Ripple CEO Brad Garlinghouse has raised concerns about Michael Saylor’s bitcoin acquisition strategy after a sharp decline in the value of the firm’s preferred shares, highlighting growing pressure on its financing model.
preferred shares slump raises concerns
Garlinghouse criticized the approach as STRC preferred shares fell roughly 25% below their $100 par value, at one point dropping as much as 26% before closing near $82. The downturn came as bitcoin traded below $60,000, hovering around $58,000 during the sell-off.
He pointed to the company’s reliance on financial structuring to fund bitcoin purchases, including issuing preferred securities that carry an 11.5% annual cumulative dividend. According to Garlinghouse, this strategy is weighing on broader market performance.
financing strategy under pressure
The firm has spent about a year issuing preferred shares like STRC to expand its bitcoin holdings. However, market analysts have started urging caution, recommending a pause in further purchases and a shift toward rebuilding cash reserves to ease liquidity strain.
Recent data underscores the pressure. STRC shares fell to record lows near $75, while the company’s common stock dropped to levels not seen since February 2024 and has declined 36% over the past eight trading days.
rising debt and cash flow imbalance
The company’s balance sheet shows approximately $6.7 billion in convertible debt and more than $15 billion in perpetual preferred stock, translating to annual payout obligations of about $1.71 billion. This far exceeds the roughly $500 million in yearly revenue generated by its core software business, creating a significant cash flow gap.
The growing disconnect between income and obligations has become a key concern for traders watching the sustainability of the strategy.
market signals reflect confidence concerns
The widening gap between STRC’s market price and its $100 par value is increasingly viewed as a signal of weakening confidence in the firm’s ability to maintain dividend payments without tapping its digital asset holdings.
The company recently used nearly 70% of its cash reserves to repurchase $1.5 billion in convertible notes at a discount, reducing its U.S. dollar reserves to about $871 million. While the move helped manage liabilities, it also tightened liquidity at a critical time.
bitcoin price adds further risk
Continued volatility in bitcoin prices below the $60,000 level adds strain to the model, as asset values fluctuate while debt obligations remain fixed. A prolonged downturn could force the firm to liquidate part of its holdings, which exceed 843,000 bitcoins, to meet operational needs and payout commitments.
Despite the criticism, Garlinghouse reiterated that Ripple supports bitcoin’s long-term role, even as the company continues to promote use cases for XRP.
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