MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’

[Free Market Capitalist]

He stated before that they would increase if it falls below par

But he didn't say that in isolation; he said it in the context of a 30% CAGR for Bitcoin, which is not happening. Bitcoin's CAGR over the last five years is 6.5%, and Strategy's purchases are of negative return.

He's paying that dividend based on faith.

[MarryWithBTC]

I think, like every other Bitcoin "hero" we had in the past, he went a little bit too far.

The real issue may not be whether he went too far, but whether the model remains sustainable across a prolonged bearish cycle. If Bitcoin enters a multi year stagnation phase, the leverage becomes the stress test. In the other hand, if Bitcoin continues long-term appreciation, the structure amplifies returns.

He had a good and sensible idea, using MicroStrategy to "smuggle" bitcoin to those who couldn't buy it, but then, when the ETF arrived, this idea couldn't keep working. So he had to reinvent a lot of narratives.

The reinvented narratives are; financial engineering and risk management durability.

He's undoubtedly smart, but I think he has already done what he could for Bitcoin. Not expecting much from him.

For the hero to bow off the stage, another should emerge.

[Ambatman]

Bitcoin price is just below a percent of Strategy purchase price
I don't know if Saylor would be happy about this pump or Sad that Bitcoin just got a little more expensive
Than he could have gotten a week ago.
STRC increment was implemented recently so they may have generated quite an amount of Funds to purchase this week.
Mnav is 1.2.

[ultrloa]

Bitcoin price is just below a percent of Strategy purchase price
I don't know if Saylor would be happy about this pump or Sad that Bitcoin just got a little more expensive
Than he could have gotten a week ago.
STRC increment was implemented recently so they may have generated quite an amount of Funds to purchase this week.
Mnav is 1.2.

Maybe Saylor picture out those situation in both ways, what we have seen on current situation that Bitcoin is little bit expensive compare last week. This means that the value of their existing holding goes up to.

If the increment of their STRC generate them fresh or new funds and the Mnav is at 1.2, now they are somehow in great position to continue buying even if there are short term price swings happen in the market. Looks like for Saylor every pump is good validation for his long term bet on Bitcoin.

[Free Market Capitalist]

Bitcoin price is just below a percent of Strategy purchase price
I don't know if Saylor would be happy about this pump or Sad that Bitcoin just got a little more expensive
Than he could have gotten a week ago.
STRC increment was implemented recently so they may have generated quite an amount of Funds to purchase this week.
Mnav is 1.2.

Maybe Saylor picture out those situation in both ways, what we have seen on current situation that Bitcoin is little bit expensive compare last week. This means that the value of their existing holding goes up to.

If the increment of their STRC generate them fresh or new funds and the Mnav is at 1.2, now they are somehow in great position to continue buying even if there are short term price swings happen in the market. Looks like for Saylor every pump is good validation for his long term bet on Bitcoin.

Theoretically, he doesn't care because he's so bullish on Bitcoin, or at least he was. Now I don't know if he's faking it a bit, but in theory he doesn't care what price he buys at. If you think an asset is going to grow a lot over a long period of time, it doesn't matter if it's a little more expensive or cheaper. You buy as soon as you can with the money you have because you know you can't time the market.

[tiCeR]

Almost impossible in practice. Publicly traded companies are controlled with much less than that. For example, Bezos controls Amazon with less than 10% of the shares. I remember commenting on this in this same thread in the past.

Well, I do agree, public traded companies have a way less relevant relative majority control. I was anyway surprised how much Saylor accepted to be diluted while issuing shares. I would have tought about him raising the CLASSB shares to 20x voting power. But didn’t happen, as far as I know (it would have been difficult to miss it).

Ownership and voting power does differ in some cases, for example Meta and Zuckerberg, who has a bit more than 10% in Meta ownership, but voting power is around 60% I think.

But what's quite interesting is that Musk and Tesla or Bezos and Amazon only have 1 share 1 vote structures if I am not mistaken. They are majority holders, but what makes them mostly be safe in their position is how their impact on and relation to the company is publicly framed and perceived. When Elon Musk talks bullshit and says things like "I say and do what I want and if that means I lose money, so be it". That's not precisely what shareholders would want to hear, yet they push the share price up. It's mostly because Musk and Bezos are so tightly related to their company brands and company developments that removing them would be received as a signal of failure by the market I assume.

Michael Saylor is so closely tied to Strategy, he is the major face and the one name with his one story ("becoming the bitcoin bank") that if they outvote him or sack him, it could be perceived as a failure of the whole story and that would give Strategy a huge hit to say the least. That is at least my take, I can't tell for sure obviously, but I think that is what would happen and that is also why this crazy Elon Musk feels so safe despite his escapades. There are limits though as could be observed when Musk served in the White House. That was when the market decided to teach him a lesson.

Well, I do agree, public traded companies have a way less relevant relative majority control. I was anyway surprised how much Saylor accepted to be diluted while issuing shares. I would have tought about him raising the CLASSB shares to 20x voting power. But didn’t happen, as far as I know (it would have been difficult to miss it).

This has almost never happened in practice. The backlash for changing votings rights retrospectively is enormous and not even desired by the stock exchanges.

There is one example where the charter for voting power per share was changed in quite a smart way. Alphabet introduced a zero voting power class C share. Since that had no negative impact on those shareholders with voting power, this was accepted. Proposing a charter amendment would need a majority vote of class A and class B holders and it would have to be expected that class A holders block the suggested amendment. It is not only impractical, but it can also entail lawsuits and many other problems down the road, including distrust from the market because if that is done once, potential new shareholders would have to price in that it happens again and they lose voting power after the fact.

That is why it is highly unlikely that Saylor would ever try to dilute voting power by increasing share B to 20x or so. He is already putting the whole corporation under enormous stress. Part comes from his approach that is based on massive dilution and part comes from the highly speculative nature of bitcoin. If he now essentially breaks the contract that he has with shareholders and potential future shareholders, he would go one step too far and it would probably not be accepted by the majority of the existing shareholders.

[fillippone]

21 shares launched an Instrument giving an efficient way of getting exposure to STRC:

21shares Strategy Yield ETP

The 21shares Strategy Yield ETP (STRC) provides
exchange-traded access to Stretch, the Variable Rate
Series A Perpetual Stretch Preferred Stock, issued by
Strategy Inc. The ETP structure removes the operational
complexity of trading preferred shares, offering investors a
simple and efficient way to access yield-enhanced
exposure.
The distributions paid by Strategy Inc. after accounting for
other deductions as per Final Terms are reinvested into
the collateral of the ETP, increasing its Net Asset Value,
effectively compounding over time. Currently, the
distributions are treated as return of capital and are
therefore not in scope for US withholding tax purposes*
.

Base prospectus



Very nice and easy product to get exposure to the low volatility product of Strategy, without the hassle of getting the taxed dividend.

[Ambatman]

21 shares launched an Instrument giving an efficient way of getting exposure to STRC:

21shares Strategy Yield ETP

This was wrongly quoted
What you quoted was the response page of Bitcointalk.

The ETP structure removes the operational
complexity of trading preferred shares,

Well I boom to Europeans investors since it bridges the barriers faces in trading US based stock
And a no brainier why STRC was picked
Relatively outweighs other options from an investors perspective.

[fillippone]

The ETP structure removes the operational
complexity of trading preferred shares,

Well I boom to Europeans investors since it bridges the barriers faces in trading US based stock
And a no brainier why STRC was picked
Relatively outweighs other options from an investors perspective.

This completely makesMicheal Saylor's point of allowing more investors to pick up lower risk instruments, rather than crowding the MSTR Equity, which might be too risky for them.
The easier it is to invest in STRC (and an ETF is surely something that makes the investment easier), the more people will pick that option.

[avp2306]

The ETP structure removes the operational
complexity of trading preferred shares,

Well I boom to Europeans investors since it bridges the barriers faces in trading US based stock
And a no brainier why STRC was picked
Relatively outweighs other options from an investors perspective.

This completely makesMicheal Saylor's point of allowing more investors to pick up lower risk instruments, rather than crowding the MSTR Equity, which might be too risky for them.
The easier it is to invest in STRC (and an ETF is surely something that makes the investment easier), the more people will pick that option.

Well somehow this is a great point, since it can make investors have access getting exposure from Bitcoin through STRC without taking more risk from the equity of MSTR. This widen up the participation by offering convenient and lower risk option to investors, then gives investors option to continue the direct equity route.

Saylor use this as practical example.

[Free Market Capitalist]

Well I boom to Europeans investors since it bridges the barriers faces in trading US based stock

From Europe, there aren't many barriers; you can buy STRC on IBKR, for example.

This completely makesMicheal Saylor's point of allowing more investors to pick up lower risk instruments, rather than crowding the MSTR Equity, which might be too risky for them.

I actually think STRC is quite risky as the rising dividend is based on nothing more than the access to liquidity the company has.

In this case, I see two problems. If you invest directly in STRC, you have the company risk of Strategy, but in this case, you add the company risk of 21Shares.

MSTY is a derivative of a Strategy product also by another company that was very popular a year and a half ago but is no longer talked about as much.



The decline in the share price has gone hand in hand with the decline in the high dividend it paid, which was its main attraction. That should give pause to those who buy a stock for its high dividend. A high dividend is a clear sign of high risk.

Saylor use this as practical example.

What Saylor doesn't tell you in that image is that he bases digital credit on a fairy tale.

[fillippone]

Well I boom to Europeans investors since it bridges the barriers faces in trading US based stock

From Europe, there aren't many barriers; you can buy STRC on IBKR, for example.

This completely makesMicheal Saylor's point of allowing more investors to pick up lower risk instruments, rather than crowding the MSTR Equity, which might be too risky for them.

I actually think STRC is quite risky as the rising dividend is based on nothing more than the access to liquidity the company has.

In this case, I see two problems. If you invest directly in STRC, you have the company risk of Strategy, but in this case, you add the company risk of 21Shares.

MSTY is a derivative of a Strategy product also by another company that was very popular a year and a half ago but is no longer talked about as much.



The decline in the share price has gone hand in hand with the decline in the high dividend it paid, which was its main attraction. That should give pause to those who buy a stock for its high dividend. A high dividend is a clear sign of high risk.

Saylor use this as practical example.

What Saylor doesn't tell you in that image is that he bases digital credit on a fairy tale.

The credit risk of 21share is quite limited, as the instrument is as actually an ETN (exchange traded note), and the fund is bankruptcy segregated from the rest of the 21shares assets.
Also for an European investors the dividends are double taxed, so it’s highly inefficient.

[fillippone]

In this case, I see two problems. If you invest directly in STRC, you have the company risk of Strategy, but in this case, you add the company risk of 21Shares.

The credit risk of 21share is quite limited, as the instrument is as actually an ETN (exchange traded note), and the fund is bankruptcy segregated from the rest of the 21shares assets.
Also for an European investors the dividends are double taxed, so it’s highly inefficient.

[Free Market Capitalist]

Hey, first of all, I think you need to delete the former post. You posted with an overquote first and then this post.

The credit risk of 21share is quite limited, as the instrument is as actually an ETN (exchange traded note), and the fund is bankruptcy segregated from the rest of the 21shares assets.

You are right.

Also for an European investors the dividends are double taxed, so it’s highly inefficient.

Here, I would say that, to begin with, it does not have the tax advantage that it has in the United States. But you can easily avoid double taxation by filling out the W-8BEN form at your broker (for example, IBKR). The US withholds 15% of the dividend, and then you pay the corresponding tax in Italy, being able to deduct that 15%.

US-Italy Tax Treaty: Withholding Rates Explained

I think it is pretty much the same for most European countries if not all.

[Donneski]

The credit risk of 21share is quite limited, as the instrument is as actually an ETN (exchange traded note), and the fund is bankruptcy segregated from the rest of the 21shares assets.

You actually made a good clarification right here. Many people still assume these products carry the same kind of issuer risk so the ETN structure changes that a bit.

Also for an European investors the dividends are double taxed, so it’s highly inefficient

I think that’s probably where the real drawback is. Once taxes start eating into the returns, the wrapper becomes less attractive. At that point some investors might just prefer direct exposure instead of adding another layer in between.

[coinrifft]

Michael Saylor posting a cryptic message, with 1 million views already,



https://x.com/saylor/status/2030630059573207263

I guess it's open for interpretation, but one thing is for sure, Strategy are coming after that Bitcoin as we almost mined 20 Million already.

[The Sceptical Chymist]

I don't know if Saylor would be happy about this pump or Sad that Bitcoin just got a little more expensive

He bought all of that bitcoin for the treasury of a publicly-traded corporation.  One would hope that he wouldn't be disappointed in a price increase--and were he to make a statement like that, I bet it would have a lot of shareholders raising their eyebrows and scratching their heads.  I've been seeing members here lose sight of the context of the relationship between Michael Saylor and bitcoin.  Either that or there's no understanding of who Saylor is ultimately accountable to or even what it means when a company has common stock traded on an exchange.  There's a lot that goes with that.

[SeriouslyGiveaway]

He bought all of that bitcoin for the treasury of a publicly-traded corporation.  One would hope that he wouldn't be disappointed in a price increase--and were he to make a statement like that, I bet it would have a lot of shareholders raising their eyebrows and scratching their heads.  I've been seeing members here lose sight of the context of the relationship between Michael Saylor and bitcoin.  Either that or there's no understanding of who Saylor is ultimately accountable to or even what it means when a company has common stock traded on an exchange.  There's a lot that goes with that.

Saylor has over leveraged the company Strategy's investment in Bitcoin especially recent years in this market cycle. It's very surprising to see that as with his experience since the last season, when he and Strategy firstly joined this Bitcoin market, they already experienced how severe and terrible a bear market is. I would have expected Saylor and Strategy only apply the same strategy like they did in the previous market cycle or even better a little bit by lowering their leverage for better risk management and secure their profit in Bitcoin portfolio in long term.

They did exactly opposite than my expectation by increasing their leverages more and higher. Perhaps many shareholders of Strategy actually have felt very disappointed with Strategy and Saylor recent months.

Over leverage, be over confident about anything combined together can be a start of nightmare.

[The Sceptical Chymist]

Over leverage, be over confident about anything combined together can be a start of nightmare.

Oh, you've got that right.  I've mentioned this in a few posts in the distant past, but does anyone remember the story of Long Term Capital Management?

I certainly don't think Strategy's leverage is going to endanger the global economy, but I have to wonder who's manning the risk management desk there.  One other thing that's been on my mind every time I see something about Strategy/Saylor is how much bitcoin is enough for treasury purposes?  I don't even think that's the goal anymore (and somebody tell me if that's been outright stated publicly), because Strategy has morphed from a software company into what amounts to a bitcoin holding company.  They might as well be a lottery ticket holding company, and the risk they've taken on with all of the BTC is enormous.

But as I've said before, Michael Saylor will go down in bitcoin history either as a visionary who made his shareholders very rich or a reckless idiot and a case study for Harvard MBAs on speculative mania and its influence on corporate America.  That history obviously has yet to be written, and though I'm not a fan of Saylor I'm not hoping he fails, as that would mean something really bad happened to bitcoin.  Someone pass the popcorn?

[Free Market Capitalist]

I think that’s probably where the real drawback is. Once taxes start eating into the returns, the wrapper becomes less attractive. At that point some investors might just prefer direct exposure instead of adding another layer in between.

You could have bothered to read the explanation I gave about this in the post before yours. Double taxation is easily avoidable.

But as I've said before, Michael Saylor will go down in bitcoin history either as a visionary who made his shareholders very rich or a reckless idiot and a case study for Harvard MBAs on speculative mania and its influence on corporate America.  That history obviously has yet to be written, and though I'm not a fan of Saylor I'm not hoping he fails, as that would mean something really bad happened to bitcoin.  Someone pass the popcorn?

I feel the same way. I want Strategy to do well because if it does poorly, at least in the short term, Bitcoin will also do poorly. But analyzing the situation, I see that the preferreds are based on a house of cards.