Foreign media commentators noted that Strategy's recent $25 million buyback of its floating-rate preferred stock, STRC, has sparked controversy in the market. The article argues that investors are focusing not only on the buyback amount itself, but also on why the company used the funds to support such securities instead of continuing to accumulate Bitcoin.
STRC is not a fixed-payment instrument.
The controversy stems first from the nature of STRCs. The article points out that STRCs differ from traditional debt instruments in that they do not have a fixed-price repayment arrangement at maturity. Although the security was initially issued at around $100, this does not mean the market price must return to that level.
Given this context, critics argue that the company's $25 million expenditure to boost prices in the short term merely resulted in a market rebound and did not directly improve the company's fundamentals. The article therefore questions the efficiency of this use of funds.
The use of funds is different from before.
The article mentions that the purpose of Strategy's previous rounds of funding was relatively clear, typically focusing on three areas:
- Increase Bitcoin holdings
- Improve dividend coverage
- Reduce the size of outstanding debt
This time, however, some of the funds appear to have been diverted to STRC itself. Commentators believe this differs from the company's past capital operations centered around its Bitcoin treasury, leading to speculation that management may be prioritizing stabilizing preferred stock prices.
The $100 mark is facing selling pressure.
The article also points to investor psychology as a factor in the controversy. Some buyers purchased STRC near $100, only to see a significant price drop afterwards. Since the instrument lacks redemption at the issue price, the market lacked sufficient reason for it to naturally return to its original level.
Commentators suggest that even if STRC prices recover to the $95-$96 range, early holders may choose to sell to reduce losses. This implies significant selling pressure above, and buybacks may not be enough to help prices sustainably return to $100.
Continued share buybacks may not change the valuation divergence.
The article further points out that if Strategy continues to buy STRC, the effect may still be limited to a short-term boost. As long as the market's valuation logic for the security remains unchanged, the price may still fall back.
The commentary concludes by stating that investors are now more concerned about how management will explain this capital allocation decision, especially why they prioritize supporting STRC at this stage rather than continuing to expand their Bitcoin holdings.
