Analysis: Strategy's credit risk has eased as its preferred shares are now worth more than its convertible bonds

PANews, January 22 – According to an exchange report, the credit risk of bitcoin treasury company Strategy has eased, as the notional value of its perpetual preferred shares has reached $8.36 billion, exceeding its $8.2 billion in convertible debt. This shift in capital structure towards permanent capital reduces refinancing risk and balance sheet volatility. Convertible bonds introduce refinancing risk at maturity and volatility linked to the share price, whereas perpetual preferred shares do not require principal repayment and pay a fixed dividend, ranking between common equity and debt in priority.

The company's preferred share portfolio consists of four instruments, with a total annual dividend of approximately $876 million. In addition, Strategy holds $2.25 billion in reserves to improve dividend coverage and reduce short-term financing risk. The number of outstanding common shares has increased from 76 million in 2020 to over 310 million, which may alleviate future dilution pressure from bond conversions.