MicroStrategy's Cash Crisis: Preferred Shares Plummet Amid Bitcoin Woes

MicroStrategy's stock has plummeted to its lowest level in over two years, marking a 46% drawdown for the last 30 days. The company's preferred shares, which offer a dividend yield of 11.5%, have dropped as low as $74.

The issue lies with the company's financial engineering, which involved issuing high-dividend preferred stocks to fund Bitcoin purchases. As Bitcoin prices fell, the obligations to pay dividends grew, leaving MicroStrategy trapped between a rock and a hard place.

According to crypto research firm CryptoQuant, rebuilding the cash reserve to ~$2.8 billion (24 months of coverage) is necessary for the price of Strategy's preferred shares to recover. However, selling some of its Bitcoin holdings could cut against its reputation.