MicroStrategy (MSTR) has announced an expanded funding round through the sale of $2.1 billion in preferred stock STRF, which is intended to complement the previous financial expansions funded by MSTR and STRK sales.
According to Cryptopolitan on the 25th (local time), MicroStrategy announced its intention to sell $2.1 billion in preferred stock STRF, offering a 10% yield. The company released a new prospectus regarding the potential sale of STRF shares with proposed terms and passive income.
Unlike STRK, STRF cannot be converted to common stock.
MicroStrategy selected TD Securities USA LLC, Barclays Capital Inc., and The Benchmark Company LLC as sales agents. The company negotiated a temporary sales plan where no agent is obligated to sell a specific amount of STRF. The stock offering may occur over a limited period or intermittently, in continuous offerings or block units.
STRF shares were listed on NASDAQ at the end of March and are currently trading at $100.65. The shares provide a 10% annual dividend, paid quarterly in cash. MicroStrategy also raised funds through an 8% passive income program linked to convertible STRK shares.
MicroStrategy announced it will use STRF sale proceeds for corporate purposes and intends to allocate some funds to operating expenses and additional BTC purchases.
The new offer is a relatively small addition to MicroStrategy's potential stock sales. The company has approved up to $39 billion in MSTR and STRK shares to be deployed long-term.
The STRF sale is expected to occur over an extended period, providing the company flexibility to negotiate market conditions. MicroStrategy will also retain the right to repurchase STRF shares or defer dividends in unfavorable market situations.
The recent BTC market rally has been beneficial to MicroStrategy, leading to successful MSTR and STRK sales. All ATM program assets have varying risk ratios, and priority in compensation may differ in adverse market events.
STRF aims to leverage demand for predictable passive income with additional BTC exposure. However, the prospectus suggests STRF remains linked to overall market performance. MicroStrategy explained its practice of funding passive income offerings through additional stock sales.
In the prospectus filed with the US SEC, MicroStrategy stated, "We expect to fund cash dividends on our perpetual preferred stock primarily through additional capital raising activities, including but not limited to market offerings of Class A common stock and preferred stock."
The company warned it might choose not to pay dividends or may be unable to secure necessary cash. MicroStrategy has already cautioned in its prospectus that debt burden could lead to unfavorable funding conditions and inability to fund new BTC purchases.
Nevertheless, demand for MicroStrategy assets remains relatively high.
Following the latest BTC all-time high of over $111,000, MSTR stock is trading at $402.69, still near its six-month high. STRK has risen from an April low of $83 to trade at $100.
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