STRC has no reason to return to $100.

Author: 100y.eth Source: X, @100y_eth Translation: Shan Ouba, Jinse Finance

Based on current fundamentals, there is no logical support for STRC to recover to $100.

The original mechanism logic that was meant to support STRC's price and stabilize it around $100 was as follows:

1. If STRC's market price drops below $100, the price decline would push up the dividend yield, while MicroStrategy (hereinafter referred to as Strategy) might raise the nominal dividend rate to above 11.5%;
2. Strategy has the right to repurchase MSTR at $101 per share; once the price exceeds this threshold, upside potential is capped;
3. If Strategy declares bankruptcy, STRC holders have a claim on assets of $100 per share plus accumulated unpaid dividends.

For STRC to return to $100, the entire mechanism must function fully and effectively, but in reality, the conditions are not met.

I. Adjusting the dividend rate cannot fundamentally support the price

Raising the dividend rate is unlikely to have a substantial positive effect, for two core reasons: First, increasing dividends would add to Strategy's own financial burden, potentially worsening the company's cash flow. From an investor's perspective, forcing higher payouts when the company is under operational pressure also sends negative market signals. Second, the adjustment and distribution of dividends are not rigid obligations tied to STRC; they are entirely determined by the company's board of directors, creating great uncertainty for investors.

STRC uses a fixed per-share dividend model rather than a dividend based on investment principal proportion. The product was originally designed so that income-focused investors would not have to overly worry about principal erosion. However, even so, the market cannot be sure whether Strategy can maintain the current dividend level long-term.

Admittedly, relying on existing US dollar cash reserves, the company can cover bond interest and preferred stock dividends for 9.8 months; if it sells its Bitcoin holdings, the dividend cash flow could theoretically support about 30 years. But this does not eliminate the long-term uncertainty of dividends.

A cash buffer of 9.8 months is not long. To extend the dividend period using cash reserves, the company would have to continuously issue additional MSTR shares through ATM. Continuously issuing shares at the current adjusted net asset value per share would inevitably dilute book value per share, making this model completely unsustainable.

Even if US dollar cash is exhausted, the company surviving by selling Bitcoin to maintain itself and STRC would completely deviate from MicroStrategy's original positioning and core value. This would weaken the investment appeal of both STRC and MSTR products, triggering a negative cycle of continuous price decline.

II. Without a redemption mechanism, the $100 per share claim is essentially useless

Relying solely on dividend adjustments to guide price makes the $100 baseline meaningless. The initial market belief that STRC could anchor at $100 was based on the core assurance: if MicroStrategy goes bankrupt, STRC holders can claim residual assets of $100 per share plus accumulated dividends.

To put it bluntly, the current market price of STRC is $75, which seems like a 25% discount to the $100 baseline, offering great value, but that is not the case. The key difference is: STRC is not a bond; it is a preferred stock. Bonds have fixed maturity dates. If it were a bond product, investors would get back the full $100 at maturity, and such a large discount would never occur.

Unless MicroStrategy separately issues a STRC repurchase plan, the only way for investors to get back their full principal is to wait for the company's bankruptcy liquidation. This path itself has two major flaws.

First, contrary to common market perception, it is very difficult for MicroStrategy to go bankrupt. The company's net leverage ratio is only 11%, and the amplification factor of bonds + preferred stock relative to Bitcoin reserves is only 44%. For its leverage system to completely collapse, Bitcoin's price would need to fall to 11% of its current price, about $6,600. Even accounting for significant sell-off declines, the probability of this scenario is extremely low.

Second, even if bankruptcy liquidation does occur, investor rights are still not guaranteed. For bankruptcy to be triggered, it means the low 11% leverage has been completely breached. Under such extreme market conditions, STRC, as a preferred stock with a claim subordinated to bondholders, would find it difficult for investors to fully recover the remaining assets.

In short, for investors to receive the full $100 per share liquidation payout, two conditions must be met simultaneously: ① MicroStrategy declares bankruptcy; ② the remaining assets after bankruptcy liquidation are sufficient to fully pay $100 per share. The second condition is basically impossible to achieve.

III. Multiple risks叠加, there is no logic for STRC to stand firm at $100

MicroStrategy initially priced STRC at $100 with a base dividend rate of 11.50%, but the actual price of STRC is entirely determined by market trading. Under extreme market conditions, the protection of the $100 per share liquidation claim is insufficient, and the long-term sustainability of the dividend policy is also in doubt.

Currently, STRC's market price is $75, corresponding to an annualized actual dividend yield of 15.3%. Compared to the original 11.5% base yield, investors require an additional 3.8% risk premium to compensate for potential losses such as bankruptcy risk and dividend uncertainty.

If market investors, after comprehensively evaluating various risks, believe that a 20% annualized return is appropriate for STRC's risk level, the corresponding fair price would be only $57.5. Fair pricing depends on market uncertainty and investor risk appetite; there is no single standard answer.

Based on all current fundamentals, there is no driving factor supporting STRC's price returning to $100. Its price will ultimately converge toward the market-recognized reasonable risk pricing.