On March 11, Strive Inc. bought Strategy’s 11.5% dividend-paying STRC at its full par value of $100 per share “instead of holding idle cash.”
It inaccurately insinuated that its $50 million STRC purchase would somehow pay for $50 million worth of dividend payouts to Strive’s shareholders while earning extra benefits.
Indeed, it claimed that holding STRC instead of cash would earn dividends at a higher rate than a money market, lengthening Strive’s runway for servicing dividend payments on its own STRC competitor, SATA.
Fast-forward to Friday’s close of business in New York, however, and Strive’s $50 million STRC purchase, inclusive of its three paid monthly dividends of $480,000 apiece, is now worth just $48,140,000.
In other words, holding STRC instead of cash has cost Strive $1.86 million, a loss of 3.7% in just three months.
Strive is the bitcoin treasury company co-founded by Vivek Ramaswamy and a former Bud Light executive. It bought 500,000 shares of Strategy’s STRC fully priced at $100 apiece.
The pitch was that STRC behaves like cash but pays a generous yield. Well, it does pay a generous yield, and also, the shares closed at $93.40 on Friday — down 6.6% since Strive purchased them three months ago.
A money market competitor that loses money
Despite dubious ads and endless comparisons, STRC isn’t a bank account, money market, bond, swap, note of indebtedness, nor any other product that enjoys FDIC or SIPC insurance.
To the contrary, STRC is a stock and trades at any price set by Nasdaq traders. Strategy has never promised to bid for STRC, and shareholders have no right to redeem STRC for their original investment.
Historically, STRC has paid $0.96 monthly dividends per share, but Strategy may suspend dividends at any time and at its discretion.
Strategy allegedly designed STRC to hover near its $100 par, adjusting the rate every month “to encourage trading around STRC’s $100 par value and to help strip away price volatility.”
Unsophisticated retail investors, as well companies that benefit from Bitcoin-branded media attention like Strive, bought into that guidance.
Read more: Jim Chanos was right about Strategy — just not patient enough
Strive bought STRC for ‘stable price behavior’
Chief executive Matt Cole, a former CalPERS portfolio manager, framed the purchase as smart treasury management.
“Instead of holding idle cash earning low yields in money market funds, we believe it makes sense to allocate a portion of those reserves to instruments like STRC that provide strong yield dynamics while maintaining stable price behavior,” he said in March.
It took less than three months to decimate that “stable price behavior” guidance.
Strive’s own chief risk officer, Jeff Walton, claimed STRC “offers clear advantages over traditional fixed income assets.”
Stable price behavior was the whole point. Strive bought STRC with more than a third of the company’s cash at the time of purchase.
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