Meet 'Stretch'—Michael Saylor's Latest Solution for Distributing a Significant Dividend with Bitcoin. Here's What You Should Understand.

Main Insights

• Strategy has introduced new financial products that blend characteristics of both stocks and bonds.
• The company's preferred securities offer dividend payments and share similarities with both equities and fixed-income assets, drawing interest from a mix of individual and institutional investors.

If you thrive on market swings, consider buying bitcoin. If volatility isn't for you, bitcoin might still be worth a look.

This is the message from Michael Saylor, chairman of Strategy (MSTR), whose latest offerings—preferred shares that combine elements of stocks and bonds—are designed to appeal to both seasoned investors and newcomers who may be wary of unpredictable stock markets.

These preferred shares function like bonds by providing regular dividend payments, but also resemble stocks since their holders are lower in priority than creditors within the company's capital structure. Four such securities are now listed on the Nasdaq, each with unique nicknames: "Stretch," "Stride," "Strife," and "Strike." Of these, "Stretch" (ticker: STRC) has received the most attention.

Why This Is Relevant

With many investors currently searching for assets that generate steady income, Strategy's preferred shares may be attractive—provided they're comfortable with the underlying exposure to cryptocurrency.

One reason for this interest is the current yield of 11.5%. In contrast, Strategy's common stock has lost half its value over the past year as the crypto market declined. (According to Michael Saylor, "Stretch is for everyone.") While some compare "Stretch" to a stablecoin, there are important distinctions to consider.

Similar to stablecoins that aim to maintain a fixed value against currencies like the U.S. dollar, Stretch is intended to trade at $100. Strategy manages this by adjusting the dividend rate monthly, and its yield currently surpasses that of some "investment-grade" preferred shares, which typically offer 6% to 7% returns.

However, unlike stablecoins, Stretch is not equivalent to holding cash. Unlike Circle's (CRCL) USDC, which is backed by short-term U.S. Treasurys with government backing, Stretch relies on Strategy's own assets. These include its software business, a substantial bitcoin reserve—738,731 coins recently valued at about $53 billion—and over $2 billion in cash reserves, which the company says are meant to cover both debt and preferred dividends, though they may be used for other purposes at Strategy's discretion.

While Strategy's regular shares have often attracted individual investors, the preferred shares, including Stretch, have been purchased by major institutional investors such as Fidelity, Vanguard, Capital Group, and BlackRock's iShares, according to data from Yahoo Finance. These funds typically seek out income-generating investments.