Strategy Inc.'s Income Model Separates Bitcoin Capital from Dollar Income

Michael Saylor, executive chairman of Strategy Inc. (Nasdaq: MSTR), has explained how his company generates income for investors in its bitcoin-focused business. In a published model, he detailed how the company uses bitcoin as capital and dollars for income.

The key distinction is that bitcoin itself does not pay a coupon, but Strategy pays dividends under its securities terms. Saylor stated that the cryptocurrency serves as the company's capital, while financing and cash reserves turn it into shares that provide dollar income. Funding can come from selling new shares or selectively selling holdings.

The company has two distinct investments: MSTR common shares provide ownership in the business, while STRC (Stretch) investors seek dollar income and reduced price volatility. STRC is preferred stock, ranking ahead of common shares for dividends and proceeds in liquidation, with a 12% annualized rate. Cash is paid twice monthly, with the rate adjusting monthly to encourage trading near its $100 stated value.

Saylor views shorter waits for cash as a way to improve reinvestment timing, and the company has proposed daily dividend payments. Shareholders are scheduled to vote on the proposal on October 28, with the first daily record date for determining payout eligibility set for November 1, followed by payment on November 2.