- Strategy’s STRC stock closed at $87.31, significantly below its $100 par value target.
- The stock’s low monthly average price triggers a rule requiring a potential dividend rate increase to at least 12%.
- The company has several tools, like pausing dilution or share buybacks, to encourage higher bids but has not used them effectively.
Strategy’s flagship STRC stock, designed to trade near $100, closed yesterday at just $87.31, creating a crisis of confidence one week before its dividend snapshot. CEO Michael Saylor takes pride in the stock trading at par, but current prices are 12.7% below the target.
Consequently, the stock’s June performance has triggered a critical rule in the company’s framework. Its monthly volume-weighted average price of $94.09 is below the $95 threshold, mandating a dividend increase.
This means the dividend could rise from 11.5% to at least 12% for the next period. Normally, increases are just 0.25%, making this potential jump significant.
However, investors face considerable uncertainty. Strategy’s public disclosures warn that dividends are not guaranteed and can be reduced or suspended at any time.
Meanwhile, the company has alternative methods to support the stock price but has shown little willingness to use them. For instance, it could pause its dilutive share issuance program near $100.01.
It could also buy back shares directly, a tactic it has never employed. Strategy has recently sold common stock to bolster its cash reserves, yet this has proven ineffective so far.
Finally, the board could announce a surprise benefit, as CEO Phong Le did by purchasing $1 million of STRC. The stock has regained its peg before, but restoring confidence now requires decisive action.
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