Strategy's STRD offerings will 'prove highly accretive' to MSTR shareholders, TD Cowen says

Corporate Bitcoin treasury company Strategy (ticker MSTR) recently purchased about 10,000 more bitcoins for $1 billion, bringing its total holdings near the 600,000 BTC mark. 

The company funded its recent purchases primarily through its upsized $1 billion IPO of perpetual Stride preferred stock ( STRD ). This process "establishes a channel for future high yield funds flows into bitcoin," according to analysts at TD Cowen . Additional funds came from at-the-market sales of STRK and STRF.

Strategy now holds a total of 592,100 BTC, following its most recent purchases last week. 

The firm's perpetual preferred stock programs, STRK  and  STRF , are in addition to the "42/42" plan , which targets a total capital raise of $84 billion in equity offerings and convertible notes for bitcoin acquisitions through 2027. Perpetual preferred shares have no maturity date, but offer fixed dividend payments for as long as the company continues to operate.

Strike (STRK) is convertible with an 8% fixed dividend, while Strife (STRF) is non-convertible and offers a 10% fixed cumulative dividend. Stride (STRD) offers a fixed 10% non-cumulative annual dividend and is non-convertible.

"We thus expect [STRD] will trade at a higher dividend yield relative to the company's senior preferred shares," TD Cowen analysts wrote in a Tuesday note. Strategy has $63 billion of underlying bitcoin value versus $11.6 billion of total debt plus preferred outstanding, which led analysts to "consider the junior securities very safe."

Strategy will target a long-term leverage ratio of 20% to 30% through the issuance of fixed income securities, Chairman Michael Saylor said last month on the company's earnings call. The firm's leverage ratio is defined as the ratio of its total debt and preferred stock outstanding to the value of its bitcoin holdings.

TD Cowen has a "buy" rating and $590 price target on MSTR shares and expects Strategy to issue additional STRD shares, much like it has with STRK and STRF.

"To the extent bitcoin continues to appreciate rapidly in USD terms, future issuance will likely prove highlight creative to common shareholders," they wrote.

Strategy's stock trades around $369.75 at publication time, according to The Block's MSTR price data .