A preferred stock built to trade like a T-bill and pay like a junk bond did both, right until it did neither. Strategy, Inc.'s Stretch (STRC) is a variable-rate perpetual preferred stock whose dividend resets every two weeks to hold its price near $100 par. For its first year, that mechanism worked exactly as designed: the rate floated up to 11.5% and held there for four straight months, high enough to function as a form of digital credit, stable enough that the market treated $100 as a floor.
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Then the floor moved. By 26 Jun, STRC printed a $71.25 low, roughly 29% below par.
The mechanism that was meant to defend that price is what's known as a flywheel. When STRC trades above par, Strategy issues fresh shares through its at-the-market (ATM) programme, a facility that lets a company sell new stock gradually into the market, and routes the proceeds into bitcoin (BTC). That issuance caps the share price near $100 while funding the company's bitcoin treasury in one motion. Below par, the programme stops because issuing shares below their stated value would dilute existing holders rather than support the price. Strategy has now paused it.
The dividends, however, don't pause. They're cumulative and compounding, and at 11.5% on the outstanding base, they cost Strategy roughly $1.21bn a year. The market is now pricing STRC to a yield in the mid-teens, well above the stated rate, which implies investors see significant risk that the dividend itself may need to rise further to defend the price. Resetting the dividend towards 16% to pull the stock back to par would push the annual cost above $1.68bn, against a balance sheet already short on cash. The mechanism meant to stabilize the stock has become a drain on it.
Two bets on the same collateral
Two protocols turned STRC's dividend stream into onchain collateral, used to back tokens designed to behave like dollars. Apyx took the more aggressive approach. Its apxUSD is a synthetic dollar intended to remain overcollateralized – backed by more assets than tokens in circulation – at all times, while a companion token, apyUSD, acts as a yield-bearing savings wrapper on top of it. Together, the structure is roughly 82% backed by STRC, making Apyx the largest single holder of the preferred stock by that measure. Saturn Credit took a more conservative route: investors deposit USDC and receive USDat, a token whose staked version, sUSDat, holds roughly 45% Treasuries against 55% STRC.
At their May peak, Apyx's apxUSD supply had swelled to $525mn, against $153mn for Saturn's more Treasury-backed USDat. The riskier structure was also more than three times the size, and it was the one carrying the bulk of the STRC exposure.
That difference is what determined how each token behaved once STRC fell. Saturn's USDat held its $1 peg throughout the stress window, the only one of the four tokens examined here that did. Apyx's apxUSD, the token explicitly designed to stay overcollateralized, traded as low as $0.70 and closed at $0.773, a roughly 23% decline, steeper than the fall in the preferred stock backing it.
Chart
(Source: Coin Gecko, Trading View)
apyUSD's losses were amplified because it isn't a simple dollar-pegged token. It accrues STRC's dividends into its redemption value over time, so its underlying net asset value (NAV) had climbed to a peak of 1.37 by the end of May, meaning each token represented a claim worth $1.37. When confidence broke, holders exiting near the low were selling that $1.37 claim for as little as $0.95, a haircut of roughly 31% to its underlying value. Saturn's staked token, sUSDat, told a similar story in absolute terms, bottoming at $0.70.
Chart
(Source: Saturn Credit, Apyx)
The outflow data shows the same divide. Across the stress window from 6 to 25 Jun, Apyx's tokens lost roughly $240mn in net outflows. Saturn fared better but wasn't untouched: once its staked sUSDat token is counted alongside the senior USDat token, the combined drawdown becomes more visible, with the staked tranche absorbing most of the impact, while the senior USDat bled a comparatively modest $8.2mn.
The reserve gap
Apyx publishes its real-time collateralization data through Accountable, a third-party proof-of-reserves platform that independently ingests reserve and liability data from Apyx's systems and verifies it. That's a different standard of assurance to a traditional audit – Apyx separately undergoes monthly attestations from an accounting firm – but it offers a more continuous, real-time signal than self-reported figures alone.
That distinction matters here because the headline reserve figure on Apyx's dashboard can look healthier than the underlying position. Reported reserves include protocol-owned liquidity and unissued inventory alongside the actual backing assets. Stripped of those, the hard collateral – STRC preferred stock and Treasuries – totalled $233.2mn against $287.3mn of circulating apxUSD as of late June, or roughly 81% collateralized. That ratio held above 101% through May, fell below full backing on 2 Jun and slid to 81% by month-end, opening a collateral shortfall of roughly $54mn in under four weeks.
Chart
(Source: Accountable)
The risk this creates goes beyond accounting. It changes apxUSD from an overcollateralized synthetic dollar into one whose backing now depends on STRC recovering in price, fresh capital being raised or redemptions slowing down. As collateral falls short of the tokens in circulation, each redemption shrinks the remaining cushion further, which can pressure confidence and prompt platforms that accept apxUSD as collateral to discount its value or cap how much they'll lend against it. Once that happens, a reserve shortfall stops being just a valuation problem and starts being a liquidation problem.
Apyx, Saturn Credit and Strategy did not respond to requests for comment.
How a small footprint produced large forced sales
Both tokens found significant use inside Pendle, a protocol that splits yield-bearing tokens into two separate pieces: a principal token, representing the underlying asset's value at a future date, and a yield token, representing the income it generates in the meantime. Holders looking to lock in STRC's dividend without taking on the token's price swings used Pendle to strip out and hold just the principal token.
For Apyx, roughly 55% of apyUSD's supply sat inside Pendle's yield-tokenization contracts, while another 13% was deposited into Morpho, a lending protocol where users borrow against crypto they've posted as collateral, with that collateral automatically sold off if its value falls too far relative to the loan. Saturn's USDat followed similar rails, with roughly 51% of its supply inside Pendle and 17% in Morpho.
Both structures, in other words, routed meaningful portions of their tokens into the same two venues: Pendle to lock in STRC's yield, Morpho to borrow against the resulting position. Combined exposure to the three STRC-linked tokens inside Pendle peaked at $434mn on 30 May, with more than a quarter of all principal tokens on the platform concentrated in a single trade built on one preferred stock. That share has since fallen to 17% as positions unwound, with Apyx's Pendle exposure down 80% from its peak against an 11% decline for Saturn's.
Chart
(Source: Dune Analytics, Morpho)
Once STRC's price began moving, the unwind ran through Morpho, where the borrowing loop lived. From 27 May to 25 Jun, collateral tied to Saturn and Apyx triggered $13.5mn of liquidations on Morpho, more than half of everything liquidated on the platform during that window, with roughly $8mn of that tied specifically to Pendle's principal tokens posted as collateral. Apyx alone accounted for $11.2mn of the total, against $2.3mn for Saturn. For context, bitcoin fell roughly 28% and Ether (ETH) fell further over the same period, comparable in scale to STRC's own decline, but the STRC-linked tokens liquidated at a rate that, relative to their size, outpaced even deeply integrated bitcoin- and Ether-backed collateral elsewhere on the platform.
Each layer made sense; the stack didn't
Tokenization, the process of representing ownership of an asset as a digital token on a blockchain, promised to make illiquid assets easier to trade. What it delivered here was narrower: a way to compress an illiquid security with settlement delays into something that traded, moved and could be borrowed against as if it were cash, inside systems that settle and liquidate within seconds.
That's the mismatch at the centre of this story. STRC is a preferred stock whose real liquidity can disappear for days during periods of volatility – selling a large block of any stock under stress takes time. But once wrapped into apxUSD, apyUSD, USDat or sUSDat, it traded and was borrowed against as though that friction didn't exist. When the underlying preferred fell, the wrapped tokens fell further because the market for exiting them was thinner. The lending positions built on top liquidated harder still because automated systems had no choice but to sell collateral into the same shallow market everyone else was trying to use at once.
Each step made sense on its own. STRC offered a high yield. The wrapper tokens made that yield tradeable. Pendle let investors separate and lock in the income. Morpho let them borrow against the position. Stacked together, they produced a token that proved more fragile than the asset it was built from, not because tokenization failed as a concept, but because it made an old problem – illiquidity – harder to see until it mattered.
