STRC, known informally as "Stretch," fell to an intraday low of $82.50 on June 18, roughly 17% below the $100 par value at which it was sold to investors in its July 2025 IPO. By the close that day, the stock had partially recovered to $88.59, still about 11% below par. It has since climbed further to approximately $91. Palmer attributed the drop to a "leverage flush," meaning a cascading wave of forced liquidations by investors who had borrowed to hold the instrument, rather than any fundamental breakdown in the product's structure. His note pushed back on the use of depeg language, a term borrowed from stablecoins, arguing that STRC functions as preferred equity, not as a fixed-value monetary instrument. Palmer maintained that STRC is not a stablecoin. Holders who bought STRC for its 11.5% annual dividend accepted equity-adjacent market risk in exchange for that yield.

STRC was launched as part of Strategy's broader capital markets approach under executive chairman Michael Saylor. It is one of several preferred instruments in Strategy's suite, alongside STRK, STRF, and STRD. The company, which rebranded from MicroStrategy in February 2025, raises funds through equity, preferred stock issuances, and convertible notes, then uses the proceeds to buy Bitcoin. It currently holds 846,842 BTC acquired at an average cost of $75,658 per coin, for a total acquisition cost of roughly $64.1 billion. At a Bitcoin price of approximately $62,500, the portfolio was worth roughly $52.9 billion, implying an unrealized loss of approximately $11.1 billion on its holdings. Bitcoin has since partially recovered to around $64,000. The broader decline saw Bitcoin fall roughly 22% between mid-May and mid-June 2026, sliding from above $80,000 to around $62,500. That price decline put direct pressure on STRC and on MSTR shares, which are down 10.44% year-to-date while the Nasdaq 100 has gained 21.64% over the same period. Over the past six months, MSTR has declined approximately 24.95%, underscoring the depth of its divergence from the broader index.

The selloff was compounded by a series of decisions that eroded investor confidence in Strategy's ability to cover its dividend obligations. In May, the company used $1.5 billion from a cash reserve, previously sized to cover roughly 24 months of preferred dividends, to repurchase its 2029 convertible notes. That deployment left the reserve at around six to seven months of coverage. The reserve was subsequently rebuilt, reaching approximately $1 billion by June 8 and $1.1 billion by June 15, before the June 18 selloff. Then, on June 1, Strategy sold 32 BTC (worth approximately $2.5 million at the time) to fund dividend payments, marking its first Bitcoin sale since 2022. That sale was small in absolute terms but symbolic: it signaled that dividend obligations could force asset liquidations. Palmer described the market reaction as an overreaction, noting that management had previously signaled this possibility to investors.

During the selloff, Michael Saylor's only public statement was a brief social media post on June 19, Juneteenth, a United States market holiday. The timing drew scrutiny from investors who had expected more direct management engagement. Separately, Saylor had previously disclosed that STRC was designed with AI assistance, a detail that attracted additional attention as structural vulnerabilities in the instrument were exposed in the market.

Competition has added further pressure on STRC's pricing. Strive Asset Management's SATA preferred security, which targets the same institutional buyer base, offers a 13% annual yield versus STRC's 11.5%, pays dividends daily rather than twice a month, and carries no outstanding convertible debt. SATA was trading near par at roughly $99.99 while STRC languished at a discount. Jesse Myers, Head of Bitcoin Strategy at The Smarter Web Company, attributed STRC's continued weakness partly to this capital rotation and, according to published reports in BeinCrypto and Yahoo Finance, expects Strategy to announce a dividend rate increase on June 30, potentially lifting the rate to 11.75% or 12%, to restore competitive positioning.

Benchmark's $570 price target on MSTR implies roughly 319% upside from the stock's current level near $136. The target was previously cut from $705 due to Bitcoin volatility, making Palmer's reaffirmation a hold at the revised level rather than a reflection of unchanged conviction. Palmer applies a sum-of-the-parts valuation framework that uses a 7x multiple on estimated Bitcoin gains through year-end 2026, added to the value of Strategy's legacy software business.

For investors and institutions outside the United States, the STRC episode carries pointed lessons. South Africa's Africa Bitcoin Corp, listed on the Johannesburg Stock Exchange and formerly known as Altvest Capital, is actively building a Strategy-style Bitcoin treasury, targeting 21,000 BTC by 2030 through a $210 million raise. The company also plans secondary listings in Botswana, Kenya, and Namibia. CEO Warren Wheatley has positioned his company's shares as a way for pension funds and retirement funds, which cannot hold Bitcoin directly, to gain regulated Bitcoin exposure through equity. The STRC selloff illustrates the risk embedded in that framing: a Bitcoin price drop of roughly 22% translated into a 17% intraday decline in STRC from its $100 par value over five weeks, with leverage in the secondary market amplifying the move. In India, any comparable instrument would face scrutiny from SEBI, which since April 2025 classifies tokens or equity-like instruments that offer dividends, voting rights, or returns based on third-party efforts as securities, and from the RBI, which has expressed skepticism toward instruments that blur the line between stable-value products and equity. Benchmark's "not a stablecoin" defense is not only a market narrative but a legally relevant distinction in jurisdictions actively drawing those regulatory lines.

Strategy is expected to disclose a potential dividend rate adjustment on June 30. How institutional investors respond to that announcement will be an early indicator of whether Bitcoin treasury preferred equity can hold its footing as a credible asset class through a prolonged Bitcoin downturn.