Michael Saylor is back with another scheme to stretch Bitcoin into the core of a $100 billion financial empire. This time, it’s about building an entirely new funding model at Strategy, the company formerly known as MicroStrategy. According to Bloomberg, the chairman has dumped traditional tools like equity offerings and convertible debt to go all-in on something most companies wouldn’t touch: perpetual preferred stock. These new securities, branded as “Stretch,” don’t mature, don’t guarantee dividends, and don’t give investors any control. Saylor wants them to act like a funding faucet he can crank open whenever he wants to buy more Bitcoin , while avoiding diluting existing shareholders. Saylor pushes retail into perpetual preferreds The company has already raised around $6 billion this year through four perpetual preferred tranches. The most recent, a $2.5 billion “Stretch” sale, now ranks as one of the largest capital raises in the crypto industry this year, beating out Circle’s IPO. A quarter of those buyers were retail, not institutions. That’s almost unheard of for preferreds, which usually come from investment-grade names like banks or utilities. Strategy has no credit rating. The securities are junior, making them way outside the comfort zone for big debt buyers. Michael Youngworth, who leads convertibles and preferred strategy at Bank of America, said , “I have no past knowledge of any company doing this the way that MicroStrategy has just to capitalize on the retail fervor.” He’s not the only one raising eyebrows. Saylor’s goal is to create what Strategy calls a “BTC Credit Model,” a framework where Bitcoin , a volatile asset with no cash flow, supports income-generating securities. If enough buyers show up, he claims the system could raise $100 billion, even $200 billion. But if they don’t, Strategy could be left holding expensive dividend obligations without the income to cover them. Selling Bitcoin to plug the gap is off-limits. Saylor’s “hold on for dear life” strategy doesn’t bend for liquidity issues. Since January 2024, Saylor has raised over $40 billion, $27 billion from common equity and $13.8 billion from fixed-income instruments. Phong Le, Strategy’s CEO, said the plan is to build a stronger capital structure than what failed during 2022’s crash, when a Bitcoin -backed loan from Silvergate nearly tanked the company. “Over time, we may not have convertible notes,” Phong said. “We will be relying on perpetual preferred notes that don’t ever come due.” Preferreds bring long-term risks if Bitcoin crashes But the model relies on paying dividends forever using Bitcoin , which generates no yield. And if prices drop, so does investor appetite. If the market turns cold, Strategy could struggle to cover payouts. Some of the preferreds allow skipped payments. They’re non-cumulative, which means the company doesn’t need to make up missed dividends. Some obligations can even be paid in shares. But Strategy still said it’s willing to sell stock below its typical 2.5x net asset-value floor if that’s what it takes to stay afloat. Unlike convertibles, these preferreds don’t convert into shares or mature. They never have to be repaid. That gives Saylor more room to breathe, especially since Strategy has been able to sell stock at a premium over its actual Bitcoin holdings, a gap Saylor calls the “mNAV premium.” But these preferreds aren’t cheap. Youngworth pointed out they carry 8% to 10% coupon rates, which is expensive long-term. If crypto crashes, payouts don’t go away. Short seller Jim Chanos called the non-cumulative Stretch notes “crazy” for institutions to touch. “If I don’t pay the dividends, they are not cumulative. I don’t have to pay them back,” he said during a Bloomberg interview. Jim believes Strategy’s leverage is maxed out and sees Stretch as a way to push it further. He’s betting against the stock while going long Bitcoin , expecting the premium to collapse. The Stretch units sit above common shares but below convertibles in Strategy’s capital stack. They don’t carry the protections of traditional debt. Convertibles are still favored by Wall Street because they’re easier to hedge with market-neutral strategies. Killing them removes a valuable arbitrage tool for investors. All of this only works if Bitcoin stays valuable and people keep buying into the system. If confidence drops, the whole thing falls apart. Sign up to Bybit and start trading with $30,050 in welcome gifts
