New York: Distressed-debt funds that snapped up Strategy Inc’s beaten-down preferred shares are in talks with one of the company’s bankers about swapping them for other securities, pitching it as a win-win as the relentless rout in crypto puts the bitcoin accumulator in an increasingly tough spot.

The investors have had conversations with Moelis & Co about exchanging their holdings for other preferred shares at a discounted price, or potentially for common shares, which have plunged by roughly 75% in the past year.

Any deal would likely be done under what’s known as a Section 3(a)(9) exchange, said the people, who asked not to be named discussing private conversations.

That refers to a law allowing companies to swap instruments without formally registering with the Securities and Exchange Commission.

A representative for Moelis declined to comment. A Strategy spokesperson didn’t respond to a request for comment.

Discussions remain preliminary and no formal pitches have been made to the company, the people said.

Once one of the most high-flying stocks on Wall Street, Michael Saylor’s Strategy has plunged as bitcoin lost momentum, throwing into question its business model of accumulating ever-greater amounts of the token.

That structure hinged on issuing equity and debt relatively cheaply – and, more crucially, on the price of the original cryptocurrency to keep going up.

Instead, the digital token has tumbled, forcing Strategy to concede it may need to sell some of its bitcoin stash to raise cash.

The company unloaded a record US$216mil of the token last week, it said in a filing released on Monday.

In a sign of just how bullish Strategy investors once were, some of the company’s preferred equity issued in early 2025 have a conversion price of US$1,000. Strategy closed last week at US$100.77. — Bloomberg