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Why Strategy’s Preferred Stock, STRK, Is Defying MSTR’s Downturn

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Disclaimer: The analyst who wrote this piece owns shares of Strategy (MSTR).

Strike (STRK), the preferred stock issued by bitcoin buyer Strategy (MSTR) has been listed for just over a month and is currently 3% higher than at its Feb. 5 introduction. Strategy’s common stock, on the other hand, is 20% lower over the same period.

Preferred stock like STRK can be thought of as a hybrid of equity and debt. Holders have a greater right to dividend payments than common stock owners if the company makes them and also to the company’s assets in the event of a liquidation. STRK is a perpetual issue, which lacks a maturity date (like equity) and pays a fixed dividend (like debt).

Those features mean preferred stock tends to be less volatile than the common stock. That certainly seems to be the case for STRK. According to Strategy’s dashboard, STRK has a 26% correlation with MSTR and a slightly negative -7% correlation with bitcoin (BTC). It’s also less volatile, at 49%, compared with bitcoin’s roughly 60% and MSTR’s volatility exceeding 100%.

Last week, Strategy announced a $21 billion at-the-market (ATM) offering for STRK. That is, it’s prepared to sell up to that amount of the stock at the current market price over a period of time. If all the STRK is sold, the company would face a total annual dividend bill of about $1.68 billion.

Generating that amount of cash means the company would either to sell common stock through an ATM offering — unlikely given the depressed share price as of late —or use cash generated from operations or proceeds from any convertible debt raised.

STRK offers an 8% annual dividend yield based on its $100 liquidation preference and at the currently price of $87.45, offers an effective yield of around 9%. As with debt, the higher the STRK price, the lower the yield, and vice versa.

STRK also includes a feature allowing each share to be converted into 0.1 share of common stock, equivalent to a 10-to-1 ratio, when the MSTR price reaches or exceeds $1,000. Strategy stock closed at $262.55 on Wednesday, for the option to become viable it would have to appreciate significantly, offering potential upside beyond STRK’s fixed dividend.

As an income-generating product with lower volatility, STRK presents a more stable option with potential upside. However, the massive ATM offering could impact this potential upside, similar to how ATM share sales have affected the common stock’s performance.

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Arbitrum Ecosystem Unveils ‘Onchain Labs’ to Support Early-Stage Projects

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The main organizations supporting the Arbitrum blockchain, Offchain Labs and the Arbitrum Foundation, unveiled a new program designed to kick-start early-stage projects in the ecosystem.

The new program, «Onchain Labs,» is designed to provide go-to-market support to «experimental and volatile» projects, according to a blog post from Offchain Labs, Arbitrum’s main developer.

“Through Onchain Labs, we’re dedicating resources to support developers looking to rapidly expand the application layer by ideating with them from the ground floor to bring the best user experiences to Arbitrum,” the blog post said. “As we do with many Arbitrum teams, we’ll provide product and [go-to-market] support to these early-stage projects, collaborating closely to help their applications thrive on Arbitrum.”

Arbitrum Foundation is a non-profit that stewards Arbitrum ecosystem governance. Offchain Labs, which created the blockchain in 2021, focuses on developer tooling and core network infrastructure.

Offchain Labs is pitching its new initiative as a way to spur greater activity and interest in the wider Arbitrum ecosystem. According to the blog post from the company, the first Onchain Labs projects will soon emerge from stealth. Offchain Labs said the only projects supported by its new program will be those that explicitly «commit to fair and equitable launches» — presumably meaning they avoid token launches and other mechanics that preference insiders.

Offchain Labs stated in its blog post that the selection criteria are meant to avoid «extractive ecosystems» and «zero-sum games.» Tandem, Offchain Labs’ venture capital arm, «may or may not purchase associated tokens in public markets,» the company added.

Arbitrum is a layer-2 optimistic rollup network on Ethereum. Like other rollups, the chain is designed to process transactions faster and more cheaply than the main Ethereum blockchain. Several new blockchains are built on Arbitrum’s technical framework, forming a network of interconnected blockchains called Arbitrum ‘Orbit.’

Arbitrum is currently the largest layer-2 network on Ethereum, with roughly $12.2 billion on its primary ‘Arbitrum One’ chain, according to L2beat.

Read more: Arbitrum Deepens Ties with South Korea’s Lotte Group

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Gemini Hires New CFO as It Prepares for Potential IPO

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Crypto exchange Gemini has appointed a new chief financial officer as it positions itself for a potential initial public offering.

The company’s latest hire, Dan Chen, who previously served as vice president of capital markets at Affirm, announced the move in a social media post.

«Crypto is the most dynamic sector in finance and Gemini is at the forefront of this revolution — making it simple and secure to engage on the digital asset frontier,» Chen wrote in the post.

Chen will work alongside Gemini co-founders Cameron and Tyler Winklevoss to help scale the business. The timing of the hire aligns with Gemini’s reported ambitions for an IPO, which would provide greater access to capital while subjecting the company to the transparency requirements of public markets.

Read more: Billionaire Winklevoss Twins-Backed Gemini Confidentially Filed for a U.S IPO: Bloomberg

If Gemini moves forward with the public listing process, it will be part of a small but growing number of crypto-native companies considering an IPO in the U.S. stock exchanges, including Kraken, Circle, Bullish (parent company of CoinDesk) and Blockchain.com

Gemini has not formally confirmed its IPO plans, but the appointment of a CFO with extensive experience in financial strategy suggests that preparations may be underway.

Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk’s full AI Policy.

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Bakkt Shares Drop 35% After Loss of Two Major Customers

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Bakkt Holdings (BKKT), a crypto exchange and custody firm, saw its shares plunge on Monday after disclosing that neither Bank of America (BAC) nor crypto trading app Webull Pay would renew their commercial agreements with the company.

At the time of writing, BKKT shares have dropped 35% in after hours trading to $12.83. The stock made its all-time high in October 2021, when it was traded for $1,063 shortly after the firm became public through its merger with VPC Impact Acquisition Holdings.

Bank of America accounted for roughly 16% of Bakkt’s loyalty service revenue in 2023. Webull, meanwhile, represented 74% of Bakkt’s crypto service revenue in the same period. The agreement with Bank of America is scheduled to expire on April 22, while the contract with Webull will end on June 14.

Bakkt has requested an extension of time to file its 2024 annual report with the SEC.

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