Woofun AI reports that Farside Investors published an analysis stating the price stabilization mechanism for Strategy (MSTR) preferred stock STRC is fundamentally unstable. The instrument was issued at $100 with a design intended to push prices toward that level through dividend adjustments, but this system relies on company discretion rather than automatic triggers. If credit risk perceptions rise, increasing dividends to support the price could weaken the company's credit position, creating a potential "death spiral".

The analysis notes that issuing perpetual instruments with an 11.5% yield to purchase Bitcoin represents a poor trade for Strategy, as long-term Bitcoin growth may not cover the annual cost. While the fair value of STRC is estimated at $144 assuming a fixed 11.5% dividend, the company's right to lower dividends by 25 basis points monthly until reaching the SOFR rate reduces the estimated value to approximately $55. Currently trading around $75, STRC is 25% below its target, and the stabilization mechanism has failed to activate. Analysts suggest Strategy may eventually need to buy back STRC or abandon the mechanism to lower dividends to SOFR levels.