Crypto treasury companies turn to high-yield preferred equity as shares slide

Traders Union
All News
Financial News
Crypto treasury shifts to equity

Highlights

Companies like Strategy, Strive Asset Management, and Capital B are raising $10.5 billion via high-yield digital credit as equity valuations fall.
Strategy's Stretch pays 11.5 per cent annual dividends monthly, Strive offers 13 per cent annually in daily installments, while falling crypto and equity prices challenge sustainability.
Strategy shares are down 60 per cent, The Smarter Web Company 30 per cent, and Capital B 83 per cent, with bitcoin slipping 32 per cent year-on-year amid growing doubts about the model's viability.

New funding model spreads beyond Strategy

As reported by Financial Times, companies built around holding crypto tokens are increasingly looking to so-called digital credit, a form of perpetual preferred stock popularized by Michael Saylor's Strategy, to raise cash as equity valuations weaken. The instrument combines debt-like income with equity-like structure, offering investors high recurring payouts without the upside tied to common share performance.

Strategy's version, called Stretch, pays annual dividends of 11.5 per cent in monthly installments, and the company uses the proceeds to buy more bitcoin. About $10.5 billion has flowed into the product since its listing roughly 10 months ago, and Strategy is now proposing to pay investors twice a month.

U.S.-listed Strive Asset Management, co-founded by Vivek Ramaswamy, runs a similar product that is set to pay 13 per cent annual interest in daily installments from mid-June. The Smarter Web Company is also considering a London listing for its own version of digital credit, according to people familiar with the matter, while Paris-listed Capital B says the structure is its main focus as it seeks to expand the Strategy model in Europe.

Falling crypto and equity prices test sustainability

Demand for these products is rising as crypto treasury companies face a harsher market backdrop than during last year's buying wave. Initial gains in many share prices have largely reversed as investor enthusiasm cools, the market becomes more crowded, and token prices remain under pressure.

Bitcoin has fallen 32 per cent over the past year, while shares in Strategy, The Smarter Web Company and Capital B are down 60 per cent, 30 per cent and 83 per cent respectively over the same period. The model has also drawn scrutiny because dividend payments are funded through further capital raising, raising questions about how sustainable the approach is if market appetite weakens further.

Some crypto treasury companies are already retreating, selling token holdings and returning to their original operating businesses. Even so, supporters of digital credit argue the products broaden the investor base by appealing to buyers who prefer predictable cash returns over direct exposure to bitcoin volatility.

In our earlier article on Strategy (MSTR), we examined how the company’s stock was trading below key moving averages amid heightened volatility, even as it remained active in Bitcoin accumulation. We also noted Strategy’s $1.5 billion convertible-bond repurchase and the transfer of BTC to Coinbase Prime, which fueled speculation about selective Bitcoin sales and raised fresh questions about liquidity management and funding dividend obligations.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.