New ETF eyes 95% allocation to MicroStrategy’s STRC
OranjeBTC, a Bitcoin (BTC) treasury company based in Brazil, announced that it is going to launch a new exchange-traded fund (ETF) in early September.
Called DIGY11, the fund provides Brazil traders access to the perpetual preferred shares of Bitcoin companies through an index developed in partnership with MarketVector.
The shares of the fund will be traded on the Brazilian stock exchange (B3), and it will invest in preferred equity issued by companies in the Bitcoin ecosystem.
OranjeBTC includes STRC and SATA in DIGY11
Perpetual preferred shares are preferred equity securities with no fixed maturity, generally designed to make recurring distributions to investors.
For a preferred equity to be eligible to find a place in the DIGY11 fund, the issuer must hold at least 50% of its total assets in Bitcoin and a minimum of 4,000 BTC, the company said.
Based on the criteria, OranjeBTC has selected two preferred shares to be included in the initial index composition:
-
STRC issued by Strategy
-
SATA issued by Strive
What is STRC?
Strategy (Nasdaq: MSTR), formerly MicroStrategy, has made a name for itself as the world's largest Bitcoin treasury company. Despite recent sales, the Michael Saylor-led firm still holds 840,447 BTC on its balance sheet.
Stretch (STRC) is Strategy's perpetual preferred stock that pays 12% annual dividends, payable semi-monthly in cash. Strategy uses STRC as a means to raise capital.
STRC's dividend rate is adjusted monthly to encourage trading around $100 par value and to help strip away price volatility.
If investors are willing to buy STRC around $100, the company can issue new preferred shares for approximately $100 each and use the proceeds for Bitcoin purchases.
But if STRC's price falls to $90 instead of $100, Strategy raises 10% less capital per share. Worse, investors will demand a higher yield to compensate for the lower price, increasing Strategy's financing cost.
The STRC stock is currently trading at $95.73, putting Strategy's capital raising mechanism under stress.
Exame reported that DIGY11 will allocate 95% of the portfolio to STRC, with the remaining allocation for SATA.
Popular on TheStreet Roundtable:
What is SATA?
Founded by Vivek Ramaswamy and Anson Frericks in 2022, Strive, Inc. (Nasdaq: ASST) is also one of the several major Bitcoin treasury companies. It holds 20,167 BTC on its balance sheet.
Content Original Link:
" target="_blank">
