24 Mar 2026, 16:30
STRK: The Most Undervalued And Versatile Bitcoin Security Today
Summary Strategy Inc 8.00% Perpetual Strike Preferred offers a unique blend of fixed income and MSTR equity upside. STRK’s issuance overhang has been mostly eliminated, with authorized shares cut and ATM capacity reduced. STRK provides three ways to win: MSTR rally-driven conversion value, credit repricing of its discounted dividend stream, and over 10% tax-deferred yield. I rate STRK a Buy for its superior risk-reward profile in the capital stack, contingent on bullishness towards BTC and MSTR’s business model. In this article, I argue that Strategy Inc 8.00% Series A Perpetual Strike Preferred Stock ( STRK ) is the most mispriced security in Strategy’s ( MSTR ) capital stack. The market seems to be valuing it like a damaged junior preferred. Strategy’s March 23, 2026 filing marks an inflection point. It launched a new STRK ATM capped at $2.1 billion, terminated the prior $20.3 billion STRK ATM, and cut authorized STRK shares from 269.8 million to 40.27 million, while simultaneously scaling STRC with a new $21 billion ATM and a huge increase in authorized STRC shares. At today’s share price of under $75, STRK still carries its fixed 8% dividend on a $100 stated amount, which works out to a current yield of more than 10%, and it remains the only preferred in the stack with direct MSTR upside through conversion into 0.1 shares of common. This combo of convertibility and fixed income matters a lot. STRC trades around par by design and currently pays an 11.50% variable dividend. STRF is the senior-most perpetual preferred and pays 10% fixed. STRD offers 10% on paper, but it is high-yield, non-cumulative, and the most junior preferred. STRK sits between STRD and STRC in seniority while having some upside exposure to MSTR, which is exactly why I think it is the best risk-reward instrument today. STRK Today STRK is a convertible perpetual preferred that pays an $8 per share annual dividend and can be converted at the holder’s option into 0.1 shares of MSTR. With MSTR at $138.20, the current intrinsic conversion value is only about $13.82 per STRK share. The “equity content” of STRK is therefore about 18% (13.8 / 75 = 0.18). The rest of the share value is the discounted dividend stream. Therefore, today STRK behaves more like a high-yield preferred with a free or very cheap upside kicker attached. Meanwhile, it has been mostly disregarded by the market because MSTR and STRC are getting almost all the attention, and STRK itself sits in an awkward “middle spot” in the capital structure. In my view, this is part of the reason why STRK has gotten to be so undervalued. Some Key Facts I think the issuance overhang on STRK has been eliminated. Strategy’s latest filing replaced a prior STRK ATM program with more than $20 billion capacity with a new one sized at $2.1 billion, and it cut authorized STRK shares to 40.27 million. At the same time, STRC was clearly elevated as the preferred instrument Strategy wants to scale. One possible reason to discount a convertible preferred is fear that management will keep issuing it aggressively, creating a drag on the value. That fear is a lot less justified now than it was a few months ago. Next, STRC’s seniority does not automatically make STRC the better investment. STRC is designed to trade around $100. Strategy says the dividend rate is adjusted monthly to encourage trading around par and reduce price volatility, and the STRC framework includes dividend resets, ATM issuance management, and call mechanics to keep the security near its stated amount. In other words, STRC is not supposed to offer any price appreciation. That leaves STRK in a far more attractive position. It is junior to STRF and STRC, yes, but it is also the only preferred that still offers fixed income plus common equity upside. So while STRC is built to be stable and STRF is built to be senior credit, STRK remains the only instrument that can benefit both from credit repricing and from a strong MSTR rally. There Are Three Ways To Win With STRK The first path is the obvious one: MSTR works again. I do not mean MSTR merely drifting higher. I mean the market re-embracing the common as the levered Bitcoin equity. If MSTR regains momentum, volatility, and premium to underlying BTC holdings, the conversion value embedded in STRK can expand and generate strong price appreciation. The second path is credit repricing. STRK yields over 10% on a fixed dividend. Again, this represents 82% of the value of the security (the equity conversion piece is 18%). If the market reprices the discounted dividend stream, it can justify a meaningfully higher price than where the shares trade today based on an expansion of the non-equity portion of the shares. The third path is simply holding the security and getting paid a tax-deferred dividend. Due to Strategy’s negative taxable earnings and profits, distributions on all its preferred equity are treated as return of capital and are expected to remain ROC for the foreseeable future. For most U.S. holders, that means the current cash flow is tax-deferred by reducing the cost basis of the shares, meaning one would pay capital gains after a sale. More than 10% tax-deferred income is very attractive, and so I would treat this as a separate way to “win” with STRK. STRK Looks Better Than The Alternatives This, of course, depends on your exact preferences, but I think for a general audience this claim is generally true. I assume most people want to outperform a broad equities basket without taking on too much risk or enduring downside volatility. So here’s the rundown on the other securities in the capital stack: MSTR still offers the most explosive upside, but it also absorbs the most volatility and the most direct dilution risk. Strategy just refreshed a $21.0 billion common ATM, and the common remains the main instrument through which the company can raise very large amounts of capital quickly. That makes MSTR excellent for investors who want maximum torque to BTC and maximum management discretion, but it does not make it the best security in the stack on a risk-adjusted basis. STRC is the strongest success story among the preferreds, and I understand why people like it. It has already reached about $5.0 billion of notional outstanding, pays monthly, and is designed for price stability around par. STRC is the most liquid preferred equity in the world and the largest preferred in the capital stack. Interestingly, Strategy has published that STRC’s Sharpe Ratio based on 30D volatility has risen to almost 4. This is a bit sensationalist because the stock hasn’t even existed for a year yet, but it is technically true and a cool fact. STRC Metrics - See Sharpe at top right (Strategy) But here’s another factor. If Strategy succeeds with scaling STRC, the dividend rate will likely be moved lower over time as demand for the instrument grows. That is good for Strategy and acceptable for shorter-duration credit investors. But it is not the setup I want if I am trying to maximize total risk-adjusted return (risk here refers to more than variance). Another thing that must be considered is that with STRC, we are guaranteed no upside, yet we accept the tail risk of a significant de-peg from the $100 price. This unfavorably asymmetric risk-reward doesn’t seem like a good option for a long-term position. STRF is more senior and cleaner. If we want the safest preferred claim inside Strategy, STRF would be the obvious choice. But safety has already been recognized by the market. STRF trades near $100 (par) and offers a roughly 10% current yield. STRD goes the other direction. It trades at a similar discount to STRK and offers a higher current yield, but it is explicitly non-cumulative and has no conversion feature. To me, that makes STRK the happiest middle ground: superior upside to STRF, better structural protection than STRD, and better symmetry than STRC. Risks The biggest risk is that all of Strategy’s preferreds (and the common stock) are downstream from the same core economic reality: the company is one very big BTC balance sheet. If BTC enters a deep and extended bear market, every layer of the capital stack can get repriced. It is also possible for the equity option to disappoint. I think the simplest way to understand Strategy's business model is that it raises capital and buys BTC. Therefore Strategy needs BTC to outperform the cost of capital on the money it raised. Given that much of the preferred has a dividend rate of over 10%, MSTR investors absolutely need BTC to exceed this rate of return, or else they will cover the difference out of their own pocket. And this, of course, matters to STRK investors too, because a fifth of their share value is derived from MSTR. For this risk to play out, we’d really need MSTR to trend lower and lower because BTC doesn’t outperform the 10% cost of capital used to acquire it. At that point, even though STRK dividends are getting paid, the erosion of the common stock will cause STRK to underperform the other preferreds. This risk is unique to STRK. Conclusion I rate STRK a Buy because I think the market is over-penalizing the security for two things that have already changed: the large issuance overhang and the assumption that Strategy’s focus on STRC makes STRK obsolete. Today I can buy a fixed income preferred at a steep discount to par value, earn about a 10.5% current yield, and keep the only conversion right in the preferred stack. Quite an attractive combination, I think. But I am bullish on STRK because I am bullish on BTC. If one strongly disagrees with the Bitcoin thesis, then one is better off looking somewhere else.
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