How bitcoin-backed preferred stock works

"Bitcoin-backed preferred stock" is shorthand for perpetual preferred shares issued by companies whose main asset is bitcoin. This guide walks through how such a security comes into existence, what holders are entitled to, and how the issuer pays them. Figures are taken from the filings linked in each sentence. It is an explanation of mechanisms, not investment advice.

What "backed" means, and does not mean

The company holds bitcoin, and the preferred shares are a claim on the company. The shares are not secured on any particular coins. The STRF certificate of designations, for example, ranks STRF ahead of Strategy's other preferred series and its common stock, but behind all of its debt. In a liquidation, creditors are paid first from whatever the company owns, and preferred holders then share in what remains up to their liquidation preference.

So "backed" describes the balance sheet: the value of bitcoin and cash the issuer holds relative to the claims ranking ahead of and alongside the preferred. The capital stack guide explains how to read that balance sheet.

Step 1: the certificate of designations

A US company's charter usually authorises its board to create series of preferred stock. When it does, it files a certificate of designations with its state of incorporation and reports it on a Form 8-K. That document fixes:

• the stated amount (usually $100) and the dividend rate;
• payment dates and record dates;
• whether unpaid dividends accumulate;
• ranking against other classes;
• redemption and repurchase rights;
• voting rights, which are typically limited.

The prospectus guide explains where to find each of these.

Step 2: the initial offering

The issuer sells an initial block of shares, often below the stated amount. Examples from the filings:

• STRC: 28,011,111 shares at $90 on 29 July 2025, raising about $2.52 billion gross (8-K).
• SATA: 2,000,000 shares at $80, issued on 10 November 2025 (424B5).
• SATS: 7,000,000 shares at $90, issued on 20 October 2026, raising $630 million gross (424B5).

Selling below $100 means the initial holders receive a dividend calculated on $100 while paying less, so their effective yield at issue is higher than the headline rate. On a hypothetical 10% rate and a $90 price, the effective yield would be about 11.1% (10 × 100 ÷ 90). The effective yield calculator does this arithmetic.

Step 3: ongoing issuance through ATM programmes

After the initial offering, issuers typically sell further shares through at-the-market programmes: a sales agent sells shares on the exchange at prevailing prices over time. Strategy and Strive report these sales in weekly 8-K filings. The proceeds are generally used to acquire more bitcoin or to fund reserves.

ATM sales also affect the liquidation preference. For the Strategy series, the preference is reset each business day to the greatest of the stated amount, the prior day's last sale price (if the issuer sold shares in the previous 10 trading days) and the 10-trading-day average price. The effect is that shares sold above $100 carry a liquidation claim at least equal to the price at which they were sold. SATA uses the same approach but, according to its prospectus supplement, the preference is floored at $100 and capped at $110.

Some issuers have also limited sales below the stated amount. Strive amended the SATA certificate of designations on 13 October 2026 to make a $100 minimum sale price for new SATA issuance binding (8-K).

Step 4: paying the dividend

Dividends are paid in cash on the stated amount at the declared rate. Payment frequency varies and has changed over time:

• STRF, STRE, STRK and STRD pay quarterly on 31 March, 30 June, 30 September and 31 December.
• STRC paid monthly until June 2026 and has paid semi-monthly since the amended certificate effective 30 June 2026. Strategy has proposed daily record dates for STRC, STRF, STRK and STRD, subject to a special meeting on 28 October 2026 (8-K).
• SATA has paid each business day since 16 June 2026, with the rate still set per monthly period (8-K).
• SATS pays each business day, with the first regular dividend date on 9 November 2026 (8-K).
• MORE pays weekly unless the board suspends payment (Quarterly Investor Update, 1 October 2026).

Bitcoin itself produces no income, so dividends come from cash. Strategy reported a USD Reserve of $4.83 billion and USD cash of $447.3 million as of 18 October 2026 (8-K). Strive reported cash and cash equivalents of $317.5 million as of 16 October 2026 (8-K), and placed $22.50 per SATS share into a dividend reserve at closing.

STRK is the exception to cash-only payment: Strategy may pay STRK dividends in cash, in Class A common stock, or a mix, according to the STRK certificate of designations.

Step 5: what happens if a dividend is missed

For cumulative series, an unpaid dividend accumulates and, for several series, compounds at a stepped-up rate. STRE's terms, for example, compound unpaid amounts quarterly at 10% plus 100 basis points, rising 100 basis points per period up to 18% (8-K). Junior stock generally cannot receive dividends while senior cumulative dividends are in arrears.

For non-cumulative STRD, a dividend that is not declared is not owed later (8-K). The cumulative vs non-cumulative guide covers the difference.

Step 6: how holders exit

There is no maturity. Holders exit by selling on the exchange. The issuer can redeem only in the circumstances its terms allow:

• Optional call: STRC at $101 and SATA at $110, plus unpaid dividends.
• Clean-up redemption: if fewer than 25% of the shares ever issued remain outstanding (most series).
• Tax redemption: on a defined tax event.

Holders of most series can require repurchase at the stated amount plus unpaid dividends on a fundamental change, such as a takeover. Issuers can also repurchase in the market: Strategy increased its digital credit repurchase programme to $3.0 billion on 19 October 2026, with $1.16 billion remaining as of 18 October 2026 (8-K).

What to check in the filing

• Whether the security is described as secured or unsecured, and where it ranks against debt.
• The liquidation preference rule, including any floor or cap.
• The payment frequency and any pending amendments to it.
• Whether the issuer may pay in stock rather than cash.
• Compounding terms on unpaid dividends, and any cap.
• Redemption triggers, call prices and the fundamental change definition.