Arkham Weighs Risk of a Terra LUNA-Style Collapse for Strategy's STRC Shares

STRC preferred shares, issued by Strategy, have lost their peg to par value and, as of publication, are trading at $74.75. At issuance, the entire offering was valued at more than $10 B; now its market capitalization has shrunk to $7.9 B.

As the security's price has fallen, its effective yield has climbed to 15.3% versus the stated 11.5% — the market is pricing in the risk that payouts will stop.

The asset's sharp drop sparked comparisons across the community to the collapse of Terra LUNA. The on-chain analytics platform Arkham broke down how the security works and concluded that there's no direct parallel here.

How It Differs From the LUNA Case

In Arkham's view, the main difference from Terra is that STRC has no forced-liquidation mechanism.

“Michael Saylor won't face forced liquidation if the security cheapens, because a drop in STRC's price doesn't trigger the cascading sell-offs that brought down the algorithmic stablecoin Terra,” the analysts emphasized.

They also noted that Strategy is under no legal obligation to pay dividends on STRC. If the company runs into trouble, the priority of payouts to these shareholders isn't guaranteed anywhere. The share price, as the company points out, reflects only how much the market believes the payouts will continue — not any obligation on Strategy's part to hold the price up.

The Market's Doubts

STRC is a perpetual preferred share with an 11.5% dividend on a $100 par value. Arkham lays out a calculation showing that roughly 105 M shares are outstanding, and servicing the offering costs Strategy about $1.2 B a year. As of Monday, the company's dollar reserves stood at $1.4 B, which covers a little more than a year of such payouts. The next payment to holders is set for June 30.

Arkham ties the sell-off to investor doubts.

“Some holders may have exited the security, figuring Saylor is unlikely to keep up the payouts or could hit difficulties raising capital; others may have shifted their money into higher-yielding assets,” the analysts write.

What This Means for Strategy

Experts rule out an immediate collapse of the company, though over time the situation could weaken its position. To keep STRC near par, Saylor needs to direct $1.2 B toward dividends year after year.

“If MSTR holders realize their money is going to pay off earlier investors, demand for Strategy's securities could fall in the future,” Arkham concluded.

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