Fidelity funds 135,979 Bitcoin purchases through preferred stock

Fidelity Digital Assets reports that perpetual preferred stock has financed the purchase of 135,979 Bitcoin as of October 5. This funding model, utilized by treasury companies, creates additional demand for Bitcoin. The preferred-stock issuance raised over 7 billion dollars and financed more than 95,000 BTC in purchases from March to May. The model relies on Bitcoin's price appreciation exceeding the cost of dividend payments. Preferred shareholders face risks including issuer, liquidity, and interest-rate risks, alongside Bitcoin exposure. The purchases represent over 0.5% of Bitcoin's maximum supply. Fidelity links this approach to the investment thesis that Bitcoin's limited supply can help preserve purchasing power as fiat currencies decline. The report emphasizes that the strategy is effective only if the appreciation of Bitcoin outpaces yield costs. Preferred securities combine characteristics of stocks and debt, with varying terms. Perpetual securities lack scheduled maturity, and some allow issuers to defer payments. Holders rank above common shareholders but below bondholders in case of company failure. Additionally, inflation risk exists for preferred shareholders, as rising prices can diminish future dividend purchasing power.

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