K33 Research warns of structural risks in MicroStrategy's BTC buying strategy

MicroStrategy's (MSTR) practice of issuing perpetual preferred stock (STRC) to acquire Bitcoin, while creating market demand, also contains structural risks, K33 Research noted in a report cited by The Block. The report stated that of the $1.57 billion in BTC purchased by MicroStrategy last week, approximately $1.18 billion was funded through the sale of STRC. STRC is a product designed to trade around $100 and offers an annual dividend of about 11.5%. According to the research, this structure is highly dependent on market sentiment. If BTC's price remains below its target for an extended period, credit risks could become prominent. However, the report also mentioned that the immediate risk is low, as MicroStrategy holds $2.25 billion in cash.