Arca chief investment officer Jeff Dorman said on May 29 that Strategy's preferred stock situation has "gotten out of hand." The company now carries $15.5 billion in preferred stock obligations with roughly $1.5 billion in annual dividends attached. Bitcoin is trading near $73,460 today, about 16% below its January 2026 opening price.

How Strategy Built Its Bitcoin Position

Strategy, formerly MicroStrategy, bought its first Bitcoin in August 2020. Then-CEO Michael Saylor allocated $250 million to purchase 21,454 BTC at roughly $11,654 per coin. The rationale was simple: cash on the balance sheet was losing value to inflation, and Bitcoin offered an alternative store of value.

The company kept buying through every market condition. It survived the 2021 bull run, the 2022 crash below $16,000, and the 2025 recovery to an all-time high near $126,000. By May 25, 2026, Strategy holds 843,738 BTC. Total purchase cost reached $63.87 billion at an average of $75,700 per coin.

From Bonds to Preferred Shares

Early purchases were funded through cash flows and convertible bonds. As Bitcoin's price rose, Strategy gained access to equity markets at large premiums. It issued MSTR shares to buy more BTC, generating what management called a "Bitcoin yield" for common shareholders.

In 2025, Strategy introduced a new funding layer: perpetual preferred stock. Five series now trade on Nasdaq: STRK, STRF, STRD, STRC, and STRE. Each carries different dividend terms. STRK pays 8% annually; STRC currently pays 11.5%.

Unlike convertible debt, these instruments carry no maturity date. The dividend obligations run indefinitely. Combined, the five series total $15.5 billion in notional value outstanding, generating roughly $1.5 billion in annual payments.

What Dorman Is Warning About

Dorman argues the preferred structure was built around one assumption: Bitcoin would keep rising fast enough to fund it. When BTC rises, equity issuance covers dividends easily. When BTC falls or stagnates, the math tightens.

He also called Strategy's recent $1.5 billion repurchase of 2029 convertible bonds "baffling" given the ongoing preferred dividend pressure. In his view, the capital structure now leaves two paths: sell Bitcoin to fund dividends, or stop paying. Both carry direct consequences for Strategy and its investors.

The preferred shares are not collateralized by Bitcoin. Preferred holders have no direct claim on the BTC stack. But any forced sale of Bitcoin to meet dividend payments puts Strategy in the open market as a seller.

The CEO Confirms It

Strategy CEO Phong Le confirmed at the Q1 2026 earnings call in early May that the company would sell Bitcoin when doing so is more accretive than issuing equity. Michael Saylor had raised the same possibility on the same call, reversing his long-held "never sell" stance. MSTR shares dropped over 4% following those remarks.

Le later told CNBC: "I believe in math over ideology." He specified that any sale would focus primarily on funding STRC's 11.5% dividend or tax optimization. He argued Bitcoin's roughly $60 billion in daily trading volume can absorb the company's annual $1.5 billion obligation without trouble.

The Runway Is Shrinking

Strategy's current USD reserve stands at $871 million. At a $1.5 billion annual dividend rate, that covers roughly seven months of payments. Continued Bitcoin price weakness compresses that window further.

The company has also bought approximately 170,000 BTC year-to-date in 2026, adding to its cost basis at prices above the current market. The average purchase price of $75,700 means the full stack is currently slightly underwater at $73,460 per BTC.

Market Odds Rise

Polymarket now shows roughly a 90% chance that Strategy sells any Bitcoin by December 31, 2026. The June 30 probability sits at 71%, and the May 31 deadline shows 18%. These figures have risen steadily since Saylor first raised the possibility of sales at the May earnings call.

Total volume traded on this prediction contract exceeds $32 million, making it one of the most actively followed crypto-related markets on the platform.

The Balance Sheet in Full

Strategy is also holding $6.7 billion in convertible notes alongside its preferred obligations. Total financial commitments therefore combine fixed debt maturities with open-ended dividend requirements. The software business posted its best quarter in a decade in Q1 2026, with revenue up 12%. That does not come close to covering the preferred dividend load on its own.

The company's Bitcoin accumulation model worked cleanly when BTC was appreciating and equity could be sold at large premiums above net asset value. That premium has narrowed in 2026, tightening every part of the funding chain. Dorman's warning is not that the model is broken, but that its cushion is far thinner than it looked six months ago.