Key facts
- Cantor Fitzgerald identifies restoring MicroStrategy's STRC preferred stock to par as the company's primary objective.
- The bank suggests this is essential for MicroStrategy to resume its Bitcoin acquisition strategy.
- Cantor anticipates management will take steps to increase cash reserves to support STRC dividends.
- Analysts believe MicroStrategy's common shares (MSTR) could benefit as its capital structure strengthens.
- JPMorgan had previously expressed concerns about the 'two-way risk' associated with MicroStrategy selling Bitcoin to fund dividends.
Cantor Fitzgerald believes that MicroStrategy's (MSTR) primary focus is to restore its STRC preferred stock to its par value, a move the bank argues is critical for the company to resume its Bitcoin acquisition strategy and strengthen its overall capital structure. Following a meeting with Executive Chairman Michael Saylor, Cantor expressed increased confidence in management's plan to stabilize the balance sheet and improve capital raising capabilities.
In early trading on Monday, STRC was priced at $87.79, while Bitcoin hovered near $61,800 and MSTR shares were down 3.4% at $97.34. MicroStrategy recently announced a sale of $216 million in Bitcoin, with the proceeds designated for STRC dividends.
Cantor's analysts, led by Ramsey El-Assal, suggested that STRC should be viewed as the foundation of MicroStrategy's funding model, rather than a competing interest for preferred holders, common shareholders, or Bitcoin investors. They recommended buying STRC to capture the spread to par and its yield, or buying MSTR common shares, which are expected to rally as the capital structure solidifies.
The analysts anticipate that MicroStrategy will continue to increase cash reserves to cover STRC dividends until the preferred stock trades at par, noting the recent increase in coverage from approximately 10 to 18 months as a first step. They also downplayed concerns regarding upcoming convertible debt maturities, suggesting the company will either revive its STRC-driven capital engine or refinance the debt before these obligations come due. As STRC recovers, Cantor expects MSTR shares to benefit, potentially enabling further equity issuance to fund additional Bitcoin purchases.
This perspective contrasts with a report from JPMorgan last week, which stated that MicroStrategy's policy of selectively selling Bitcoin to fund preferred dividends introduces avoidable two-way risk, thereby increasing market uncertainty and volatility.