Strategy's $15B Preferred Stock Burden "Out of Hand," Arca CIO Warns
In brief
- Arca CIO Jeff Dorman flags Strategy's $15B preferred stock as "out of hand" with $1.5B annual dividend obligations
- Strategy's financing model assumes Bitcoin appreciation; structure forces either BTC sales or dividend cuts
- CEO Phong Le expects Bitcoin sales but projects net positive holdings and per-share gains
- Polymarket odds: 90% Strategy sells Bitcoin by end of 2026; company holds 843,738 BTC
Preferred Stock Complexity
Strategy has issued five preferred shares — STRK, STRF, STRD, STRC and STRE — each carrying different dividend terms, seniority and risk exposure within the capital structure. Dorman argued that the model was built on the assumption that Bitcoin would continue rising strongly enough to support it. With Bitcoin down significantly year-to-date, that bet looks increasingly fragile.
Dorman questioned Strategy's decision to repurchase 2029 maturity bonds, calling it baffling given ongoing pressure from dividend obligations. The structure ultimately leaves only stark outcomes: either sell Bitcoin to pay the preferred shares or stop paying the dividend.
CEO on Asset Sales
Strategy CEO Phong Le confirmed the company might sell Bitcoin at some point, stating it will likely sell Bitcoin but will be net increasing its Bitcoin and Bitcoin per share. That distinction matters—the company isn't signaling a wholesale exit, but rather tactical sales to service obligations while maintaining long-term accumulation.
Polymarket shows roughly a 90% chance that Strategy will sell Bitcoin by December 31, 2026. The market's confidence in sales reflects the structural pressure Dorman outlined.
Holdings and Purchase Price
Strategy has purchased around 170,000 BTC this year, bringing its total holdings to 843,738 BTC purchased at an aggregate purchase price of $63.87 billion. The company's average purchase price for Bitcoin is approximately $75,700 per Bitcoin—well above current spot price. That underwater position amplifies the urgency around Dorman's warning: selling at today's levels locks in losses while servicing expensive preferred obligations.
