Strategy Proposes Paying Preferred Stock Dividends as if Every Day Were a Business Day

On Thursday, executive chairman Michael Saylor pitched a plan for his company Strategy, which manages a Bitcoin treasury, to pay dividends daily, including weekends and public holidays, on its four U.S. preferred shares. Under the proposal, dividends would accrue on every calendar day, with payment following the next business day.

A preliminary proxy was filed alongside the filing, which covers STRF, STRC, STRK and STRD. A definitive proxy is expected on October 5, with shareholders voting on October 28. Under the arrangement, the economics of each share remain unchanged.

How the Schedule Breaks Down

1. STRC would be the first to move, with its first record date set for November 1, followed by a first payment on November 2.
2. The remaining three would complete the quarter on the previous schedule, making their final payment on December 31, then switch over on January 1.

STRC currently has 24 record dates a year; all four would move to 365. For the three paying quarterly, president and chief executive Phong Le put the increase at 90 times.

June moved from monthly to semi-monthly payments on STRC, and that change cut the price decline on the day before the dividend from roughly 49 basis points down to about 36 basis points.

What Saylor Says About Volatility

“The way that you create low volatility and high liquidity is to shorten the duration of the instrument and to actively manage the credit,” Saylor said, adding that, “the higher the frequency of those adjustments, the lower the volatility of the instrument.” The lower the volatility, he added, “the easier it is to get in and get out.”

Fund managers hope for steadier month-end marks under strategy, along with a place to hold institutions’ idle cash, faster reinvestment, possible entry into low-volatility indices, and improved terms on pledges made against the shares.

Le called it “the first global security in the world with calendar day accruals and dividends.” If approved, the four would be the only securities anywhere paying on 365-day calendar accruals, among five globally with daily dividends and a combined $15 billion market value. “Digital credit, digital capital, is meant to work every single day,” he said.

The Last Vote Went Easily

In June, Le reported that a majority of STRC shareholders and common stockholders approved semi-monthly dividend payments, with 97.5% of STRC holders and 99.9% of common shareholders giving their backing. Since then, the company has paid out $255 million in STRC dividends.

The preferred shares sit at the center of how Strategy funds itself. This month it bought $139 million of STRC while pausing Bitcoin purchases, added $2 billion to its dollar reserves by selling MSTR stock, and now holds a plan that could see it sell up to $1.25 billion of Bitcoin to meet those obligations. Just last week, the firm picked up a further $76 million worth of Bitcoin, pushing its holdings close to the June high.

Why Daily Dividends Matter

The idea behind the plan is to cut down on the ups and downs tied to less frequent payouts. With STRC making monthly payments, its price dropped some 49 basis points on the day before the dividend was handed out. Once the company switched to paying twice a month in June, that decline shrunk to around 36 basis points instead.

The practical benefits are straightforward:

• Steadier month-end marks for fund managers
• A home for institutions’ idle cash
• Faster reinvestment of proceeds
• Possible entry into low-volatility indices
• Better haircuts when shares are pledged as collateral

The plan is bold, yet it has precedents. Across the globe, five securities currently pay daily dividends, holding a combined market value of roughly $15 billion. If adopted, Strategy’s four would swell that number to nine.

What Shareholders Get From This

Daily dividends mean daily income for anyone holding the shares.

October 28 is when the vote happens. Should it pass, STRC will move on November 1, with the rest following on January 1.

This is a significant step from a firm that depends largely on its preferred shares for money. It demonstrates how much importance Strategy places on these shares as a financial instrument. The vote will show whether shareholders approve.

Source material: “Strategy Wants Its Preferred Stock Dividends to Accrue 365 Days a Year,” Decrypt.

Bitcoin · dividends · preferred stock · Saylor · strategy