Strategy Launching Euro Denominated Preferred

Summary Strategy (MSTR) continues to launch preferred stock to fund Bitcoin purchases, this time a Euro denominated offering has been announced. MSTR's market cap premium over its Bitcoin holdings has diminished, with shares underperforming both Bitcoin and the S&P 500 ￰0￱ concerns persist as MSTR balances crypto exposure, shareholder dilution, and rising preferred dividend ￰1￱ 2025 has progressed, I've extensively covered the ongoing preferred stock launches from Strategy ( MSTR ) as the company looks to raise new capital to fund its Bitcoin ￰2￱ massively diluting common shareholders in recent years to buy tens of billions worth of the cryptocurrency, the company is now projected to pay several hundred million dollars a year in dividend payments to these preferred ￰3￱ a few days after reporting its Q3 financial results , Strategy announced another new preferred class, but this one is a bit ￰4￱ coverage of the name My most recent article came a few weeks ago, when I detailed how the Bitcoin premium for Strategy was quickly ￰5￱ a time, the company's market cap was substantially above the value of its crypto holdings, even if you gave its small software business a fair market ￰6￱ have changed quite a bit in the last few months, however, as shares of the common stock have significantly underperformed Bitcoin over that ￰7￱ my latest article, Strategy shares have lost 13.7% through Tuesday's close, compared to a 3.5% rally for the S&P 500.

Q3 results come in quite strong For those that thought Strategy only bought Bitcoin, there is an actual business ￰8￱ company's software business reported revenues of more than $128 million in ￰9￱ was nearly 11% growth, its best increase since the summer of 2021, and the number crushed street estimates by almost $12 ￰10￱ licenses and subscription services revenues were $63.3 million, a 62.9% increase year over year, while product support revenues were $51.1 million, a more than 16% ￰11￱ services revenues were $14.2 million, a 12.0% decrease over last year's ￰12￱ down the income statement is where things get complicated, since the company's quarterly net income or loss is almost wholly dependent on what Bitcoin does in the ￰13￱ Q3, operating income was nearly $4 billion thanks to the unrealized gain on its Bitcoin ￰14￱ the end of Q3, Strategy had only about $54 million in cash on hand, but the balance sheet also showed more than $8.17 billion in ￰15￱ the quarter, the number of common shares outstanding rose by another 6 million plus to over 267 ￰16￱ latest preferred offering Prior to 2025, the company was using only equity offerings and debt to fund its Bitcoin ￰17￱ this year, the company launched its first preferred share class, and has since launched three ￰18￱ one that came during Q3 was the Strategy Inc 9.0% SERIES A PERPETUAL STRETCH PREF STK ( STRC ).

This is a variable rate preferred, which started with a 10.00% annual dividend that has since been increased twice, now fetching a 10.5% annual ￰19￱ the earnings release linked in my opening, management explains how that preferred's dividend will evolve based on the STRC stock ￰20￱ are also the following preferreds: Strategy Inc 8.00% SERIES A PERPETUAL STRIKE PFD ( STRK ), which features an 8% annual ￰21￱ Inc 10.00% SER A PERPETUAL STRIFE PFD STK ( STRF ), which features a 10% annual ￰22￱ Series A Perpetual Stride Preferred Stock ( STRD ), which features a 10% annual ￰23￱ the end of March, the two preferred share classes outstanding then had a little more than 16 million total shares ￰24￱ on the notional values provided on the company's dashboard , that number as of the end of last week was up to about 67 million shares among the now four ￰25￱ dividends being paid here are growing quite large, and currently the company is using common stock sales to pay those ￰26￱ big news this week, however, was the latest preferred share ￰27￱ is launching a Euro denominated preferred share class , Strategy’s 10.00% Series A Perpetual Stream Preferred Stock (the “STRE Stock”).

The initial offering is based on 3.5 million shares, par value 100 Euros, with this dividend being paid ￰28￱ declared dividends are not paid on their specific date, the dividend rate goes up a full percent, up to a maximum of 18% per year, and the link above details how the dividend payments ￰29￱ on the current exchange rate, this latest offering would raise gross proceeds of just over $400 million. However, it's possible that the company could raise even more if there is enough ￰30￱ these numbers as well as their respective annual dividend rates, the chart below shows how annual run-rate dividend payments have increased since the start of these programs earlier this ￰31￱ numbers are based on the share counts at the end of each respective quarter, and the 11/3 date assumes the latest offering is completed for the 3.5 million share ￰32￱ Preferred Stock Dividend Payments (Company Filings) At the end of Monday, Strategy was set to pay out about $696 million in annual dividend payments, or about $174 million per ￰33￱ the company has previously detailed , it has used the common stock in the market sales program to raise money for dividend payments.

Thus, shareholders of the common stock are being diluted to pay the preferred holders, and the amount of that dilution is starting to grow quite a bit over time. A look at the current valuation When you look at the valuation of Strategy, there are two ways to think about ￰34￱ first is the normal way, looking at the market cap of the common stock, but you could also include the total value of the preferreds as ￰35￱ has been trading at a significant premium to its Bitcoin holdings for a while now, but that premium dropped in Q3 as the chart below shows, and has gone even lower so far in ￰36￱ this calculation, I have included the preferreds, thus the "all-in" market ￰37￱ Bitcoin Premium (Author's Calculation) As of Monday, the total value of Strategy's two common share classes and its four preferred share classes was more than $82.4 ￰38￱ 4PM Eastern, the value of its Bitcoin holdings, not including any purchases that were made during the day, was about $68.5 billion.

Thus, the all-in premium has gone from about 35% to just 20% so far during ￰39￱ rest of the business is certainly not worth that premium, given it is expected to report less than half a billion dollars in software sales this ￰40￱ software companies that show decent growth can go for about 10 times ￰41￱ at that figure, that means the software business is worth just a couple of billion dollars at most, so investors here are basically paying about a little more than 1.14 times the value of the company's Bitcoin ￰42￱ than hoping Bitcoin prices rise over time, the other main part of the bull case for Strategy common holders has to do with major index ￰43￱ Strategy reporting another quarter of positive net income, it could allow the stock to become a member of the S&P 500 index, which should trigger a sizable amount of institutional ￰44￱ of the premium that Strategy shares trade at currently could be due to those betting that S&P 500 inclusion will before the end of this ￰45￱ thoughts and recommendation Strategy announced a major revenue beat last week, but the more important news was the latest large quarterly profit due to Bitcoin gains, potentially allowing for S&P 500 ￰46￱ the capital raising front, the company continues to tap its preferreds, while also diluting common shareholders a little as ￰47￱ week, management announced that it is launching a Euro denominated preferred share class, as it looks to gain new investors and raise more ￰48￱ a result, the annual run rate of preferred dividends is now approaching $700 ￰49￱ company is also seeing its Bitcoin premium evaporate further, putting it a lot closer to fair ￰50￱ the moment, I continue to rate the common stock as a ￰51￱ you are a long-term believer in Bitcoin, it seems likely that Strategy shares would rise over time, but you might be better off just buying Bitcoin directly or through one of the ETFs like the iShares Bitcoin Trust ETF ( IBIT ).

I believe that Strategy is going to continue to sell a lot of shares to purchase more Bitcoin, which could provide a headwind to the possible upside ￰52￱ we see Bitcoin prices hold steady or even head higher in the next few quarters, Strategy may be worth a speculative short-term buy then if you believe the S&P 500 committee will add it to the index.