Strategy Inc.’s (NASDAQ:MSTR) preferred stock (NASDAQ:STRC) dropped below $98 on Tuesday as Peter Schiff declared the death spiral he predicted has officially begun.
Cash Reserve Drained From 21 Months To 6.1 Months
Strategy’s USD reserve, designed to cover preferred stock dividends, stood at $871 million as of May 31, covering just 6.1 months of payments.
Saylor himself said he wants that number above 18 months.
Annual dividend obligations across Strategy’s four preferred stock series now exceed $1.7 billion, meaning the reserve eroded from over two years of coverage at the start of 2026 to barely half a year today.
The drain happened quickly. Strategy pulled $1.38 billion from the reserve to repurchase $1.5 billion of convertible debt at an 8% discount.
While the debt buyback made financial sense, it left the dividend buffer dangerously thin.
Schiff Says Yield Must Rise As STRC Falls Below Par
STRC is designed to trade near its $100 par value, with the monthly dividend rate adjusted in 0.25% increments if price slips below that level.
The stock now trades at $98, triggering exactly the mechanism Schiff warned about.
“As STRC investors begin to worry about MSTR’s ability and commitment to pay the yield, the price will fall further. That will force Saylor to raise the official coupon to get STRC back to $100. Death spiral,” Schiff posted on X Tuesday.
mNAV At 1.21x Makes Stock Sales Nearly Worthless
Crypto analyst Taiki Maeda pointed out that MSTR’s market-to-NAV ratio sits at 1.21 times, just below the 1.22 times breakeven where issuing new shares to fund dividends or buy Bitcoin actually adds value per share.
Below that line, selling stock destroys shareholder value rather than building it.
“He still needs to raise cash from somewhere. STRC creates some execution risk for BTC which is unfortunate,” Maeda wrote Tuesday.
He added that selling just 32 Bitcoin (CRYPTO: BTC) was too small to solve the liquidity problem, and he would have preferred Strategy sell $1 to $2 billion upfront to rebuild conviction.
The feedback loop Schiff described is now visible: STRC falls below $100, Strategy must raise the yield, more capital is needed, Bitcoin gets sold to fund dividends, Bitcoin price drops, STRC falls further.
Strategy sold Bitcoin for the first time since 2022 last week as Bitcoin now trades below $70,000.
Image: Shutterstock
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