Garlinghouse warns Strategy's bitcoin financing 'financial engineering' as STRC slides 25%

Strategy's STRC preferred stock slid 26% below its $100 par value as Ripple CEO Brad Garlinghouse called the company's bitcoin funding model "financial engineering" that hurt the broader market.

"Financial engineering does not drive long-term value," Garlinghouse said in a CNBC interview Friday. "The long-term value of any digital asset is going to be driven by utility."

STRC, which carries an 11.5% annual dividend and is engineered to trade near $100, fell to a record low Thursday, dropping as much as 26% below par. Strategy's common stock closed around $82, its lowest since February 2024, as bitcoin slipped below $59,000. The cushion behind STRC's dividends has thinned from more than seven years of coverage to about 14 months, according to CryptoQuant.

The criticism adds to mounting pressure on Strategy's financing engine, which stalls when STRC trades below $100. CryptoQuant recommended the company pause further bitcoin purchases and rebuild cash reserves, while Rosen Law Firm has opened an investigation into whether Strategy made materially inaccurate business disclosures. Despite the pressure, Polymarket data showed a 99.4% probability of bitcoin staying above $54,000, reflecting strong market conviction in a price floor.

Garlinghouse, who runs the company behind XRP, said he remains bullish on bitcoin itself. He argued that Strategy's reliance on preferred stock financing has created market distortions and does not benefit the broader crypto ecosystem in a sustainable way.

Benchmark-StoneX analyst Mark Palmer argued that Strategy's funding engine has become "less efficient" rather than broken, rejecting comparisons between STRC and assets that have collapsed outright. Anchorage Digital's head of research, David Lawant, said that while defensive positioning has risen into the upper range of historical readings, Strategy's options market has not reached conditions normally associated with forced deleveraging.

Insider selling has added another layer of concern. SEC filings show Strategy director Jarrod Patten sold 55,750 shares over the past three months for roughly $9 million in proceeds, including a June 23 transaction where he exercised options and sold 1,500 shares at $106.08. The sales have taken place as investors debate the sustainability of Strategy's reliance on repeated share issuance and leveraged bitcoin accumulation.

This article is for informational purposes only and does not constitute investment advice.