Jack Mallers Slams Perpetual Preferred Equity as 'Owing Money Forever'

Twenty One Capital CEO Jack Mallers warned that perpetual preferred equity is essentially 'signing up to owe money forever.' He made this statement in a follow-up podcast appearance, expanding on his earlier critique of Strategy (MSTR) Executive Chairman Michael Saylor's financial strategy.

Mallers contrasted the newer instruments with older convertibles, which could be retired through equity conversion at a premium. Unlike convertible bonds, perpetual preferreds are non-callable and do not convert into equity, carrying a coupon rate of about 11.5% forever.

MicroStrategy's recent preferred stock issue, called Variable Rate Series A Perpetual Stretch Preferred Stock (STRC), is an example of this newer model. Mallers noted that the perpetuals can never be wiped out and can only be addressed by one of four options: selling Bitcoin, issuing dilutive common shares, discontinuing preferred payments, or creating cash flow elsewhere to fund the coupon.