Michael Saylor will pay 18% dividends to buy bitcoin if he has to

As the price of bitcoin (BTC) declines towards the average purchase price at Strategy (formerly MicroStrategy), founder Michael Saylor is willing to pay USD dividends at up to 18% per year to access more capital.

In an announcement about a new series of stock that he calls the “STRF Perpetual Preferred Stock,” Saylor revealed that Strategy is offering 5 million new shares with $100 of liquidation preference and limited conversion rights into MSTR common shares.

Liquidation preference is the right to receive money in the event of a “liquidity” (payout) event such as an acquisition, public offering, or dividend.

Instead of convertibility at a $1,000 strike price per MSTR share which is a marquee feature of Strategy’s STRK preferred shares, Saylor is simply focused on paying cash to entice investment in his new STRF preferred shares.

Strategy is upping its dividend rate from STRK’s 8% rate. Instead, STRF holders will enjoy a 10% fixed dividend in USD that increases to a maximum of 18% annually if the company becomes late on payments. Dividends are payable every fiscal quarter.

The STRF ticker symbol evokes the “strife” of paying cash every three months rather than the aspirational “strike” price of $1,000 hinted at by the STRK ticker symbol.

Neither class has voting rights and both have mid-capital stack seniority for liquidation rights: above common MSTR yet below debtholders

Read more: Michael Saylor’s bitcoin announcements no longer seem to pump MSTR stock

STRF further increases the cash burden on Strategy

If the company successfully sells its intended 5 million shares of STRF, its first dividend is due on June 30. Of course, the company has some discretion to not pay dividends, yet unpaid dividends compound and increase by 100 basis points (1%) per quarter up to a maximum annual rate of 18%.

Hopefully, BTC’s price increases enough — or Strategy invents new debt or corporate offerings to raise the USD — to service those dividend payments.

Although STRF doesn’t have the aspirational strike price of its predecessor, it does have a less important redemption feature. In addition to tax code-related redeemability events, if less than 25% of the shares become outstanding (i.e. circulating publicly), Strategy may choose to redeem all shares for cash to clean up its capital stack.

Little has changed on the news in today’s Nasdaq session. Shares of MSTR are trading about 2% lower after the news. That mirrors a similar, 1.8% decline in bitcoin’s price today. Morgan Stanley, Citi, Barclays, and Moelis are leading the STRF preferred share offering.