Risks of bitcoin treasury preferred stock

This guide sets out the mechanisms through which the value of, and income from, bitcoin treasury preferred stock can change. It does not assess how likely any of them is, and it is not investment advice. Each point is tied to the instrument terms or issuer disclosures, with dates. Issuers' own risk factor sections, in their prospectus supplements and annual reports, are longer and should be read in full.

1. Bitcoin price and asset cover

The issuers' main asset is bitcoin, which produces no income and whose price can move sharply. The preferred terms do not link dividends to the bitcoin price, but the price determines how much asset value stands behind each layer of the capital stack.

As an example of scale: Strategy reported 848,517 bitcoin as of 18 October 2026 (8-K), against debt of $6.75 billion and five preferred series as of 30 June 2026 (10-Q). A fall in bitcoin reduces the cover for every layer, and junior layers lose cover first. The capital stack guide shows how to calculate it, and the coverage sensitivity calculator lets readers vary the price.

2. Paying dividends from cash

Because bitcoin produces no income, dividends come from cash: operating income where there is any, cash reserves, and proceeds of new securities. Strategy reported a USD Reserve of $4.83 billion as of 18 October 2026, which it describes as intended to support preferred dividends and debt interest. Strive placed $22.50 per SATS share into a dividend reserve at closing on 20 October 2026 (8-K).

If reserves run down and new issuance is not possible on acceptable terms, the issuer may need to sell bitcoin or defer dividends. The terms allow deferral; for cumulative series, deferred amounts accrue.

3. Board discretion over dividends

Dividends on preferred stock are payable only when declared by the board. A missed preferred dividend is not a default in the way a missed bond coupon is. Cumulative series carry the missed amount forward, in several cases at a stepped-up compounding rate, and the issuer generally cannot pay junior stock until arrears are cleared.

4. Non-cumulative terms (STRD)

STRD is non-cumulative: if Strategy does not declare a dividend, it is not owed later (certificate of designations). STRD also ranks last among Strategy's five preferred series. See cumulative vs non-cumulative preferred.

5. Rate changes on variable-rate series

STRC, SATA and MORE have variable rates.

• STRC may be cut by up to 25 basis points plus the fall in one-month term SOFR over the prior period, but not below one-month term SOFR, and not while accumulated dividends are unpaid (8-K).
• SATA has a similar limit tied to monthly SOFR, with an additional requirement that the prior period's average price was at least $99 (424B5).
• MORE's rate may be varied by the board within parameters set out in its prospectus, which 21DC has not yet reviewed (Quarterly Investor Update, 1 October 2026).

Over several periods, successive permitted cuts can add up, particularly if SOFR is falling. Strategy stated a 12.00% STRC rate for November 2026 record dates (8-K, 15 October 2026) and Strive a 13.00% SATA rate for November 2026 (8-K).

6. Fixed-rate series and market yields

For fixed-rate series (STRF, STRE, STRK, STRD, SATS), the dividend does not change, so the price adjusts instead. If market yields on comparable instruments rise, or the issuer's perceived credit standing falls, the price can fall below the stated amount. Because the shares are perpetual, there is no maturity date at which the price is pulled back to par.

7. Issuer discretion over the terms

Issuers can amend certificates of designations, subject to the voting rights of affected holders. Recent examples:

• STRC moved from monthly to semi-monthly payments under an amended certificate effective 30 June 2026 (8-K).
• Strategy has proposed daily record dates for STRF, STRC, STRK and STRD, to be voted on at a special meeting on 28 October 2026 (8-K).
• STRK's liquidation preference was changed to a floating rule by amendment on 7 July 2025 (8-K).

Issuers can also issue more preferred stock ranking equal to or ahead of an existing series, unless the terms prevent it. STRF's terms require majority STRF holder consent for stock senior to STRF.

8. Redemption and call risk

• STRC can be called at $101 and SATA at $110, plus unpaid dividends. A holder who paid more than the call price would receive less than they paid on a call.
• Most series can be redeemed in a clean-up if fewer than 25% of shares ever issued remain outstanding, or on a tax event, at the liquidation preference plus unpaid dividends.
• On a fundamental change, holders can usually require repurchase at the stated amount plus unpaid dividends. If the shares trade above the stated amount, that repurchase price is below the market price.

9. Liquidity and trading

The shares trade on exchanges, and a holder's exit is a market sale. Trading volume varies by series. Smaller listings may trade thinly: MORE had 211,112 shares admitted on 14 October 2026, of which 100,000 were held in an ATM facility (first day of dealings). Metaplanet's MERCURY shares were reported as unlisted as of May 2026 (CoinDesk), an unconfirmed press report.

Issuer repurchases and ATM sales also influence trading. Strategy's digital credit repurchase programme had $1.16 billion remaining as of 18 October 2026 (8-K); if that capacity is used up or withdrawn, a source of demand goes with it.

10. Dividends paid in stock (STRK)

Strategy may pay STRK dividends in Class A common stock rather than cash, valued at 95% of a volume-weighted average price and subject to a floor price (certificate of designations). A holder receiving shares bears the price risk of those shares.

11. Tax treatment

Strategy has said it "currently expects" declared preferred distributions to be treated as return of capital for US federal income tax purposes, to the extent of a holder's tax basis (FWP, 24 August 2026). Strive's filings should be checked separately for its own statement. That expectation depends on each company's earnings and profits and can change from year to year. For non-US holders, US withholding tax and home-country tax rules apply, and treatment depends on individual circumstances. The UK tax guide covers this in more detail; neither guide is tax advice.

12. Currency

• STRE pays euros on a €100 stated amount. A US dollar or sterling-based holder bears euro exchange rate risk on both income and capital.
• MORE pays sterling on £100, so a dollar- or euro-based holder bears the reverse.
• The US-listed series pay in US dollars, which is a currency risk for UK and euro-area holders.

13. Data and disclosure

Some figures on this site come from secondary sources and are marked as unconfirmed, including several MORE terms and all Metaplanet preferred terms as of 22 October 2026. Issuers report some numbers weekly and others quarterly, so any combined view mixes dates.

What to check in the filing

• The issuer's own risk factors in the latest prospectus supplement and 10-K.
• Rate-cut limits, reference rates and any conditions on cuts.
• Whether dividends are cumulative, and how arrears compound.
• Call prices, clean-up and tax redemption triggers, and fundamental change terms.
• Whether dividends can be paid in stock.
• The currency of payment and of the stated amount.
• The issuer's stated expectation on tax characterisation for the current year.