What are the economic risks of MicroStrategy's preferred share funding strategy?
Replied byBill Barhydt
Founder & CEO at Abra
Niche: Cryptocurrency
Revenue: Approx. 3 Million USD/month
Location: Mountain View, California, United States
Started: 2014
By marketing preferred shares like Stretch to retail investors at a fixed rate, they imply that the par value of the shares will remain stable. If the share value drops significantly, those investors face a net loss. This forces MicroStrategy to buy back shares or sell Bitcoin to maintain the peg.
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