Arca’s Jeff Dorman sees only one fix for Strategy’s STRC crisis

Strategy’s STRC preferred stock has fallen as much as 17% below its $100 par value, prompting Arca Chief Investment Officer Jeff Dorman to argue that selling billions of dollars worth of Bitcoin may be the company’s best path to easing pressure on its capital structure.

According to a June 18 X post by Dorman, the recent decline in STRC has left Strategy facing increasingly difficult choices as investors question the sustainability of its preferred stock obligations. The preferred security dropped to a record low of $82.53 on June 18 before recovering and closing at $88.59, remaining well below par value.

Describing the situation as the latest stage of the “MSTR pickle,” Dorman said management must decide whether to take direct action to restore confidence in STRC or continue operating under a structure that leaves multiple parts of the company exposed to uncertainty.

Selling Bitcoin could buy Strategy more time

In Dorman’s view, the most effective solution would involve Strategy selling between $3 billion and $4 billion worth of Bitcoin. Assigning a 25% probability to that outcome, he said such a move would provide additional flexibility, support STRC holders, and address concerns surrounding the preferred stock without materially changing the company’s long-term Bitcoin strategy.

While Dorman acknowledged that a large Bitcoin sale could weigh on the asset in the short term, he argued that it would buy the company significant time and reduce pressure on its financing structure.

His most likely scenario, however, points elsewhere. Dorman assigned a 70% probability to Strategy continuing its current approach of selling small amounts of MSTR stock at what he described as non-accretive levels.

Under that outcome, he said STRC investors would retain some hope of recovery while Bitcoin holdings remain largely intact, though common shareholders could face further downside.

The comments arrive as scrutiny surrounding Strategy’s financing model continues to intensify. As reported by crypto.news, Peter Schiff recently accused Strategy co-founder Michael Saylor of misleading investors who purchased STRC after it was promoted as a yield-generating investment.

Schiff argued that retirees and income-focused investors could have grounds for legal action if risks associated with the security were not adequately disclosed. He also warned that the stock’s decline could make future fundraising more expensive if investors begin demanding higher yields to purchase additional STRC shares.

Dividend obligations remain at the center of concerns

Beyond stock sales and Bitcoin disposals, Dorman assigned a 5% probability to what he called a “nuclear option” involving the elimination of payments tied to preferred securities.

According to Dorman, such a move could leave preferred shareholders recovering only 30 to 40 cents on the dollar while effectively shutting Strategy out of capital markets. At the same time, he said the company would eliminate an annual cash obligation of roughly $1.7 billion.

Separate concerns about liquidity have also emerged in recent weeks. Earlier, market maker QCP estimated that Strategy’s available liquidity could support preferred dividend payments for approximately seven and a half months.

QCP added that if existing funding channels become less attractive, the company may eventually need alternative sources of capital, with Bitcoin sales potentially becoming one available option.

Alongside those concerns, Dorman challenged Strategy’s valuation. Based on his calculations, the company holds roughly $35.2 billion in unencumbered Bitcoin collateral against an equity market capitalization of about $40.4 billion, leaving MSTR trading at approximately 1.15 times net asset value.

Given those figures, Dorman argued that MSTR should trade below net asset value and warned that the stock could continue falling unless Bitcoin stages a strong recovery. Even then, he said any upside would depend on Strategy avoiding additional dilution through dividends, asset sales, or future fundraising activities.