Preferred Stock “Domino”: Strive records a loss of 7.08 million, with Strategy risks spreading in a chain

Author: Liam 'Akiba' Wright
Translation: Saoirse, Foresight News

Preferred shares issued by Bitcoin treasury companies are no longer just simple yield-bearing assets; they have become a credit benchmark for assessing the balance sheet robustness of Bitcoin enterprises. While market focus remains on Strategy, data disclosed by Strive, the world’s seventh-largest publicly listed Bitcoin treasury holder, provides a direct view of the real impact of risk spillover: another Bitcoin treasury company holds Strategy preferred shares, and the value fluctuation of this position has clearly become a signal of market pressure.

In an updated filing on June 29, Strive disclosed that between June 18 and June 26, its holdings of 505k STRC shares remained unchanged, but the fair value of the position fell from $505k to $44.74M.

In just eight days, with no change in share count, the position value evaporated by $7.08 million. Based on a simple calculation using the reported fair value, the market’s valuation of Strive’s STRC holdings dropped from approximately $88.59 per share to $74.57 per share.

This filing does not prove that the company is insolvent, forced to sell assets, or that its capital structure has completely failed. However, it reveals a more critical fact: even before a major crisis erupts, the risk of Bitcoin treasury preferred shares can transmit through cross-shareholding to the balance sheets of other companies.

As of June 26, Strive still held 19,864 Bitcoin, $141.7 million in cash and equivalents, and had 7.83M of its own SATA preferred shares outstanding. But the core signal from this financial report is not about the scale of its own assets — it is that its exposure to Strategy preferred shares has fundamentally changed investors’ judgment logic for the entire sector.

There has been ongoing debate in the market around Strategy’s STRC issuance: will investors treat this product as a stable income vehicle, or as a high-risk credit asset tied to Bitcoin price movements, market liquidity, and Strategy’s ability to pay dividends? Strive’s disclosure makes this question even more acute.

Cross-holdings of each other’s preferred shares by different Bitcoin treasury companies create a clear channel for risk transmission. If STRC trades at a discount, Strive will record asset losses in its own financial fair value; if later Strive’s SATA preferred shares also face market skepticism, the market can directly assess whether the current pressure is isolated to a single company or has spread across the industry through the preferred share financing model.

These treasury preferred shares were initially marketed with stable yields, fixed par value, and regular dividends, making them highly attractive to income-seeking investors. But when market attention shifts to discount-to-par, cash reserve coverage, dividend adjustment mechanisms, share buybacks, and potential asset sales, the trading nature of these securities fully shifts toward credit-type risk assets.

The core question investors now care about most is: does the issuer have sufficient cash, accessible financing channels, and enough Bitcoin liquidity to credibly ensure dividend payments?

Strive’s unrealized loss of $7.08 million on its STRC preferred shares over eight days exposes the cross-shareholding risk in the industry. It also lists all the tools Strategy uses to stabilize — cash reserves, high dividends, coin sales, share issuance — along with a third-party estimate of STRC’s fair value at only $49.887, and the market backdrop where current Bitcoin prices are far below the company’s average holding cost. This suggests the need to closely track preferred share discounts, dividend coverage capability, and Bitcoin selling actions to determine industry risk direction.

Strategy’s new operational plan: Essentially credit risk management

Strategy’s regulatory filing on June 29 further confirms the above logical shift. The company introduced a digital credit capital framework, accompanied by policies including dollar reserve management rules, a revised STRC dividend plan, preferred share buyback plan, common share buyback plan, and a Bitcoin monetization plan. This set of tools is specifically designed to address a stressed capital structure.

Strategy disclosed that as of June 28, its dollar reserves stood at $2.55 billion; the board mandates that management must retain cash reserves sufficient to cover at least the next 12 months of preferred share annual dividends and interest expenses, unless the board approves a lower threshold. The filing also states that reserves can be supplemented by selling tokens under the Bitcoin monetization plan or through other capital market operations.

This reserve is crucial because Strategy raised the regular annual dividend on STRC to 12%, paid twice monthly, effective for record dates on or after July 1. The company has announced cash dividends of $0.50 per share for the settlement periods ending July 31 and August 15, subject to the terms of the STRC issuance agreement.

While raising the dividend provides short-term support for this yield product, it also raises new questions: if the security continues to trade at a discount, can this high dividend be sustained long-term?

Strategy clearly outlined the policy linkage logic: the STRC dividend plan will comprehensively reference STRC secondary market price, overall market yields, credit spreads, Bitcoin price and volatility, reserve coverage, capital market conditions, and the company’s overall capital structure. The filing also emphasizes that STRC dividends are not guaranteed and will not be unilaterally increased solely because the STRC market price falls below par value.

The entire policy system is entirely a proactive credit management approach. The company also authorized up to $1 billion for repurchasing its own digital credit securities; if management determines buybacks can enhance enterprise value and optimize capital structure, STRC will be the priority repurchase target. Another $1 billion was authorized for repurchasing Class A common shares. These buyback authorizations do not obligate the company to execute, but they clearly show all the tools management can use if discount risk worsens.

Within the same capital framework, Bitcoin sales are also included as a formal response measure. The board approved a Bitcoin monetization plan, allowing the sale of Bitcoin to raise up to $1.25 billion to supplement dollar reserves; if management determines this is preferable to issuing additional common shares or other capital market operations, proceeds from coin sales can be used to fund preferred share dividends and interest expenses, as well as share buybacks.

The company clearly stated that this plan does not force Bitcoin sales, but the authorization fundamentally changes the narrative: this company, originally known for hoarding Bitcoin, now has a formal channel to use Bitcoin assets to stabilize its credit system.

Fair value calculation: Core test of dividend sustainability

Third-party firm Farside’s publicly available STRC fair value calculator explains why market discussion has moved far beyond headline yields. CryptoSlate queried the tool on July 7; under preset calculation conditions, STRC’s net present value per share was only $49.887. The model assumes an initial coupon rate of 11.50%, dropping to 3.60% from month 33 onward.

This calculation rests on a key assumption: the company continues as a going concern, paying dividends in full and permanently. This valuation is not an official price from Strategy and should not be confused with Strategy’s announced 12% annualized STRC dividend policy. However, it clearly reflects the core variables that preferred share investors really care about: valuation is highly dependent on dividend sustainability, discount rate, and the issuer’s ability to continue paying interest amid Bitcoin price and capital market volatility.

The wider Bitcoin market environment further amplifies this credit test. CryptoSlate Bitcoin price data shows that on July 8, Bitcoin was trading at approximately $62,000, down 1.8% in 24 hours, up 5.5% in seven days, with a total market cap of $1.24 trillion, and Bitcoin’s market cap representing 58% of the total crypto market.

However, Strategy’s Bitcoin holdings as of June 28 show the company holds 847,363 Bitcoin, with an average acquisition cost of $75,651. The current market price being well below the average cost does not force immediate selling, but it explains why the market is highly focused on reserve policies, at-the-market (ATM) issuance mechanisms, and Bitcoin monetization terms.

Strategy’s ATM data directly demonstrates that this business model still has ample financing room. Between June 22 and June 28, the company did not issue additional preferred shares via ATM, only sold 12.67M MSTR common shares, raising net proceeds of $1.1524 billion. Remaining issuance capacity: STRC preferred shares at $17.5108 billion, MSTR common shares at $24.2575 billion, along with other preferred share issuance plans.

The entire business model still has multiple buffers, but the key question is: how much will it cost to use these tools when investors demand higher yields, securities trade at deep discounts, or stronger asset backing is needed?

Two scenarios: determining whether risk spreads broadly

The current market has two core judgment logics for the future:

Scenario 1: Risk is contained, affecting only Strategy

STRC discount narrows; dollar reserves and dividend policy stabilize market sentiment; the Bitcoin monetization plan remains a backup; Strive’s asset impairment is just a one-time short-term impact from cross-shareholding; other industry treasury companies are unaffected; pressure is concentrated on Strategy itself.

Scenario 2: Risk spreads broadly

STRC remains at a deep discount for an extended period; raising dividends fails to calm the market; the company increasingly relies on common share ATM issuance; the Bitcoin monetization plan moves from authorization to actual sales; meanwhile, Strive’s own SATA preferred shares come under pressure, no longer seen as an independent product but grouped with STRC as a high-risk asset. At that point, Bitcoin treasury preferred shares will evolve from a single company issue into a systemic risk for the entire sector.

Existing filings do not prove Scenario 2 has occurred, but they sufficiently explain the root of market concern: Strive’s STRC holdings directly convert Strategy’s discount risk into fair value losses on another company’s financial statements.

Strategy’s introduced framework integrates dividends, cash reserves, share buybacks, ATM issuance, and potential Bitcoin sales into a unified risk buffer system; Farside’s valuation tool highlights that the company’s going concern status and the assumption of perpetual dividends are the core determinants of preferred share value.

The key indicators for subsequent market observation are very clear: whether the discount of STRC and SATA relative to par widens, whether dividend cash coverage is credible, whether the company increases common or preferred share issuance, and whether Bitcoin sales remain only at the authorization stage.

Strive’s future financial disclosures will be a key signal to determine whether the loss on its Strategy preferred shares is just an isolated case or the first public sign of Bitcoin treasury credit risk spreading across the industry through the preferred share model.