MicroStrategy’s preferred stock STRC has slid deep below par, and Arca CIO Jeff Dorman says there’s only one clear way to buy the company time: a large Bitcoin sale.
What happened
- STRC dropped as much as 17% below its $100 par value, hitting a record low of $82.53 on June 18 before recovering to close at $88.59 — still well under par.
- The decline has intensified scrutiny on MicroStrategy’s capital structure and the sustainability of its preferred-stock obligations.
Dorman’s take — three possible paths
In a June 18 post on X, Dorman laid out what he sees as the realistic options for MicroStrategy (MSTR) and the likelihood of each:
1) Big Bitcoin sale (25% probability)
- Dorman’s preferred “fix”: sell $3 billion–$4 billion of BTC.
- Pros: would shore up STRC, give the company breathing room and reduce financing stress without changing its long-term Bitcoin strategy.
- Cons: would likely pressure BTC’s price short-term, but he argues the time bought would be worth it.
2) Small MSTR stock sales (70% probability — Dorman’s most likely outcome)
- Management continues selling modest amounts of MSTR at what he calls non-accretive levels.
- Result: BTC holdings largely intact and STRC investors keep some hope, but common shareholders could face further downside as dilution or weak sales dynamics play out.
3) “Nuclear option” — eliminate preferred payments (5% probability)
- Cut payments tied to STRC, which Dorman estimates could leave preferred holders recovering just 30–40 cents on the dollar.
- Effect: removes about $1.7 billion in annual cash obligations but would likely shut MicroStrategy out of capital markets long term.
Broader context and risks
- Liquidity concerns: market maker QCP estimated MicroStrategy’s available liquidity could support preferred dividend payments for roughly 7.5 months. If funding channels weaken, BTC sales may become necessary.
- Legal and reputational risk: Peter Schiff recently accused co-founder Michael Saylor of misleading investors who bought STRC after it was marketed as a yield product. Schiff suggested retirees and income-focused investors might have grounds for legal action if risks weren’t properly disclosed, and warned the decline could make future fundraising costlier.
- Valuation snapshot: Dorman estimates MicroStrategy holds about $35.2 billion in unencumbered Bitcoin collateral versus an equity market cap near $40.4 billion — implying MSTR trades at roughly 1.15x net asset value. He argues MSTR should trade below NAV and warns the stock could slide further unless Bitcoin mounts a strong recovery and the company avoids additional dilution via dividends, sales, or fundraising.
Bottom line
Dorman frames the situation as the latest chapter in the “MSTR pickle”: either the company dumps a sizable chunk of BTC to stabilize STRC now, or it continues with incremental equity sales and risks prolonged uncertainty and downside for common shareholders. Investors will be watching management’s next moves closely — and how any big BTC sale would ripple through both MicroStrategy’s balance sheet and the broader market.
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