Strategy reported a $12.54 billion net loss in the first quarter, mostly driven by a massive $14.46 billion unrealized markdown on its bitcoin holdings. Despite this, executives pointed to momentum building behind its preferred STRC shares as a bright spot.
The premier bitcoin treasury company said Tuesday that strong demand for STRC, which has lately been the primary funding "engine" behind its mostly weekly bitcoin (BTC) buys, helped it raise $5.58 billion out of a total $11.68 billion so far this year.
Executives are now framing STRC as a central pillar of the company's "digital credit" model. CEO Phong Le said the instrument has shown "strong demand, high liquidity, and low volatility," calling it a "big success."
STRC is structured to trade near a $100 par value with an adjustable dividend rate to keep the price near that level. Investors currently receive an 11.5% annual yield, while Strategy uses the funds to buy more bitcoin.
Strategy has now paid out more than $692 million in cumulative dividends across its preferred stocks, including STRC, STRK, STRF, and STRD, but analysts are still split on the sustainability of this model.
Critics argue it relies on "circular" issuance, with some going as far as calling it a Ponzi scheme. Others defend it as a way to convert demand for yield into bitcoin exposure for Strategy.
Last month, Bitwise CIO Matt Hougan described STRC as "a perpetual preferred stock that trades like equity but offers a bond-like dividend yield," adding that Strategy could "raise billions more" through the instrument to fund additional bitcoin purchases.
Others, including analysts at Grayscale, say spot bitcoin ETFs remain the “cleanest” way to gain exposure without the added complexity of preferred stock structures.
The bulk of Strategy's quarterly losses stemmed from a bitcoin price drawdown during the period that saw it drop more than 25% from roughly $90,000 to $65,000.
The firm now holds 818,334 bitcoin after its latest purchases near the end of April. The stash is worth $66.82 billion with an average cost of $75,537 per bitcoin.
Bitcoin itself hit a three-month high of nearly $82,000 on Tuesday, putting the company at an unrealized gain of just under $5 billion on its holdings.
Despite falling 1% in post-market trading, Strategy's common stock (MSTR) reached $190 on Tuesday, the highest it has traded since mid-November, according to The Block crypto equity data.
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