Distressed debt funds that hold Strategy's preferred shares are in talks with Moelis & Co. about exchanging them for other securities, Bloomberg News reported. The discussions involve swapping the holdings for other preferred shares at a discounted price or for common shares, which have fallen nearly 75% over the past year. Any transaction would likely use a section 3(a)(9) exchange, allowing the swap without SEC registration. The move could give the funds a better chance to profit from any upside in Strategy, and a swap for common shares would reduce the company's dividend burden since it does not pay dividends on common stock.
Moelis & CoMoelis is advising on the exchange, generating advisory fees.
MicroStrategy IncorporatedPotential swap could reduce dividend burden but dilutes common shares; net effect unclear.