Strategy Inc. is making waves with an unconventional financing move. The Bitcoin-focused firm has announced plans to issue 3.5 million Series A preferred shares, offering investors an attractive 10 percent dividend yield. However, this seemingly generous payout comes with a significant catch that could substantially increase the company’s financial obligations under certain conditions.
Capital Raising for Bitcoin Acquisition
The primary driver behind this capital initiative is Strategy’s continued aggressive pursuit of Bitcoin. Company documents indicate the proceeds from this €100-denominated per share offering will be directed toward additional Bitcoin purchases and general corporate purposes. By pricing the shares in euros, Strategy appears to be specifically targeting European capital markets for this fundraising effort.
These new “STRE” securities will carry a face value of €100 each and promise quarterly dividend payments that translate to an annual yield of 10 percent. While this fixed income component may appeal to yield-seeking investors, the structure contains provisions that warrant closer examination.
The Dividend Penalty Clause
Market observers are particularly focused on the penalty mechanism embedded in the preferred share terms. Should Strategy fail to make scheduled dividend payments, the company would face escalating interest charges on unpaid amounts. This penalty interest would begin at 11 percent and could increase by an additional 100 basis points with each subsequent missed payment period, potentially reaching a maximum annual rate of 18 percent.
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Financial analysts note that this feature creates substantial risk for the company during periods of liquidity constraint, as compounding unpaid dividends could rapidly amplify Strategy’s debt burden.
Mixed Market Reception
The market response to this announcement has been divided. Some investors appear attracted by the high nominal yield, while others express concerns about potential equity dilution and the complexity of the financial instrument.
Recent Bitcoin purchasing patterns may also be giving some market participants pause. Between October 27 and November 2, Strategy acquired just 397 Bitcoin, representing a noticeable slowdown compared to previous accumulation phases.
Maintaining Analyst Confidence
Despite these concerns, several financial firms maintain positive outlooks on Strategy. H.C. Wainwright has reaffirmed its “Buy” recommendation, while Canaccord Genuity recently raised its price target. The prevailing sentiment among supportive analysts suggests that Strategy’s Bitcoin strategy could ultimately prove successful, provided the company maintains control over its financing arrangements.
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