Strategy CEO says underestimated leverage drove STRC's 25% collapse

Strategy CEO Phong Le said Strategy underestimated how much borrowed money would flow into STRC. STRC is Strategy's $9.3 billion preferred stock. STRC pays a 12% annual dividend. STRC is designed to trade near its $100 face value. STRC fell to about $75 in late June. STRC now trades at $99. Le said investors borrowed against Bitcoin at about 6% to collect STRC's 12% yield. When Bitcoin fell, holders had to post more Bitcoin or sell STRC, Le said. That forced selling drove the price lower. Le said traders later bought STRC between $75 and $90. Le said he also bought some STRC. In late June, Strategy established a framework with a cash reserve and buyback authorizations. The framework included a plan to sell Bitcoin when needed. Strategy began repurchasing STRC in late July. Le said earlier dividend increases toward 12% did not lift the price. Le said a higher payout would drain cash and weigh on common shareholders. Buybacks reduce future dividend bills. Strategy's dollar reserve holds about $5.1 billion. Le said the reserve covers roughly three years of dividends. The reserve can only pay preferred dividends and interest on Strategy's convertible debt. Strategy funds the latest STRC buybacks through sales of its MSTR common stock. Strategy may also use Bitcoin to fund the buybacks. Le said 95% of his pay is tied to MSTR's share price. Le urged holders to think in three-year periods. Le said institutions now own about 30% of STRC. Institutional ownership was 20% previously. Le expects STRC to return to $100 as long-term holders replace leveraged traders. STRC holders of record on September 30 receive the next dividend. Payment is due October 15, according to Strategy.