Ripple CEO Brad Garlinghouse criticized Strategy's approach of funding bitcoin purchases through preferred-stock issuance, stating the method has damaged the broader crypto market while maintaining his bullish stance on bitcoin itself. Strategy's STRC preferred shares, designed to trade near a $100 par value, fell about 25% below that level and hit a record low on Thursday, dropping as much as 26% under par despite carrying an 11.5% annual dividend. The criticism came as analysts at CryptoQuant urged Strategy to pause bitcoin buying and rebuild cash reserves, noting the dividend coverage cushion behind STRC has collapsed from more than seven years to roughly 14 months.
Garlinghouse drew a line between his criticism of Strategy's funding mechanism and his view of bitcoin as an asset. "Financial engineering does not drive long-term value," he said, pointing to STRC's performance as evidence of the funding model's limitations.
STRC Preferred Shares Hit Record Low Below Par Value
Strategy's STRC preferred shares, structured to trade near a $100 par value, fell approximately 25% below that benchmark and reached a record low on Thursday. The shares dropped as much as 26% under par despite carrying an 11.5% annual dividend. Garlinghouse called the price decline a "damning indictment" of Strategy's preferred-stock-funded bitcoin acquisition approach.
CryptoQuant Warns on Dividend Coverage Shrinkage
Analysts at CryptoQuant urged Strategy to pause its bitcoin buying and rebuild cash reserves. The firm noted that the dividend coverage cushion behind STRC has collapsed from more than seven years to roughly 14 months, representing a sharp narrowing of the buffer that funds the preferred stock's payouts.
The strain extended to Strategy's common stock, which fell to its lowest level since February 2024, closing around $82 on Friday. Bitcoin slipped below $59,000 over the same period.
Strategy Sold 32 Bitcoin in Late May to Fund Dividends
Late in May, Strategy sold 32 bitcoin to help fund STRC dividend payments. The transaction marked the first time the company had liquidated any of its bitcoin holdings to meet an obligation, underscoring the pressure the dividend commitments place on its cash position.
FAQ
What did Ripple CEO Brad Garlinghouse say about Strategy's bitcoin funding approach?
Garlinghouse said Strategy's method of funding bitcoin purchases with preferred-stock issuance has hurt the broader crypto market, calling it financial engineering that does not drive long-term value. He pointed to STRC's roughly 25% decline below its $100 par value as a "damning indictment" of the approach, while maintaining he remains bullish on bitcoin itself.
Why did CryptoQuant warn Strategy to pause bitcoin purchases?
CryptoQuant warned that the dividend coverage cushion behind STRC has shrunk from more than seven years to about 14 months. The firm urged Strategy to pause bitcoin buying and rebuild cash reserves due to this sharp narrowing of the buffer that funds the preferred stock's dividend payouts.
When did Strategy first sell bitcoin to fund dividend payments?
Strategy sold 32 bitcoin late in May to help fund STRC dividend payments. This marked the first time the company had liquidated any of its bitcoin holdings to meet an obligation.
