the range than par.

$100 Level Controls Strategy’s Bitcoin Funding

Mr. Le directly links further STRC issuance and Bitcoin purchases to the recovery of preferred stock. Strategy CEO said in an interview in July that they would resume issuing additional STRCs once they returned to par.

“We will continue to build it. And, yes, when the stretch returns to parity, we will issue more. We will buy more Bitcoin,” Lee said.

Under this funding model, if it returns to $100, Strategy will be able to sell new STRC shares on more favorable terms and use the proceeds to add Bitcoin. Until the discount ends, Le’s comments indicate the company has little incentive to expand the program.

The strategy has already demonstrated how pressure on preferred securities can impact Bitcoin treasuries. The company sold 3,588 units, according to a July 6 filing. $BTC Raised $216 million to fund dividends and maintain liquidity on digital credit securities. After the sale, Mr. Thaler reported that Strategy held $843,775. $BTC and increased its US dollar reserves to $2.55 billion.

Also on July 6, Binance Stocks added STRC to spot trading, according to an exchange announcement reported by crypto.news. This listing follows the introduction of STRC-linked perpetual futures, offering Binance users another route to trade preferred securities.

Binance said that full securities lending will be available after the stock trade is fully settled. While this listing adds a new distribution channel to STRC, the continued discount in the stock price indicates that the ETF’s accumulation and additional trading access have not yet restored the $100 level needed to resume Bitcoin purchases with Strategy’s preferred stock funds.