Strategy’s Preferred Equity Overtakes Convertible Debt for First Time - A Market Shift You Can’t Ignore

Preferred equity just pulled ahead of convertible debt in strategic allocations—marking a historic flip in the capital stack.

The Preference Shift

For years, convertible notes offered a sweet spot: debt-like security with equity-like upside. But something's changed. Investors are now opting for the clearer, senior claim of preferred stock—even if it means sacrificing some conversion optionality. It's a defensive pivot in plain sight.

Why Now?

Volatility's the trigger. When markets churn, the defined liquidation preference of preferred equity looks a lot safer than a conversion price that might never hit. It's capital preservation over lottery tickets—a sign that risk appetites are recalibrating, not disappearing.

The Fine Print

This isn't just about safety. Preferred equity often comes with stronger governance rights—board seats, veto powers—giving strategic investors more control. In a downturn, influence matters more than hope.

So, the next time a founder pitches you a convertible round, ask them why. The smart money is already voting with its term sheets. After all, in finance, the 'innovative' structure is often just the old one with a higher fee.

In January, STRC preferred shares returned to the $99-$101 range and have held at that price for weeks. STRC is the most traded preferred share of Strategy, and has recently returned to trading above par. STRC is still actively promoted and traded, as it is considered a relatively low-risk, high-dividend exposure to Strategy and BTC. 

Strategy buys more time with preferred equity

Strategy has a series of debt maturity periods starting from 2028. Strategy has secured its interest and dividend payments, but the debt is the factor that has created the biggest worries about the company’s model. If BTC falls by a larger amount, creditors may demand repayment and trigger some BTC selling. 

Preferred equity has the advantage of no maturity date, requiring no repayment of principal. Instead, the preferred shares have to pay generous ongoing dividends. For Strategy, a higher share of preferred equity means a lower refinancing risk. 

Strategy also posted its BTC holdings against its debt. At current prices, the holdings cover the obligations many times over. Even a smaller BTC appreciation can make the debt structure viable and keep Strategy solvent. 

Strategy also stopped issuing new convertible debt, instead relying on a portfolio of preferred stocks with dividends and varying seniority and risk profiles. 

Strategy’s common stockholders absorb losses

While Strategy’s debt is not a problem at the moment, MSTR common stock is down to $160. The shares trade at a six-month low, following months of dilution. 

MSTR is just above its 12-month bottom, and may be amplifying the recent BTC dip to the $88,000 range. 

Previously, MSTR traded at around $400 while BTC traded at $95,000. Due to dilution and worsened sentiment, the same ratio is not preserved. Strategy still preserves a 1.06 points mNAV ratio, though each week, access to financing is closely watched for signs of problems.

Playbook strategy treasuries in total hold 867,258 BTC, of which 709,715 BTC are in Strategy’s treasury. For almost all other companies, new purchases have slowed down significantly.

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