Strategy's own buybacks accounted for more than a fifth of weekly trading volume in its STRC preferred stock through most of September, according to a Keyrock research report. With just $547 million left in its $2 billion repurchase authorization, the company faces a test of whether independent investors can keep STRC trading without its support.
Strategy's buying accounts for a fifth of STRC trading
Strategy's repurchases accounted for more than 20% of weekly trading volume in its variable-rate preferred stock, STRC, during almost every week of September, Keyrock found. The company's share of trading reached about 28% the week of Sept. 8 before falling to just under 20% in early October.
Strategy had spent approximately $1.45 billion of its $2 billion authorization as of Oct. 4, leaving $547.2 million available. The buybacks helped STRC recover from the mid-$70s in June to approximately $99.50, near the security's $100 reference price. However, the repurchases are discretionary, and Strategy can modify, suspend, or terminate the program.
Depth holds up near par, but thins out fast away from it
STRC averages approximately $150 million in daily volume. Keyrock found it can typically absorb about $28 million in trading before its price moves 10 basis points, well ahead of Strive's SATA and Strategy's fixed-rate preferred securities, each with less than $3 million in comparable market depth. Using an illustrative execution rate, Keyrock estimated a $50 million STRC position could be liquidated in less than two trading days, versus about five days for SATA and six to eight weeks for the fixed-rate issues. Yet removing Strategy's own buying reduces estimated trading capacity to approximately 80% of reported volume.
The picture worsens once the price drifts from par. On the worst 10% of trading days, estimated depth within a 10-basis-point move falls from about $28 million to $6.5 million. STRC is roughly four times less liquid 1% to 3% away from par and about eight times less liquid beyond a 6% deviation. The correlation between distance from par and illiquidity measured 0.43, compared with 0.10 for the size of Bitcoin's own daily price swings. Still, Keyrock found a similar pattern before the buyback program began, so the research does not establish that Strategy's purchases caused the relationship.
Authorization is running low as a dividend vote nears
Between Sept. 28 and Oct. 4, Strategy repurchased approximately $176.3 million of STRC. In the same period, the company acquired 334 Bitcoin for approximately $28.7 million. Of the preferred repurchases, $154.1 million came from cash reserves, compared with $13 million used for Bitcoin purchases. At that pace, the remaining $547.2 million authorization would last approximately three weeks, though Strategy previously doubled the authorization and could do so again.
Shareholders are scheduled to vote Oct. 28 on amendments introducing daily dividends across Strategy's US-listed preferred stocks, with STRC set to begin the new dividend schedule Nov. 2 if approved. Keyrock identified family offices, private-bank discretionary accounts, and specialist credit funds as the most promising sources of larger allocations, saying their participation could determine whether STRC develops enough independent demand.
Source: CryptoSlate
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