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$STRK, Strategy’s New Preferred Stock on Steroids

Adrian Christiansen
March 19, 2025
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5
minute read

Strategy (formerly MicroStrategy) is solving the number one problem for investors when it comes to bitcoin: volatility. How can you get exposure to bitcoin's upside, without the added drawback of volatility?

Bitcoin is the number one performing asset, as the saying goes: “It's going up forever, Laura.” However, that doesn’t mean it’s immune to dramatic drawdowns. In the long term, it’s only increased in value, but along the way it can temporarily drop 25, 50, or even more than 70%. If you're a responsible retail investor then the dips are okay to weather, and even present immense opportunity if you believe in bitcoin’s long-term potential.

But if you're an institutional investor, you have a fiduciary responsibility. You're managing other people's money and you have certain mandates. You can't have  your portfolio go down 50% or even 25%, so how can you get directional exposure to bitcoin’s upside without the volatility? That's where Strategy comes into play.

How the company does this is first by securing a large amount of bitcoin on its balance sheet. Strategy now holds over 499,096 bitcoin on their balance sheet and they have it in a lever fashion.

$MSTR

Leveraging up their bitcoin holdings means that when bitcoin goes up, $MSTR has the potential to rise even higher, all the while when bitcoin goes down, the stock has the same potential to drop even lower. 

This levered bitcoin exposure essentially makes $MSTR a more volatile proxy of bitcoin. What Strategy is actually doing is that the volatility being added to $MSTR equity (through levering up bitcoin) is being stripped from its convertible notes. 

Strategy is taking bitcoin's volatility, stripping it off the notes, and giving it to their equity. These convertible notes are a mix of a debt and a call option. If you're buying a Strategy convertible note, it is debt. You're lending the money, you'll get the principal back, plus some amount of interest over a split period of time. 

But what makes it different from a traditional loan is the call option that is embedded into the note. Hence if you buy one of these notes, Strategy’s stock goes up, and instead of getting your principal back, you have the option to convert into $MSTR equity. 

Doing this gives you a protected downside, because at the end of the day, it's a loan that Strategy is servicing. You can get your principal back, but you have an upside opportunity on $MSTR because of this embedded call option. 

Hence, because $MSTR is a more volatile levered proxy of bitcoin, if you want to convert the note into Strategy stock, you inherently have off-site exposure to bitcoin, but without the volatility, because of it being a fixed income; a debt. 

Therefore, the Strategy note is essentially a no-brainer for traditional finance investors stuck up in the bond markets. Strategy understands that, and has gone full force in the last few months, issuing as many convertible notes as possible. This is just making the play even better because Strategy’s convertible notes have a very attractive interest rate for Strategy. 

They're able to borrow money for less than 1% interest to buy bitcoin, when right now, the risk-free rate of the US 10-year treasury is roughly 4.5%. So investors are foregoing 4.5% risk-free U.S. treasuries to lend money to Strategy because they're clamoring for that bitcoin exposure. 

Strategy has been running this play on repeat, issuing these notes and buying bitcoin. And they have been able to stack hundreds of thousands of bitcoin just in the last few months.

$STRK 

Securities market data for $STRK

This was, up until now, the only black hole in the market, but this week, Strategy is coming up with another monetary breakthrough innovation: a preferred stock called $STRK. Already, $STRK has a very appealing profile as a financial asset as it starts with an 8% dividend. 

Yes, you read that right: this is a dividend-paying preferred stock. In the future, the 8% may vary based on the actual acquisition price, as this 8% is based on a liquidation price of $100 per share, but that doesn’t overshadow the fact that it is a fixed income paying a dividend. 

What makes this really fascinating is that this has a perpetual call option embedded into it. The difference between a perpetual call option and a traditional call option is that there's no expiration date for the perpetual one. That's what makes $STRK so valuable. Because with the standard call option, if the stock price doesn't reach your strike price on your option before the expiration date, then your option is essentially worthless. 

It expires having no value because if your conversion price is higher than the actual stock price, it's dead. And so the fact that there's an expiration date presents inherent risk. If the stock doesn't go over that price before the expiration of the option, your investment is burnt. 

But with a perpetual call option, you always have the ability to turn one share of $STRK into 0.1 share of $MSTR at $1,000 per share. So if at any point in the future, whether it's one year from now, 10 years from now, or 100 years from now, if a Strategy common stock goes above $1,000 per share, you can convert every 10 shares of $STRK into one share of $MSTR. 

A graph demonstrating the difference between $STRK and convertible notes

Here is the chart from Michael Saylor, which shows the added benefits of $STRK preferred stock compared to the pre-existing Strategy convertible notes. Alongside the fact that this is a perpetual option, it has no expiration date, and also has unlimited upside potential, unlike the past convertible notes which have what is called a “provisional call price.”

Therefore, this means that if the shares of Strategy go beyond the provisional call price, Strategy can automatically redeem those call options on behalf of the note investors, essentially capping their upside opportunity for the $MSTR note buyers.

$MSTR note investors' profits are limited by the price cap they were purchased at, while there is literally no cap to the profits to be made on the preferred stock $STRK which holds no provisional call price. 

This is a 3D chess move by Michael Saylor and Strategy’s engineers who came up with $STRK, offering, along with the preferred stock, an upside not limited by time or share price. At any price of the $MSTR common stock, and at any time in the future, you can convert your perpetual call option $STRK into $MSTR stock.

By doing this, Strategy is essentially closing the gap with the ETFs’ offer. Strategy offers fixed-income bitcoin exposure with unlimited call option upside on the biggest bitcoin treasury company in the world. Once more, Michael Saylor innovates and creates another anomaly for the market to digest.

The question remaining seems to be: How fast will the market digest $STRK? One thing is certain, Michael Saylor is indeed using all his time trying to figure out how to buy bitcoin. 

Michael Saylor MicroStrategy meme

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