Introduction
Michael Saylor, the executive chairman of Bitcoin treasury firm Strategy, announced on Thursday plans to implement daily dividend payments for its four U.S. preferred shares, identified as STRF, STRC, STRK, and STRD.
Dividend Structure and Timeline
According to the proposal, these dividends will accumulate every day, including weekends and public holidays, and will be distributed on the next business day, while maintaining the financial structures as they currently exist.
A preliminary proxy statement was submitted on the same day as the announcement, with a final proxy anticipated by October 5, followed by a shareholder vote set for October 28. If the proposal for STRC, the first of the four to adopt this structure, is approved, the inaugural record date for its dividends would be November 1, leading to the first payment scheduled for November 2.
The other three preferred shares will continue with their existing quarterly schedules until the end of this year, making their last payments on December 31 before transitioning to the new daily accruals starting January 1.
Operational Changes
Currently, STRC operates with 24 record dates annually; under the new system, all four shares will transition to a full 365-day record calendar. The president and CEO of Strategy, Phong Le, indicated that for the three shares that pay quarterly, the dividend payout frequency would increase by a factor of 90.
Impact on Market Volatility
Saylor emphasized that increasing the frequency of dividend payments contributes to reduced price volatility and heightened liquidity, stating:
“The way that you create low volatility and high liquidity is to shorten the duration of the instrument and to actively manage the credit.”
He also explained that enhanced frequency could lead to more accessible buying and selling opportunities for investors.
Historical Context and Expectations
Historically, when STRC declared monthly dividends, market prices would drop by approximately 49 basis points on the day before payouts. However, after modifying their schedule to semi-monthly in June, this decline was reduced to around 36 basis points. Strategy anticipates that this new daily structure will also lead to more stable month-end evaluations for fund managers, provide a solution for institutions holding excess cash, promote quicker reinvestment, and improve integration into low-volatility indexes.
Global Significance
Le further characterized this initiative as “the first global security in the world with calendar day accruals and dividends,” asserting that, if sanctioned, these will be the only securities globally offering daily dividends linked to a 365-day accrual system, a distinctive feature among a select few with daily dividend structures totaling a market capitalization of $15 billion. He remarked:
“Digital credit and digital capital are meant to operate every single day.”
Shareholder Sentiment and Financial Context
Shareholder sentiment appears favorable: a previous adjustment for semi-monthly dividends drew overwhelming support, with 97.5% of STRC shareholders and 99.9% of common shareholders in favor. Strategy has disbursed $255 million in dividends for STRC to date.
The preferred shares play a critical role in funding Strategy’s operations; this month, the firm invested $139 million in STRC while momentarily halting Bitcoin purchases, having raised $2 billion from MSTR stock sales to bolster reserves. A framework is also in place which could lead to selling up to $1.25 billion in Bitcoin to fulfill these dividend responsibilities. Recently, the firm further increased its Bitcoin position by acquiring $76 million more, nearing its record level of holdings from June.
