STRK Rises 3% Since Launch While MSTR Falls Over 20% – What’s Behind the Divergence?
Strike (STRK), the preferred stock issued by Bitcoin-focused investment firm Strategy (MSTR), has shown resilience in its first month of trading. Since its launch on February 5, STRK has gained 3%, while MSTR’s common stock has plunged over 20% during the same period.
Preferred stocks like STRK function as a hybrid between equity and debt, offering shareholders priority in dividend payouts and claims on company assets in the event of liquidation. STRK is a perpetual preferred stock, meaning it has no maturity date like common equity, yet it pays a fixed dividend, similar to debt instruments.
These characteristics make preferred stocks generally less volatile than common shares, a trend that has played out with STRK. According to Strategy’s data dashboard, STRK has only a 26% correlation with MSTR and a slightly negative -7% correlation with Bitcoin (BTC). Volatility data further supports this stability, with STRK at 49%, compared to BTC’s roughly 60% and MSTR’s exceeding 100%.
Impact of Strategy’s $21 Billion ATM Offering
Last week, Strategy announced a massive $21 billion at-the-market (ATM) offering for STRK, allowing the company to sell up to that amount of STRK at prevailing market prices over time. If fully executed, this could result in an estimated annual dividend payout of $1.68 billion.
To fund this commitment, Strategy has limited options—raising capital through an additional common stock ATM sale seems unlikely given MSTR’s declining share price. Instead, the firm may need to rely on cash flow from operations or issue convertible debt to cover the dividend obligation.
STRK’s Dividend Yield and Conversion Feature
STRK currently offers an 8% annual dividend yield based on its $100 liquidation preference. However, at its latest price of $87.45, the effective yield rises to around 9%, reflecting the inverse relationship between share price and yield.
Additionally, STRK includes a built-in conversion feature: Each share can be converted into 0.1 shares of MSTR if the common stock reaches $1,000. With MSTR closing at $262.55 on Wednesday, a significant price appreciation would be needed for this option to become valuable, but it does offer potential upside beyond STRK’s fixed dividend.
STRK as a Stability Play in a Volatile Market
As an income-generating asset with lower volatility than both BTC and MSTR, STRK presents a more stable investment alternative. However, the looming $21 billion ATM offering raises concerns about potential dilution, similar to the pressure MSTR’s common stock has faced from past share sales.
For investors, STRK’s appeal lies in its steady dividend payments and reduced price swings, but its long-term upside could be tempered by the sheer scale of Strategy’s issuance plans.
