Explosive! Is the $100 face value of $STRC preferred stock a mirage? Analysts tear it apart: bankruptcy claims are virtually worthless, and the 11% leverage hides a death trap!

Listen, you might think $STRC dropping to $75 is a bargain — after all, face value 100, dividend rate 11.5%, and you can get your principal back in bankruptcy. But the truth is: it will never get back to $100.

First, look at the mechanism. Strategy originally designed an automatic balancer: when the price falls, the dividend yield rises, and the company can even increase the nominal dividend rate from 11.5%. Moreover, Strategy has the right to repurchase $MSTR at $101, so $MSTR cannot rise too much. More importantly, in the event of bankruptcy, you have a claim of $100 per preferred share plus accumulated unpaid dividends. Sounds reliable, right?

But every link is broken.

First, increasing the dividend rate is useless. Why? For the company, higher dividends are a financial burden; the more you raise them, the more dangerous it becomes. For investors, a company that suddenly increases dividends when its financial situation deteriorates is actually terrifying. Moreover, dividends are not a contractual obligation — the board can change its mind at any time. The uncertainty of whether you will receive dividends always hangs over your head.

Second, the company can currently cover bond interest and preferred stock dividends with its dollar reserves for about 9.8 months; if it sells $BTC, it can last 30 years. But can 9.8 months be called a long-term solution? To extend it, it would have to continue issuing $MSTR through the ATM, but at the current mNAV level, each issuance dilutes book value, like drinking poison to quench thirst. As for selling $BTC to survive — that would be like dismantling the company's own brand, because Strategy's founding purpose is to hold $BTC. Selling coins would trigger a negative feedback loop, causing the appeal of both $STRC and $MSTR to collapse.

Alright, dividends are unreliable, so let's talk about the fantasy of 'getting back $100 in bankruptcy.'

The key point: $STRC is not a bond; it has no maturity date. Bonds have a clear repayment time. If it were a bond, the $75 discount would have been arbitraged away long ago. But preferred stocks have no maturity; there is only one way to get back your principal — the company goes bankrupt.

Here are two cruel paradoxes.

First: Strategy is very unlikely to go bankrupt. The net leverage ratio is only 11%, and the total leverage of bonds plus preferred stocks is only 44% of the Bitcoin reserve. To actually go bankrupt, Bitcoin would have to fall to about 11% of its current price — roughly $6,600. Even considering sell-off pressure, it would have to drop to around $10,000. Do you believe that?

Second: Even if it actually goes bankrupt, you won't get $100. Because bankruptcy means that the 11% leveraged position has collapsed, and the claim rights of preferred stockholders are ranked after bonds; in all likelihood, the assets will have been carved up already.

So you see, for $STRC investors to get $100, two conditions must be met simultaneously: first, Strategy must go bankrupt, and second, you can still get paid after bankruptcy. The former is almost impossible, and even if the latter were possible, it wouldn't be your turn.

Now $STRC is trading around $75, and the effective annualized dividend yield has become 15.3%. The market is essentially saying: we demand an additional 3.8% compensation for bankruptcy risk and dividend uncertainty. If investors think the reasonable yield should be 20%, then the price will fall to $57.5.

No one knows where the fair price is — it depends on everyone's fear and greed. But one thing is certain: in the current situation, there is no reason for $STRC to return to $100. Its price will only converge to the number the market assigns, and that number is most likely lower than 75.

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