According to BlockBeats, on June 27th, Farside Investors published an analysis of Strategy's (MSTR) preferred stock, STRC, stating that STRC's so-called price stabilization mechanism is inherently unstable. The product was issued at $100 and designed with a mechanism to push the price towards $100: if STRC falls below $100, the company can increase dividends to push the price up; if it rises above $100, it can decrease dividends to suppress the price. If investors perceive an increase in Strategy's credit risk, the STRC price should fall, and if the company subsequently increases the dividend yield, it could further weaken the company's creditworthiness, leading to a "death spiral." Furthermore, the coupon rate is determined by the company itself and is not an automatic stabilization system, which exposes investors to significant uncertainty when evaluating STRC.

From a basic financial perspective, Strategy's decision to issue a perpetual instrument with an 11.5% yield and use the proceeds to buy Bitcoin is a poor trade. Even if Bitcoin's long-term average annual growth rate reaches 10%, coupled with a long-term inflation of 5%, Bitcoin could still be very successful, but it might not cover the 11.5% annualized cost. If the price of Bitcoin falls in stages, the company might need to sell BTC at a low price to pay interest, resulting in a net loss. Assuming the STRC coupon remains at 11.5%, its fair value, calculated at an 8% discount rate, is $144, significantly higher than the issue price of $100. Under this assumption, issuing STRC is a bad trade for Strategy, but investing in STRC might be a good investment. However, STRC is not a fixed-rate perpetual bond; Strategy has the right to lower the coupon by 25 basis points each month until it reaches the SOFR rate (currently around 3.6%). Considering this right, the estimated value of STRC is approximately $55.

STRC is currently trading at around $75, about 25% below the $100 target. The price stabilization mechanism is not currently functioning, and the company has not responded by raising the coupon rate. This means the mechanism is largely ineffective, and there is no clear reason for STRC to return to $100 in the future. If the market expects Strategy to gradually lower the coupon rate to SOFR, STRC should approach $55. Strategy's most likely short-term option is to maintain the 11.5% coupon rate and temporarily ignore the STRC discount issue, continuing to pay the coupon through issuing new shares or selling Bitcoin. However, they believe this is merely a postponement. If the company truly wants to resolve the issue, there are two realistic options: one is to start repurchasing STRC, and the other is to completely abandon the price stabilization mechanism and lower the coupon rate to SOFR. Repurchasing STRC is likely the most probable outcome, but the company may need some time to succumb to pressure and face reality.

According to BlockBeats, on June 27th, Strategy (MSTR)'s mNAV fell below 1, meaning the market currently values the company below the value of its Bitcoin holdings. This is unusual for Strategy, led by Michael Saylor. For years, investors have valued Strategy above the value of its Bitcoin holdings, allowing it flexibility to raise funds when needed, a practice that Saylor and his team have fully utilized.

Currently, Strategy's stock price has fallen to approximately $82, a drop of about 85% from its all-time high in November 2024, reducing its enterprise value to approximately $50.4 billion. Meanwhile, with Bitcoin priced at around $60,000, Strategy's Bitcoin holdings are worth approximately $51.1 billion. This means the market's valuation of the entire company is now lower than the value of its Bitcoin holdings.

At current valuation levels, Strategy's issuance of new shares would be dilutive, as the company would essentially be selling equity at a price below the value of the underlying assets. While this doesn't mean Strategy can't continue issuing new shares, raising capital at current valuation levels could draw further criticism. Strategy's recent Bitcoin purchases have already diluted common shareholders and sparked community backlash.

Market concerns are growing that Strategy is increasingly resembling a closed-end fund rather than an operating company. Similar instruments typically trade at a premium relative to their underlying Bitcoin holdings when demand is strong, but may trade at a discount for an extended period as investor sentiment weakens. However, unlike traditional closed-end trusts, Strategy still possesses a variety of instruments, including issuing debt or equity when it is beneficial to shareholders, redeeming or refinancing securities, generating operating cash flow through its software business, and actively managing its capital structure.

According to BlockBeats, on June 27, data from Coinglass showed that the Coinbase Bitcoin premium index has been in negative territory for 40 consecutive days, currently at -0.1569%, indicating continued weak purchasing power in the US market.

The Coinbase Bitcoin Premium Index measures the difference between the price of Bitcoin on Coinbase and the average price in the global market. A negative premium usually reflects strong selling pressure in the US market, decreased investor risk appetite, increased market risk aversion, or capital outflow.