STRK: Strategy's Convertible Preferred Stock

Important Disclosures

This profile has been prepared by True North Research, a media and research subsidiary of Strive, Inc. (“Strive”). It summarizes certain publicly available information and internal calculations relating to Strategy’s convertible perpetual preferred stock (“STRK”) and Strategy’s capital structure. It is part of a broader “Digital Credit” educational initiative and is provided for informational and educational purposes only.

This content is non-independent and should not be relied upon as a complete or current description of STRK, Strategy, or any offering. It does not constitute an offer to sell or a solicitation of an offer to buy any security, nor does it constitute investment, legal, accounting, or tax advice. It does not take into account the objectives, financial situation, or needs of any particular investor. Investors should make their own independent evaluation and consult their own advisers.

Any offer or sale of securities will be made only through the applicable offering documents and SEC filings, including those available on SEC EDGAR.

Because True North is a Strive subsidiary, Strive and its personnel may have economic interests in Digital Credit instruments discussed. This creates actual and potential conflicts of interest that readers should carefully consider.

Instrument Overview

STRK is Strategy’s (Nasdaq: MSTR) convertible perpetual preferred stock.

It was the first preferred security issued by a Bitcoin treasury company and remains one of the longest-standing instruments within the Digital Credit category.

Strategy priced the original 7.3-million-share offering on January 30, 2025 at $80 per share, listing it on the Nasdaq Global Select Market. The instrument carries an 8.00% fixed cumulative quarterly dividend on a $100 stated value and is convertible at the holder’s option into 0.1 shares of MSTR common stock at any time.

As of March 16, 2026, STRK traded at $78.16 — approximately a 22% discount to par — producing an effective yield of 10.24% based on current inputs. Notional outstanding is approximately $1.402 billion across ~14.02 million shares.

In simple terms, STRK is a hybrid instrument: it provides fixed income through dividends while also offering equity-linked upside through its conversion feature into MSTR common stock, which itself reflects Strategy’s Bitcoin exposure.

Within the Digital Credit framework used by True North, STRK is generally positioned as a moderate-income instrument with embedded equity optionality, rather than a pure yield-maximizing security.

(Sources: Strategy 424B5; Strategy.com STRK page.)

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Key Terms

(Sources: Strategy 424B5 prospectus supplement; Strategy 10-K 2025.)

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Rate History

STRK’s 8.00% stated dividend rate has remained fixed since launch, with no adjustments, resets, or step-ups.

Strategy’s February 28, 2026 dividend declaration maintained the quarterly payment at $2.00 per share for Q1 2026, consistent with the stated rate.

Among Digital Credit instruments, STRK’s lower stated yield reflects the presence of conversion optionality rather than a purely income-focused design. Investors accepting lower current income may be seeking exposure to potential equity participation through conversion.

(Sources: Strategy 10-K 2025; Strategy dividend declaration February 28, 2026.)

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How It Works in Practice

Dividend mechanics. Strategy’s board declares dividends quarterly, paid in cash out of legally available funds. The governing documents also permit payment in Class A common stock or a combination of cash and stock, although cash has been the operating norm. Strategy’s 2025 10-K reported $87.8 million of cash dividends paid on STRK during 2025.

Cumulative protection. STRK is cumulative. If a dividend is not paid, the unpaid amount accrues and compounds at the stated rate until paid. Arrears must be satisfied before dividends can be paid to more junior securities, including STRD and common equity.

Tax treatment. Strategy reported that 100% of 2025 distributions on its preferred instruments qualified as nontaxable return of capital for U.S. federal income tax purposes. For taxable investors, return of capital reduces adjusted tax basis rather than generating immediate income. Once basis is reduced to zero, subsequent distributions are treated as capital gains. Strategy has indicated it does not expect to generate current earnings and profits in the near term; however, tax characterization is determined annually and may differ from expectations. Preliminary tax treatment should not be treated as a guarantee.

Conversion mechanics. Each STRK share can be converted at any time into 0.1 shares of MSTR common stock at the holder’s election. There is no trigger price or forced conversion mechanism in standard terms.

Using the $100 stated value, this implies a reference conversion price of approximately $1,000 per MSTR share.

Below that level, STRK tends to behave more like a discounted preferred security with fixed income characteristics. Above it, the instrument may increasingly reflect equity participation through its conversion feature.

One important detail: upon conversion, holders forfeit any accrued but undeclared dividends.

(Sources: Strategy 424B5; Strategy 10-K 2025; Strategy July 2025 STRK amendment.)

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Capital Structure Position

Strategy’s capital structure ranks:

Debt → STRF → STRC → STRE → STRK → STRD → Common (MSTR)

STRK occupies a mid-stack position within this structure.

Three preferred series (STRF, STRC, STRE) have dividend priority over STRK. If Strategy’s ability to declare distributions is constrained, those series must be brought current before STRK dividends can be paid.

In a liquidation scenario, STRK holders would receive their $100 stated value plus accrued dividends only after debt and senior preferred claims are satisfied, but before STRD and common equity.

Strategy has disclosed a reserve structure of approximately $2.25 billion, representing roughly 2.5 years of dividend and interest coverage across instruments based on company disclosures. This provides near-term support for distributions but does not alter the structural subordination of STRK within the capital stack.

(Sources: Strategy 424B5 filings; Strategy Q4 2025 earnings.)

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Who This Instrument May Suit

STRK has characteristics that may be relevant to investors who:

• Seek a combination of current income and potential equity participation
• Are comfortable with exposure to Strategy’s Bitcoin-linked balance sheet
• Prefer a hybrid instrument rather than pure equity or pure fixed income
• Are evaluating total-return profiles rather than maximum current yield

STRK may be less aligned with the objectives of investors who:

• Prioritize maximum current income
• Require senior positioning within the capital structure
• Prefer instruments with simpler, fixed-income-only behavior
• Are not comfortable with convertible preferred dynamics or equity-linked valuation

These observations are general and do not constitute a recommendation. Each investor must determine suitability based on their own circumstances.

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Key Risks Specific to STRK

Conversion optionality risk. STRK’s conversion feature only creates economic value if MSTR trades meaningfully above the implied reference conversion price. In prolonged periods where this does not occur, holders receive lower current income relative to other Digital Credit instruments without realizing conversion benefits. The value of the embedded option is therefore uncertain and dependent on market conditions.

Dilution risk. Strategy’s disclosures indicate that conversion rates may not be adjusted for certain equity issuances, and that events may reduce or eliminate the economic value of the conversion feature without compensation. Strategy may also issue additional preferred securities ranking equally with or senior to STRK without holder consent, which may affect both capital structure positioning and perceived value.

Mid-stack subordination. STRK sits in the middle of the preferred hierarchy. It is subordinated to multiple preferred series while not offering the highest yield in the structure. This positioning may expose holders to both subordination risk and opportunity cost relative to more senior or higher-yielding instruments.

Market sensitivity. STRK’s valuation reflects a combination of fixed income characteristics, Strategy credit exposure, and equity optionality tied to Bitcoin through MSTR. As a result, its price behavior may diverge from traditional preferred securities and can be influenced by multiple factors simultaneously.

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Current Data Snapshot

(Refresh on publication day)

The snapshot highlights both the income component and the optionality embedded in STRK. At a discount to par, the instrument may present a higher effective yield than its stated rate. However, market pricing also reflects factors such as subordination, liquidity, and uncertainty around the value of the conversion feature.

→ Full instrument comparison: Markets & Instruments → Scenario analysis and stress testing: Risk Analysis → How we analyze: Methodology

This content is provided for informational and educational purposes only. It does not constitute an offer to sell or a solicitation to buy any security. Investors should review all relevant offering documents and SEC filings before making any investment decision.

True North is affiliated with Strive and is not an independent research provider. This creates potential conflicts of interest that should be considered when evaluating this content.