Strategy Extends Bitcoin Sales to Second Week To Reduce $1.1bn STRC Burden

In the second quarter, Strategy paid $400mn of cash dividends on its preferred stock. A year earlier, it paid $49mn. The bill has risen roughly eightfold in 12 months.

Since early 2025, Strategy has raised money by issuing four series of preferred shares, all listed on Nasdaq and all starting with the first three letters of the word strategy: Strife (STRF) and Stride (STRD) paying fixed dividends of 10%, Strike (STRK) paying 8%, and Stretch (STRC), whose rate the company sets itself. A fifth series, denominated in euros and trading as STRE, sits outside the Nasdaq listing. Every series is perpetual, meaning it has no maturity date and is never repaid unless Strategy chooses to redeem or buy the shares back. Holders rank ahead of ordinary shareholders and are owed a cash dividend regardless of whether the company makes money.

That last feature is why the composition of the bill matters more than its size. Of the $400mn paid in the quarter, $283mn went to STRC alone, about 71% of the total and an annualized $1.1bn from one instrument. STRC is also the only series whose cost can move. It accumulates dividends at a variable rate that, in the company's own words, it may adjust at its sole and absolute discretion. For the month ended 30 Jun, that rate was 11.5%.

The cash bill against the cash business

Annualizing, the second quarter puts Strategy's preferred dividends at about $1.6bn - and that burden is rising since its preferred-stock base nearly doubled in six months. At the end of December 2025, the company had 78.2mn preferred shares outstanding with a liquidation preference of $8bn. By 30 Jun 2026, it had 153.5mn shares and a liquidation preference of $15.5bn.

That growing obligation stands in contrast with the earnings power of Strategy's underlying software business. Strategy's software operation produced total revenues of $122.4mn in the second quarter and gross profit of $81.6mn. Annualized, that is roughly $490mn of revenue and $330mn of gross profit, against $1.6bn of dividends. Interest on the convertible notes, at $15.6mn for the quarter, is comparatively small.

The software business covers about a fifth of the dividend bill at the gross profit line. The rest has to come from somewhere, and Strategy owns two things it can turn into dollars: Bitcoin (BTC) and its own shares.

Why STRC and none of the others

Retiring STRC, which carried a fixed-coupon of 11.5% at the end of June, removes an obligation whose cost the company has been ratcheting upward at a time when the overall preferred-stock burden is rising. 

The trade also makes sense on the numbers. Strategy sold 1,690 BTC for $108.6mn, at an average price of $64,262. That was below the $75,385 average purchase price across its Bitcoin holdings, implying a loss of about $18.8mn relative to that portfolio average. 

Strategy used the proceeds to retire 1.15mn STRC shares. Those shares had a stated value of $115.2mn, meaning the company bought them back for about $6.6mn less than face value. At STRC's 11.5% June dividend rate, retiring the shares would also save about $13.2mn a year in dividends. On that basis, the annual dividend savings would offset the implied Bitcoin loss in roughly 17 months by Sandmark's calculation.

There is also no easy way to defer the problem, which is why the dollar buffer exists. STRC dividends are cumulative, accruing on the stated amount whether or not they are declared and whether or not funds are legally available. If a payment is missed, the certificate provides for further dividends to accrue on the unpaid amount, compounded semi-monthly at the prevailing rate. Skipping a payment does not save money, it increases it. An amendment effective 30 Jun shifted STRC dividends from monthly to semi-monthly, requiring Strategy to fund payments twice a month.

The zero that says the most in the filing

The loudest number in the 10 Aug filing is a zero. Strategy issued no preferred stock last week, despite having $17.5bn of STRC capacity available, plus $4bn of STRD, $2.1bn of STRK and $1.6bn of STRF. Roughly $25bn of shelf capacity, untouched.

Instead, it sold 6,585,682 common shares for net proceeds of $653.1mn and put $650mn of that into what it calls its USD Reserve, a dollar buffer held to cover preferred dividends and debt interest. That reserve has reached $4.65bn, enough to cover just under three years of dividends at current rates.

Taken together, the two decisions reveal the constraint. Adding more preferred stock at current rates would increase the dividend burden, so Strategy is avoiding it. Selling common equity raises cash without adding another coupon. And Bitcoin is the only asset on the balance sheet large enough to retire the costly preferred outright, so it is selling it.

Strategy still holds 840,447 BTC and has $785mn of preferred buyback capacity and $1bn of common buyback capacity left from the programmes announced in June. But the direction of travel has reversed. The company that built to issue securities and buy Bitcoin, is now selling BTC to retire securities and issuing shares to pay the dividends on the securities that remain.

The market read it as a mechanic

The market appeared to read the sale as a funding mechanic rather than a change in Strategy's Bitcoin thesis. Strategy shares fell modestly after the filing, trading 2% down at nearly $98, but the move did not suggest investors were alarmed. Bitcoin was trading around $64,800 at 13:10UTC, also showing little reaction to the sale.

The more important point is what the transaction says about Strategy's funding model. Its shares are trading below the value of the Bitcoin backing them. That makes issuing more common stock to buy Bitcoin unattractive, because each new share would dilute the amount of Bitcoin represented by existing shares.

Issuing more preferred stock creates a different problem: it increases Strategy's dividend obligations. That leaves the company with limited options. It can sell common shares to raise cash without adding another coupon, and it can sell Bitcoin to reduce the preferred-stock burden directly. 

That is essentially what Strategy did: it sold common stock to build its cash reserve and sold Bitcoin to retire preferred shares and cut future dividend costs.

Sandmark put questions to Strategy on 10 Aug on the funding of the STRC buybacks, the pause in preferred issuance, the current STRC dividend rate and whether the company regards two consecutive weeks of sales as a change in its approach to its Bitcoin holdings. Strategy had not responded by the time of publication.