Strategy Wants Its Preferred Stock Dividends to Accrue 365 Days a Year
Bitcoin-focused firm Strategy has proposed that dividends on its four U.S. preferred shares — STRF, STRC, STRK and STRD — accrue every calendar day, including weekends and holidays, and be paid the next business day. The company filed a preliminary proxy and set a shareholder vote for October 28; STRC would adopt the change November 1 and the other three would switch on January 1 if approved.
Why It Matters
Strategy says the move to daily accruals is intended to reduce price volatility around dividend dates, support liquidity and make the securities more attractive for institutional uses such as short-term cash parking and collateral. The preferreds are a key funding tool for Strategy and the proposed change could affect how the company manages cash and Bitcoin sales to meet obligations.
Key Facts
- Securities affected: STRF, STRC, STRK, STRD
- Proposal filed: Preliminary proxy filed; definitive proxy due October 5
- Shareholder vote: October 28
- STRC implementation date: Record date November 1, first payment November 2
- Other three implementation date: Switch on January 1 (after last old-schedule payment December 31)
Strategy has proposed changing how dividends accrue on its four U.S. preferred share classes so that accrual occurs on every calendar day and payments are made the next business day, while leaving the underlying economics unchanged. The company filed a preliminary proxy for the measure and expects to deliver a definitive proxy by October 5, with shareholders slated to vote on October 28. Under the plan STRC would move first with a record date of November 1 and first payout November 2; STRF, STRK and STRD would remain on their existing schedules through December and adopt daily accruals starting January 1.
Strategy executives framed the change as a tool to reduce volatility tied to dividend dates by shortening the effective duration of the instruments and increasing the frequency of adjustments. Management cited historical effects at STRC: when that series paid monthly the day-before-dividend price drop averaged roughly 49 basis points, and after a shift to semi-monthly payments this narrowed to about 36 basis points. The firm said daily accruals could also produce steadier month-end marks for fund managers, speed reinvestment, broaden use as a place for institutions' idle cash and improve treatment when the shares are used as collateral.
The company described the proposed calendar-day accruals as unique at a global level: if approved, these four securities would be among a small group of instruments with daily dividends and would be the only ones it says paying on a 365-day calendar accrual basis. Strategy noted that globally there are about five securities with daily dividends representing a combined market value of roughly $15 billion.
Strategy’s preferred shares are an important financing mechanism for the firm. Management reported that shareholders previously approved a move to semi-monthly payments with strong support and that the company has paid $255 million in STRC dividends since that change. The firm has also been active in managing its preferred and Bitcoin holdings this year: it bought $139 million of STRC in the referenced month while pausing Bitcoin purchases, raised $2 billion by selling MSTR stock into a dollar reserve, and has a framework that could entail selling up to $1.25 billion of Bitcoin to service obligations. The company additionally purchased about $76 million of Bitcoin the prior week, bringing holdings near their June record.