MicroStrategy launches a new move: preferred stock STRD debuts, but the community is not buying it?

What is different about this "new card"? What signals does its structural design, potential risks, and market games release?

Written by: Fairy, ChainCatcher

Strategy has come up with new tricks.

To continuously increase its Bitcoin position, MicroStrategy has been frequently 'bloodletting' in recent years, financing through common stocks, convertible bonds, and preferred stocks, advancing on three fronts.

The bull market is not over, and the chips are doubled. Yesterday, Strategy announced the launch of a new preferred stock product, STRD, which is another chip on its Bitcoin heavy position path. What makes this "new card" different? What signals does its structural design, potential risks, and market game release?

STRD: High interest, but no guarantee of arrival

STRD is a Class 3 preferred stock product launched by Strategy, with a proposed public offering of 2.5 million shares, and the proceeds will be mainly used for Bitcoin acquisition and working capital replenishment. STRD is essentially another structured expression of the BTC long strategy, continuing the framework of STRK and STRF, and making a new design in the income distribution and exit mechanism.

Similar to the previous version, the underlying asset behind STRD is still Bitcoin, but this time Strategy has adopted a more "defensive yet offensive" structure: the annualized coupon is 10%, but there is no mandatory payment obligation, and the interest does not accumulate.

The crypto KOL Phyrex interpreted succinctly: "The essence of STRD is to lend money to Strategy at an annual interest rate of 10%, but Strategy may not necessarily distribute the promised 10% interest. If it doesn't distribute, it will not make up for it later. In the explanation, Strategy promised to distribute on time, provided that the company's profits are favorable."

As for where this interest comes from, Strategy theoretically has three possible payment paths:

• Selling BTC holdings: If the Strategy liquidates part of its Bitcoin holdings, it can generate cash flow, but this will incur capital gains taxes and contradict its long-term holding strategy.
• Continuous financing roll-over: It may raise money to pay interest through reissuing debt or other instruments, which might be the approach currently preferred by Strategy.
• Operating cash flow: If the company's other businesses are profitable, it may also be used to pay interest.

While Strategy has the right not to pay interest, the cost of doing so would be extremely heavy. Once the interest rate is stopped, the market price of STRD is bound to come under pressure, investor confidence will be frustrated, and there will be more resistance to refinancing in the future. Therefore, the market generally believes that as long as the Bitcoin market is stable, Strategy is likely to choose to perform on time to maintain its market credibility and the sustainability of the capital chain.

"Triple Sword Attack": The Multi-layered Preferred Shares of Strategy

Now that we've talked about the features of STRD, let's take a look back at Strategy's current three preferred stock products. STRK, STRF and STRD have their own positioning in terms of liquidation priority, return design, and risk structure, and constitute the key puzzle pieces of Strategy's multi-layer capital structure. Here's a comparison table of the three products compiled by Juan Leon, Senior Investment Strategist at Bitwise (translated by ChainCatcher):

From the perspective of investor adaptation, STRK is more suitable for conservative allocation needs that pursue stable returns and have a lower risk tolerance; STRF is aimed at neutral investors who expect to lock in a higher fixed income but can accept a certain level of credit risk; STRD, on the other hand, focuses on aggressive funds with a high risk tolerance.

In addition to the extension of the product level, the launch of STRD may also be a step up to Strategy's capital structure chassis. According to the chart shared by community member @DogCandles, STRD has a "low status" but "big role", and optimizes the overall capital structure by improving the credit support of upper-tier products.

The community is not buying it, STRD controversy arises

The release of STRD is a carefully designed move by Strategy, but the community is not unanimous in praise. Many voices point to its "capital magic":

• @chaojidigua: Jiang Taigong fishing, those who are willing can take the bait.
• @MemeSiguoyi: Don't think that the crypto world can print money with air coins; we also have our own way of printing money in the stock market.
• @Softelectrock: Ponzi nesting dolls.

The author of "The Bitcoin Era", Adam Livingston, directly points out: STRD is essentially a BTC accumulation option disguised as a yield tool. When BTC rises sharply, Strategy redeems at face value; when BTC falls sharply, it simply does not pay interest. Investors are actually paying for their belief in "the ultimate adoption of Bitcoin".

Dylan LeClair, the Bitcoin Strategy Director at Metaplanet, described it as a "genius design" from a structural perspective: "The issuance of STRD has actually improved the credit quality of STRF."

Regarding the future development path of Strategy, crypto KOL Phyrex made a bolder prediction: "It is possible that Strategy will consider some inventory of Bitcoin, such as lending out BTC, or participating in some quantitative trading to maintain cash flow. In the future, Strategy may become a BTC-based bank."

The chips of the strategy have been pushed to the center of the table. Wrap faith in structured products, conceal unilateral bets with risk-return models, and attract market sentiment with "high interest".

This financial experiment based on faith is becoming increasingly complex and worthy of attention.