Michael Saylor Seeks to Restart MicroStrategy’s Financing Engine; Daily Preferred Stock Dividend Proposal Poised to Pass

According to Bloomberg, Strategy Executive Chairman Michael Saylor is looking to adjust the dividend structure of the company’s preferred stock, proposing to shift dividend payments for billions of dollars in preferred securities from semi-monthly or quarterly to daily. These securities carry an annualized yield of up to 12%. Saylor said the move would help boost liquidity and market efficiency. Previously, Strategy raised funds primarily by selling common stock to buy Bitcoin, but as the premium of common shares relative to its Bitcoin holdings vanished, the company turned to issuing perpetual preferred shares that do not dilute common shareholders’ equity. Such securities have no fixed repayment date, offering Strategy a new financing source. Strategy currently has over $14 billion in preferred shares outstanding. Though the firm has repurchased more than $1 billion in floating-rate preferred shares (STRC), it has not been able to issue new STRC since May. Analysts note that increasing dividend frequency mainly reduces dividend-related volatility, but cannot eliminate credit and Bitcoin price risks, nor will it necessarily improve market liquidity. The shareholder vote on the proposal will conclude on October 28. Given Saylor’s status as Strategy’s major shareholder, the proposal is expected to pass.