+- Mandalorian -- 11d --------------------------------------------------------------------------------------------[...]+ | | | 📌 What is STRC? | | | | STRC is Strategy Inc.’s (formerly MicroStrategy) Variable Rate Series A Perpetual Stretch Preferred Stock — a | | high‑yield equity instrument designed to fund the company’s Bitcoin purchases. It trades on Nasdaq under the ticker | | STRC and currently pays a variable monthly dividend around 11.5%, adjusted to keep its price near \$100 par value. | | | | - Type: Perpetual preferred stock (not a bond) | | - Issuer: Strategy Inc. (NASDAQ:MSTR), Michael Saylor’s Bitcoin‑treasury company | | - Dividend: Variable, board‑set monthly cash payout (~11–12% annualized) | | - Purpose: Raise capital to buy more Bitcoin without diluting common shareholders | | - Trading behavior: Price engineered to stay near \$100; dividend rate rises if price falls below par | | - Collateral: Not directly backed by Bitcoin; holders have only a preferred claim on residual corporate assets | | | | 📌 Why STRC is problematic from Shariah perspective? | | | | From a Shariah perspective, STRC’s yield has a high likelihood of being classified as riba because it is a | | fixed‑income–like dividend engineered to track par value, not a profit‑share from a real economic venture. But there | | is nuance — and the classification depends on why the dividend exists, how it is determined, and what the investor | | is actually exposed to. | | | | Below is the structured breakdown 👇 | | | | 1. The core Shariah question; Shariah asks one thing first: | | | | > Is the return tied to real economic risk and profit, or is it a guaranteed/engineered payout on capital? | | | | If the return is pre‑determined, capital‑linked, or designed to maintain par value, it typically falls under riba | | al‑nasī’ah (time‑based increase on capital). | | | | 2. What STRC actually is (in Shariah terms) | | STRC is: | | | | - Perpetual preferred equity, | | - With variable monthly dividends, | | - Adjusted explicitly to keep the price near $100, | | - And not tied to business profits, | | - But tied to capital‑raising mechanics. | | | | This means: | | | | - The dividend is not a share of business profit. | | - It is not tied to MicroStrategy’s operating performance. | | - It is not tied to Bitcoin appreciation. | | - It is not tied to a mudarabah/musharakah‑style risk‑sharing model. | | | | Instead, the dividend is engineered to maintain price stability; which is economically similar to a floating coupon. | | | | That is the key Shariah red flag. | | | | 3. Why many scholars would classify STRC dividends as riba: | | | | 1. The payout is linked to capital, not profit | | Shariah requires that equity returns come from actual profit, not from a pre‑engineered yield mechanism. | | | | STRC’s dividend is set by the issuer to maintain par value; not by profit. | | | | 2. The issuer adjusts the rate to keep the price stable | | This is functionally similar to: | | | | - Floating‑rate bonds | | - Sukuk that fail AAOIFI screens | | - Capital‑preservation instruments | | | | Shariah prohibits capital‑guaranteed returns. | | | | 3. The investor’s risk is not true equity risk | | Preferred equity with engineered dividends behaves like: | | | | - A perpetual bond | | - A yield instrument | | - A capital‑linked coupon | | | | This is structurally closer to riba‑based debt than to musharakah equity. | | | | 4. The Bitcoin angle does not make it halal | | Some people assume: | | | | > “If MicroStrategy uses STRC proceeds to buy Bitcoin, the yield must be halal.” | | | | But Shariah looks at contract structure, not use of proceeds. | | | | Even if the company buys halal assets, the instrument can still be riba‑based. | | | | 5. The strongest Shariah argument against STRC | | STRC’s dividend is: | | | | - Not profit‑based | | - Not risk‑sharing | | - Not tied to real economic output | | - Not variable based on business performance | | - Explicitly engineered to maintain par value | | | | This aligns with the classical definition of riba al‑nasī’ah; an increase on capital due to time. | | | | 6. Is there any argument for permissibility? | | A minority argument could be: | | | | - It is technically equity, not debt. | | - Dividends are not legally guaranteed. | | - The rate is variable, not fixed. | | - The company does take business risk. | | | | But these arguments are weak because the economic substance is still a capital‑linked yield mechanism, not a | | profit‑sharing model. | | | | AAOIFI standards generally reject preferred shares with engineered dividends. | | | | Bottom line is most Shariah scholars would classify STRC’s yield as riba, because: | | | | - The return is engineered, not profit‑based | | - The payout is linked to capital, not performance | | - The structure mimics a floating‑rate bond | | - The purpose of the dividend is price stability, not profit distribution | | | | In Islamic finance, form does not override substance. | | | | And the substance of STRC is yield on capital, not profit from enterprise. | | | | 📌 Is purchasing STRC the equivalent of a loan or equity? | | | | When you purchase STRC, you are legally buying equity, but economically you are entering something that behaves much | | closer to a loan. This duality is exactly why the Shariah classification becomes tricky. | | | | Breaking it down cleanly and without jargon: | | | | 1. What you legally own when you buy STRC | | STRC is preferred equity. | | That means: | | | | - You are not a creditor | | - You do own a slice of the company’s capital structure | | - You sit above common shareholders but below bondholders | | - You receive dividends, not interest | | - The company is not legally obligated to pay you (dividends can be suspended) | | | | So in form, you are purchasing equity. | | | | 2. What you economically experience | | This is where the Shariah issue arises. | | | | STRC behaves like: | | | | - A perpetual bond | | - With a floating coupon | | - Designed to keep the price near $100 | | - With a yield engineered by the issuer, not tied to profit | | - With capital‑preservation mechanics | | | | This means your economic exposure is: | | | | - Not true equity risk | | - Not tied to business performance | | - Not tied to profit/loss sharing | | - Not tied to Bitcoin appreciation | | - Primarily tied to receiving a yield on your capital | | | | Economically, this is loan‑like behaviour. | | | | 3. Shariah classification: form vs substance | | Shariah always prioritises substance over form. | | | | Form (legal): | | ✔️ Equity | | ✔️ Dividends | | ✔️ No legal guarantee | | ✔️ No maturity date | | | | Substance (economic): | | ❌ Capital‑linked return | | ❌ Engineered yield | | ❌ Price‑stability mechanism | | ❌ No real profit‑sharing | | ❌ Behaves like a floating‑rate loan | | | | Because the return is tied to capital + time, not profit + risk, the economic substance resembles riba al‑nasī’ah. | | | | 4. So what is it in Shariah terms? | | Most scholars would say: | | | | > You are legally buying equity, but economically receiving a riba‑like return. | | | | This is similar to: | | | | - Preferred shares with fixed dividends | | - Perpetual bonds | | - Capital‑preservation sukuk that fail AAOIFI standards | | | | These are typically classified as non‑compliant. | | | | 5. A simple analogy | | Imagine someone says: | | | | > “I’m selling you equity, but I’ll adjust your dividend every month to make sure your investment always stays | | around £100 and gives you a steady yield.” | | | | That is equity in name, but a loan in behaviour. | | | | Shariah cares about behaviour. | | Buying STRC is legally equity, but economically loan‑like. | | And because Shariah evaluates economic substance, not legal labels, the model aligns more with riba‑based | | instruments than with halal equity. | | | | | | | | https://blossom.primal.net/2b006deec9504eaf6171391d4c02984597143823f3cdc1b05a62741626c0a7eb.jpg | | | +-- reply --------------------------------------------------------------------------------------------------------- ---+📌 What is STRC? STRC is Strategy Inc.’s (formerly MicroStrategy) Variable Rate Series A Perpetual Stretch Preferred Stock — a high‑yield equity instrument designed to fund the company’s Bitcoin purchases. It trades on Nasdaq under the ticker STRC and currently pays a variable monthly dividend around 11.5%, adjusted to keep its price near \$100 par value. - Type: Perpetual preferred stock (not a bond) - Issuer: Strategy Inc. (NASDAQ:MSTR), Michael Saylor’s Bitcoin‑treasury company - Dividend: Variable, board‑set monthly cash payout (~11–12% annualized) - Purpose: Raise capital to buy more Bitcoin without diluting common shareholders - Trading behavior: Price engineered to stay near \$100; dividend rate rises if price falls below par - Collateral: Not directly backed by Bitcoin; holders have only a preferred claim on residual corporate assets 📌 Why STRC is problematic from Shariah perspective? From a Shariah perspective, STRC’s yield has a high likelihood of being classified as riba because it is a fixed‑income–like dividend engineered to track par value, not a profit‑share from a real economic venture. But there is nuance — and the classification depends on why the dividend exists, how it is determined, and what the investor is actually exposed to. Below is the structured breakdown 👇 1. The core Shariah question; Shariah asks one thing first: > Is the return tied to real economic risk and profit, or is it a guaranteed/engineered payout on capital? If the return is pre‑determined, capital‑linked, or designed to maintain par value, it typically falls under riba al‑nasī’ah (time‑based increase on capital). 2. What STRC actually is (in Shariah terms) STRC is: - Perpetual preferred equity, - With variable monthly dividends, - Adjusted explicitly to keep the price near $100, - And not tied to business profits, - But tied to capital‑raising mechanics. This means: - The dividend is not a share of business profit. - It is not tied to MicroStrategy’s operating performance. - It is not tied to Bitcoin appreciation. - It is not tied to a mudarabah/musharakah‑style risk‑sharing model. Instead, the dividend is engineered to maintain price stability; which is economically similar to a floating coupon. That is the key Shariah red flag. 3. Why many scholars would classify STRC dividends as riba: 1. The payout is linked to capital, not profit Shariah requires that equity returns come from actual profit, not from a pre‑engineered yield mechanism. STRC’s dividend is set by the issuer to maintain par value; not by profit. 2. The issuer adjusts the rate to keep the price stable This is functionally similar to: - Floating‑rate bonds - Sukuk that fail AAOIFI screens - Capital‑preservation instruments Shariah prohibits capital‑guaranteed returns. 3. The investor’s risk is not true equity risk Preferred equity with engineered dividends behaves like: - A perpetual bond - A yield instrument - A capital‑linked coupon This is structurally closer to riba‑based debt than to musharakah equity. 4. The Bitcoin angle does not make it halal Some people assume: > “If MicroStrategy uses STRC proceeds to buy Bitcoin, the yield must be halal.” But Shariah looks at contract structure, not use of proceeds. Even if the company buys halal assets, the instrument can still be riba‑based. 5. The strongest Shariah argument against STRC STRC’s dividend is: - Not profit‑based - Not risk‑sharing - Not tied to real economic output - Not variable based on business performance - Explicitly engineered to maintain par value This aligns with the classical definition of riba al‑nasī’ah; an increase on capital due to time. 6. Is there any argument for permissibility? A minority argument could be: - It is technically equity, not debt. - Dividends are not legally guaranteed. - The rate is variable, not fixed. - The company does take business risk. But these arguments are weak because the economic substance is still a capital‑linked yield mechanism, not a profit‑sharing model. AAOIFI standards generally reject preferred shares with engineered dividends. Bottom line is most Shariah scholars would classify STRC’s yield as riba, because: - The return is engineered, not profit‑based - The payout is linked to capital, not performance - The structure mimics a floating‑rate bond - The purpose of the dividend is price stability, not profit distribution In Islamic finance, form does not override substance. And the substance of STRC is yield on capital, not profit from enterprise. 📌 Is purchasing STRC the equivalent of a loan or equity? When you purchase STRC, you are legally buying equity, but economically you are entering something that behaves much closer to a loan. This duality is exactly why the Shariah classification becomes tricky. Breaking it down cleanly and without jargon: 1. What you legally own when you buy STRC STRC is preferred equity. That means: - You are not a creditor - You do own a slice of the company’s capital structure - You sit above common shareholders but below bondholders - You receive dividends, not interest - The company is not legally obligated to pay you (dividends can be suspended) So in form, you are purchasing equity. 2. What you economically experience This is where the Shariah issue arises. STRC behaves like: - A perpetual bond - With a floating coupon - Designed to keep the price near $100 - With a yield engineered by the issuer, not tied to profit - With capital‑preservation mechanics This means your economic exposure is: - Not true equity risk - Not tied to business performance - Not tied to profit/loss sharing - Not tied to Bitcoin appreciation - Primarily tied to receiving a yield on your capital Economically, this is loan‑like behaviour. 3. Shariah classification: form vs substance Shariah always prioritises substance over form. Form (legal): ✔️ Equity ✔️ Dividends ✔️ No legal guarantee ✔️ No maturity date Substance (economic): ❌ Capital‑linked return ❌ Engineered yield ❌ Price‑stability mechanism ❌ No real profit‑sharing ❌ Behaves like a floating‑rate loan Because the return is tied to capital + time, not profit + risk, the economic substance resembles riba al‑nasī’ah. 4. So what is it in Shariah terms? Most scholars would say: > You are legally buying equity, but economically receiving a riba‑like return. This is similar to: - Preferred shares with fixed dividends - Perpetual bonds - Capital‑preservation sukuk that fail AAOIFI standards These are typically classified as non‑compliant. 5. A simple analogy Imagine someone says: > “I’m selling you equity, but I’ll adjust your dividend every month to make sure your investment always stays around £100 and gives you a steady yield.” That is equity in name, but a loan in behaviour. Shariah cares about behaviour. Buying STRC is legally equity, but economically loan‑like. And because Shariah evaluates economic substance, not legal labels, the model aligns more with riba‑based instruments than with halal equity. https://blossom.primal.net/2b006deec9504eaf6171391d4c02984597143823f3cdc1b05a62741626c0a7eb.jpg
thread · root a2e4de19…895e · depth 1 · · selected a2e4de19…895e
thread
root a2e4de19…895e · depth 1 · · selected a2e4de19…895e
📌 What is STRC?STRC is Strategy Inc.’s (formerly MicroStrategy) Variable Rate Series A Perpetual Stretch Preferred Stock — ahigh‑yield equity instrument designed to fund the company’s Bitcoin purchases. It trades on Nasdaq under theticker STRC and currently pays a variable monthly dividend around 11.5%, adjusted to keep its price near \$100par value.- Type: Perpetual preferred stock (not a bond)- Issuer: Strategy Inc. (NASDAQ:MSTR), Michael Saylor’s Bitcoin‑treasury company- Dividend: Variable, board‑set monthly cash payout (~11–12% annualized)- Purpose: Raise capital to buy more Bitcoin without diluting common shareholders- Trading behavior: Price engineered to stay near \$100; dividend rate rises if price falls below par- Collateral: Not directly backed by Bitcoin; holders have only a preferred claim on residual corporate assets📌 Why STRC is problematic from Shariah perspective?From a Shariah perspective, STRC’s yield has a high likelihood of being classified as riba because it is afixed‑income–like dividend engineered to track par value, not a profit‑share from a real economic venture. Butthere is nuance — and the classification depends on why the dividend exists, how it is determined, and what theinvestor is actually exposed to.Below is the structured breakdown 👇1. The core Shariah question; Shariah asks one thing first:> Is the return tied to real economic risk and profit, or is it a guaranteed/engineered payout on capital?If the return is pre‑determined, capital‑linked, or designed to maintain par value, it typically falls underriba al‑nasī’ah (time‑based increase on capital).2. What STRC actually is (in Shariah terms)STRC is:- Perpetual preferred equity,- With variable monthly dividends,- Adjusted explicitly to keep the price near $100,- And not tied to business profits,- But tied to capital‑raising mechanics.This means:- The dividend is not a share of business profit.- It is not tied to MicroStrategy’s operating performance.- It is not tied to Bitcoin appreciation.- It is not tied to a mudarabah/musharakah‑style risk‑sharing model.Instead, the dividend is engineered to maintain price stability; which is economically similar to a floatingcoupon.That is the key Shariah red flag.3. Why many scholars would classify STRC dividends as riba:1. The payout is linked to capital, not profitShariah requires that equity returns come from actual profit, not from a pre‑engineered yield mechanism.STRC’s dividend is set by the issuer to maintain par value; not by profit.2. The issuer adjusts the rate to keep the price stableThis is functionally similar to:- Floating‑rate bonds- Sukuk that fail AAOIFI screens- Capital‑preservation instrumentsShariah prohibits capital‑guaranteed returns.3. The investor’s risk is not true equity riskPreferred equity with engineered dividends behaves like:- A perpetual bond- A yield instrument- A capital‑linked couponThis is structurally closer to riba‑based debt than to musharakah equity.4. The Bitcoin angle does not make it halalSome people assume:> “If MicroStrategy uses STRC proceeds to buy Bitcoin, the yield must be halal.”But Shariah looks at contract structure, not use of proceeds.Even if the company buys halal assets, the instrument can still be riba‑based.5. The strongest Shariah argument against STRCSTRC’s dividend is:- Not profit‑based- Not risk‑sharing- Not tied to real economic output- Not variable based on business performance- Explicitly engineered to maintain par valueThis aligns with the classical definition of riba al‑nasī’ah; an increase on capital due to time.6. Is there any argument for permissibility?A minority argument could be:- It is technically equity, not debt.- Dividends are not legally guaranteed.- The rate is variable, not fixed.- The company does take business risk.But these arguments are weak because the economic substance is still a capital‑linked yield mechanism, not aprofit‑sharing model.AAOIFI standards generally reject preferred shares with engineered dividends.Bottom line is most Shariah scholars would classify STRC’s yield as riba, because:- The return is engineered, not profit‑based- The payout is linked to capital, not performance- The structure mimics a floating‑rate bond- The purpose of the dividend is price stability, not profit distributionIn Islamic finance, form does not override substance.And the substance of STRC is yield on capital, not profit from enterprise.📌 Is purchasing STRC the equivalent of a loan or equity?When you purchase STRC, you are legally buying equity, but economically you are entering something that behavesmuch closer to a loan. This duality is exactly why the Shariah classification becomes tricky.Breaking it down cleanly and without jargon:1. What you legally own when you buy STRCSTRC is preferred equity.That means:- You are not a creditor- You do own a slice of the company’s capital structure- You sit above common shareholders but below bondholders- You receive dividends, not interest- The company is not legally obligated to pay you (dividends can be suspended)So in form, you are purchasing equity.2. What you economically experienceThis is where the Shariah issue arises.STRC behaves like:- A perpetual bond- With a floating coupon- Designed to keep the price near $100- With a yield engineered by the issuer, not tied to profit- With capital‑preservation mechanicsThis means your economic exposure is:- Not true equity risk- Not tied to business performance- Not tied to profit/loss sharing- Not tied to Bitcoin appreciation- Primarily tied to receiving a yield on your capitalEconomically, this is loan‑like behaviour.3. Shariah classification: form vs substanceShariah always prioritises substance over form.Form (legal):✔️ Equity✔️ Dividends✔️ No legal guarantee✔️ No maturity dateSubstance (economic):❌ Capital‑linked return❌ Engineered yield❌ Price‑stability mechanism❌ No real profit‑sharing❌ Behaves like a floating‑rate loanBecause the return is tied to capital + time, not profit + risk, the economic substance resembles ribaal‑nasī’ah.4. So what is it in Shariah terms?Most scholars would say:> You are legally buying equity, but economically receiving a riba‑like return.This is similar to:- Preferred shares with fixed dividends- Perpetual bonds- Capital‑preservation sukuk that fail AAOIFI standardsThese are typically classified as non‑compliant.5. A simple analogyImagine someone says:> “I’m selling you equity, but I’ll adjust your dividend every month to make sure your investment always staysaround £100 and gives you a steady yield.”That is equity in name, but a loan in behaviour.Shariah cares about behaviour.Buying STRC is legally equity, but economically loan‑like.And because Shariah evaluates economic substance, not legal labels, the model aligns more with riba‑basedinstruments than with halal equity.https://blossom.primal.net/2b006deec9504eaf6171391d4c02984597143823f3cdc1b05a62741626c0a7eb.jpg