Investors are underestimating the long-term risks embedded in perpetual preferred stocks such as Strategy’s Variable Rate Series A Perpetual Stretch Preferred Stock (STRC), according to Matt Dines, chief investment officer at Build Markets. Unlike traditional bonds, these securities do not have a maturity date, leaving holders dependent on secondary market sales to recover their principal, which exposes them to ongoing liquidity and interest rate pressures.

Dines explained that corporate issuers of perpetual preferreds can indefinitely pay dividends without repaying principal or renegotiating terms. This structure means if market appetite changes or interest rates rise, holders must absorb the price adjustments on the open market indefinitely, amplifying potential losses should liquidity evaporate on the fiat currency side.

The concern arises as Strategy has increasingly relied on STRC issuance to finance Bitcoin accumulation, driving record trading volumes. The stock recently surpassed $1.5 billion in daily trading, reflecting robust investor demand. However, the instrument’s authorized issuance cap currently stands near $28 billion. If this limit is not raised, Strategy’s capacity to acquire more Bitcoin through this funding method may stall.

At present, the total face value of outstanding STRC shares is approximately $8.5 billion, with a market valuation around $8.4 billion. STRC trades just under $100 per share and offers a variable dividend yield set at 11.5%, subject to monthly adjustments depending on market conditions. Investors also have voting rights to approve semi-monthly dividend payments for both STRC and Strategy’s common equity holders.

This variable-rate, no-maturity security differs sharply from fixed-term bonds by carrying open-ended risk. Holders who wish to exit before a company call must rely on secondary market liquidity, which can fluctuate significantly with broader market dynamics. Such features may not be fully appreciated by many investors attracted by the security’s current yield and link to Bitcoin exposure.