Strategy Boosts Bitcoin Holdings with Euro-Denominated Stock Offering

Key Takeaways

• Strategy is pricing a euro-denominated perpetual preferred stock to fund additional Bitcoin purchases.
• The new Series A Perpetual Stream Preferred Stock (STRE) will debut at 80 euros per share, aiming to raise €608.8 million.
• The offering will not be available to retail investors in the EU or the UK.
• Strategy faces headwinds in the crypto treasury market, including revenue decline and a non-investment grade credit rating.

Strategy, a company specializing in crypto treasury management, is proceeding with its strategy to increase its Bitcoin (BTC) holdings. The firm is pricing a new euro-denominated perpetual preferred stock specifically designed to finance further cryptocurrency acquisitions. The company announced on Friday that its Series A Perpetual Stream Preferred Stock (STRE) would launch at a price of 80 euros ($92.50) per share, with the goal of raising an estimated €608.8 million in net proceeds. These funds will be allocated to purchasing additional Bitcoin and for general corporate purposes. Settlement of the stock offering is anticipated on November 13.

The newly issued STRE shares will rank senior to Strategy's Perpetual Strike (STRK), Perpetual Stride (STRD), and common stock, but subordinate to its Perpetual Strife (STRF), Variable Rate Perpetual Stretch (STRC) shares, and outstanding debt. Strategy clarified that the STRE offering will not be accessible to retail investors in the European Union or the United Kingdom.

This latest capital raise follows a period of slowed acquisition activity in October, which coincided with a general downturn in crypto treasury companies and a broader decline in the cryptocurrency market. Strategy is currently navigating challenges in the treasury company landscape, reporting Q3 revenue of $2.8 billion, a significant decrease from the $10 billion reported in Q2. The company's stock has also been on a downward trend since July. Ratings service S&P Global Ratings assigned Strategy a B- credit rating in October, classifying the company as a “non-investment grade” entity characterized by speculative attributes.

For context, S&P's highest credit rating is AAA, 15 levels higher than B-. A rating of BB and lower is considered “non-investment grade.” S&P cited the concentration of BTC holdings as a risk factor for investors and suggested that Strategy is too narrowly focused on BTC instead of diversifying its business operations and income streams. However, analyst and BTC investor Willy Woo believes that Strategy is unlikely to liquidate its BTC holdings during the next crypto bear market or face bankruptcy. Woo attributes this to the manageable and spaced-out debt maturities, reducing the likelihood of a forced liquidation to meet debt obligations.