MicroStrategy's perpetual preferred stock will pay dividends. Can STRK be used for Bitcoin hedging?

Strategy (formerly MicroStrategy), a company that claims to be a Bitcoin development company, announced the first dividend payment for its perpetual preferred stock STRK, which is approximately $1.24 per share. The payment date is March 31, 2025, and the record date (ex-dividend date) is March 15, 2025. Calculated based on the closing price of $90.24 yesterday, the effective yield is approximately 8.9%.

Strategy Perpetual Preferred Stock STRK

In late January, Strategy issued 7,300,000 shares of 8% perpetual preferred stock (STRK) at $80 per share, which is an 80% discount to the liquidation price of $100. Strategy stated that the proceeds from this issuance will be used for general corporate purposes, including the acquisition of BITCOIN. The key features of STRK are:

• $100 per share liquidation preference
• Convertible into Class A common stock under certain conditions (conversion price of $1,000)
• Quarterly dividend payments (end of March, June, September, December)
• Redeemable by MicroStrategy and the holders under certain conditions
• No voting rights

First Dividend Payout, $1.24 per Share

Strategy announced that STRK will pay its first dividend of approximately $1.24 per share. The payment date is March 31, 2025, and the record date (ex-dividend date) is March 15, 2025.

With an 8% quarterly dividend, the average quarterly dividend would be $2 per share, but since the issuance was at the end of January, the first payout is calculated on a pro-rata basis, resulting in $1.24 per share. Calculated based on the closing price of $90.24 yesterday, the effective yield is approximately 8.9%.

Use STRK to Hedge BTC?

Strategy also updates STRK-related information daily on its website. The correlation coefficient between STRK and its own stock MSTR is only 1%, while the correlation coefficient with BITCOIN is -16%, and the correlation coefficient with the US market (SPY) is as high as 27%. Does this mean that STRK can be used to hedge BITCOIN?

From the STRK price chart in the upper part of the image, we can see that since STRK was first subscribed by institutional investors and then traded on the secondary market, its issue price was $80, and the price immediately rose from $85 to the level indicated in the chart, and then fluctuated between $90 and $100.

In contrast, the SPY (US market ETF), BTC, and MSTR in the lower part of the image have declined by 3.49%, 12%, and 25% respectively during this period. This shows the bond-like stability of STRK. Its 8% dividend also outperforms many bonds, but investors should note that in the US, all dividends are subject to a 30% tax withholding, so the actual dividend yield is only 5.6%, but it is still a good choice for investors seeking stability.

This is a personal opinion, please DYOR before investing.