Key Takeaways: Strategy's Bitcoin accumulation machine is running out of fuel as $1.5 billion in annual preferred dividends collide with a shrinking cash pile.
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Strategy faces $15B preferred stock crunch as Bitcoin flywheel stalls
Strategy's Bitcoin accumulation machine is running out of fuel as $1.5 billion in annual preferred dividends collide with a shrinking cash pile.
Strategy faces $15.5 billion in preferred stock and $1.5 billion in annual dividend costs as cash reserves dwindle to $871 million, Arca's Jeff Dorman warned.
"The model was built on the assumption that Bitcoin would continue rising strongly enough to support it," Dorman, chief investment officer at Arca, said. He described the structure as a bet that BTC was "about to moon" and could fund future obligations.
Strategy holds 843,738 BTC purchased at an aggregate price of $63.87 billion, or about $75,700 per coin, according to company disclosures. Bitcoin traded near $72,550 as of Thursday, down almost 6% over the past week, weakening the implicit collateral behind the preferred stock structure. The company burned through most of its cash reserve last month, spending about $1.38 billion to repurchase $1.5 billion face value of zero-coupon convertible notes due 2029 — locking in an 8% discount but leaving just $871 million on hand. Dorman called the timing "baffling" given the mounting dividend pressure.
The STRC preferred tranche alone carries a variable dividend recently raised to 11.5%, compounding the cash drain. Across four series — STRC, STRK, STRF and STRD — the company owes roughly $1.5 billion annually. Dorman said the structure leaves only stark outcomes: sell Bitcoin to pay the preferred holders or stop paying the dividend. "Someone is going to lose badly here, and it will happen in the next four months," he said.
Three Stakeholder Groups, One Balance Sheet
Strategy's capital structure pits three constituencies against each other. Common shareholders, preferred stock holders and Bitcoin itself all hold competing claims on the same assets, Dorman said. A Bitcoin sale to fund dividends would undercut executive chairman Michael Saylor's long-term accumulation thesis, while cutting payouts would punish preferred holders who bought into the 11.5% yield.
The tension escalated after Strategy CEO Phong Le confirmed the company might sell Bitcoin at some point, telling Fox Business on Thursday that "we'll likely sell Bitcoin at some point in time, but we will be net increasing our Bitcoin and more importantly, increasing our Bitcoin per share."
Polymarket Bets on a Sale
Prediction market Polymarket shows roughly a 90% chance Strategy sells some Bitcoin by Dec. 31, 2026, and a 71% probability by June 30. So far this year, Strategy has purchased about 170,000 BTC, bringing total holdings to 843,738.
The next capital move will signal which constituency comes first, Dorman said. With $871 million in cash against $1.5 billion in annual dividend obligations, the math leaves little room for delay. A forced sale of even a portion of Strategy's Bitcoin holdings could pressure the broader market, given the company's position as the largest publicly traded corporate holder of the asset.
This article is for informational purposes only and does not constitute investment advice.
