Strategy's STRC May Be Priced 13% Too Low

Khing Oei says Strategy’s perpetual preferred stock, tied to Bitcoin on the balance sheet, is trading below intrinsic value. The debate centers on dividend duration, cash flow, and the risk of a BTC drop.

Key Takeaways

• Khing Oei says Strategy’s STRC preferred stock is undervalued and should be worth about $96.30 based on his calculations.
• STRC trades near $85, but Oei argues the more than 14% headline yield is misleading because of its perpetual structure.
• The valuation depends heavily on Bitcoin sitting on the balance sheet, so investors need to weigh cash flow, dividend duration, and BTC downside risk.

Khing Oei, a former Goldman Sachs credit investor, says the market is mispricing Strategy’s STRC preferred stock. In his view, the shares are worth about $96 (€84), compared with a market price of roughly $85 (€74). The argument has centered on the stock’s apparent yield of more than 14%, but Oei says that figure becomes far less meaningful once you dig into how the instrument is structured.

Why the Yield Is Misleading

STRC pays a 12% dividend. At the current share price, that works out to a return of more than 14%, which is the number many investors are focusing on. Oei says that comparison is too simplistic, though, because STRC is not a standard bond and does not work like a fixed coupon that gets repaid at maturity.

Instead, it is a perpetual preferred stock issued by Strategy, the company formerly known as MicroStrategy. There is no maturity date, and the dividend only continues as long as the company can keep funding it. In Oei’s view, the right way to value STRC is by looking at the cash flows it can realistically produce over time, not by dividing a single coupon payment by the current share price.

The Role of Bitcoin on the Balance Sheet

Strategy uses most of the money raised through STRC issuance to buy more Bitcoin, which ties the company’s balance sheet closely to the crypto market. That makes the preferred stock especially sensitive to BTC price moves. STRC is also one piece of a larger preferred-stock lineup at Strategy, alongside STRF, STRK, and STRD, each with its own mix of risk and return.

Oei’s model assumes the assets supporting the preferred shares are more than enough to cover the dividend for a long stretch. He values the stock using 29 years of dividend payments discounted at 12%, which he says comes out to $96.30 (€84) per share. By that math, the current price of about $85 (€74) would imply only 17 years of payouts.

Why This Still Matters

For European crypto readers, the bigger point is that Bitcoin-linked products can drift a long way from the value of the assets behind them. The STRC debate also shows that BTC price is only part of the story. Investors are also judging the company’s structure, dividend stream, and balance sheet, which makes these products much more complex than simple Bitcoin exposure.

Oei also has a clear stake in the debate, since he runs Treasury, a European Bitcoin treasury company. Still, skeptics remain focused on one basic question: can the payouts hold up if Bitcoin falls sharply? That leaves the same core issue on the table, whether the current discount is a buying opportunity or a sign that the market is pricing in risk that has not fully shown up yet.