Peter Schiff Asks Michael Saylor What's Funding Dividend Payouts On Strategy's Preferred Stock: 'MSTR Is Losing Money'

Economist Peter Schiff questioned on Thursday how Strategy Inc. (NASDAQ:MSTR) can sustain the 11% dividend payout on its Perpetual Stretch Preferred Stock (NASDAQ:STRC), citing the company’s ongoing financial challenges.

Saylor Says SRTC Providing Yield With Less Volatility

It all started when Strategy founder Michael Saylor took to X, highlighting how the Bitcoin-backed preferred stock delivered 11% annual dividend, paid monthly in cash.

Saylor attached a chart showing STRC’s 6% historical volatility, significantly lower than the Strategy’s Class A shares and the iShares Bitcoin Trust ETF (NASDAQ:IBIT), the world’s largest Bitcoin exchange-traded fund.

“STRC delivers the first 11% of BTC ARR with ~85% of the volatility engineered out,” Saylor wrote.

Schiff Asks Where’s The Money Coming From

Strategy introduced the STRC preferred stock last year to provide a high-yield, lower-volatility income instrument. The proceeds are used to acquire more Bitcoin.

However, economist and Bitcoin critic Peter Schiff was not amused. He claimed “MSTR is losing money” and questioned where the company is getting money to pay yields on its instruments.

Is The Bitcoin Proxy Strategy Viable?

The MSTR stock is often seen as a leveraged Bitcoin proxy due to its recursive strategy of issuing equity and debt to acquire more BTC as its price rises. However, this link makes it vulnerable to BTC price declines too, which is exactly what is happening now.

The stock has more than halved in value over the last six months, significantly underperforming Bitcoin itself. 

Strategy’s market valuation stands at $47.50 billion, while its Bitcoin holdings are valued at nearly $59 billion. This means that the stock is trading at a discount to its net asset value.

Saylor, on the other hand, has defended the company’s business model, stating that as long as Bitcoin rises by just 1.25% annually, the company can sustain its dividends indefinitely while enhancing shareholder value. He added that the firm is “engineered” to withstand an 80-90% Bitcoin drawdown and keep operating.

The company is set to report its fourth-quarter financials next Thursday.

Price Action: At the time of writing, BTC was exchanging hands at $82,387, down 6.42% in the last 24 hours, according to data from Benzinga Pro.

Strategy shares fell 0.13% in after-hours trading after closing 9.63% lower at $143.19 during Thursday’s regular trading session. Year-to-date, the stock has fallen 5.77%.

MSTR maintains a weaker price trend over the short, medium, and long terms with a poor Value ranking, according to Benzinga’s Edge Stock Rankings.

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