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

[Ambatman]

 

They sell it as overcollateralized 5 to 1.

Each share of STRC is overcollateralized with bitcoin at a ratio of roughly 5-to-1, meaning that for every dollar of STRC issued, Strategy holds approximately five dollars’ worth of $BTC.

I believe this is about backing the dividends not the share value
It's like saying 5dollar of BTC in reserve for every one dollar of STRC dividends promised
So even if Bitcoin falls too dip
There would be collateral to cover STRC. It's more of their way of assuring investors


At the end of the day STRC isn't even collaterised legally
If I'm not mistaken it's an unsecured preference equity.

[Free Market Capitalist]

 

They sell it as overcollateralized 5 to 1.

Each share of STRC is overcollateralized with bitcoin at a ratio of roughly 5-to-1, meaning that for every dollar of STRC issued, Strategy holds approximately five dollars’ worth of $BTC.

I believe this is about backing the dividends not the share value

As I see it, different sources say different things. But it's wishful thinking anyway, as if the Bitcoin they had backed only that (the dividends or STRC shares).

If we go to the Strategy website, we see:

The Company’s preferred securities (STRF, STRC, STRE, STRK, STRD) are not collateralized by the Company’s bitcoin holdings and only have a preferred claim on the residual assets of the company.

Which contradicts what I've heard Saylor say.

At the end of the day STRC isn't even collaterised legally
If I'm not mistaken it's an unsecured preference equity.

Another thing that differs in how Saylor sells the product is this:

STRC is neither a bank deposit, nor FDIC insured, nor regulated in the same way, and does not have the same regulatory and other protections as bank accounts, money market funds, treasuries, or similar instruments and as a result may not be a comparable investment.

There are numerous videos in which Saylor pitches STRC as an alternative to savings accounts and bank deposits with much higher yield.

[fillippone]

I guess Micheal Saylor is a great seller, and of often a great Bitcoin Promoter.
Of course I wouldn’t take him as a best case for an investment advisor. He often referred to bitcoin investments in a not proper way.

[Free Market Capitalist]

I guess Micheal Saylor is a great seller, and of often a great Bitcoin Promoter.

That's right, he's a natural with words; he's a really good salesman.

I had something else in mind regarding STRC. It seems Saylor has finally found the sweet spot where, thanks to the dividend, the stock is fairly stable around $100 and he can ATM it. Last week's buying was already significant, and the fact that the price of bitcoin has risen this week while other assets have fallen (except for oil) is likely due in large part to this. But we'll have to wait at least a year to see how this turns out. I have quite a few doubts about the product, as I've mentioned in the thread; it looks like a pyramid scheme to me.

To be fair and find a possible positive aspect, I can say that if this continues to work, it could turn into a Bitcoin-buying machine during bear markets, which would help mitigate Strategy's main problem: until now he has bought a lot when prices were high and little or nothing during bear markets. But if I had to point out a potential downside, STRC doesn't have upside potential, but it does have downside potential. So far, the company has been able to offset the decline in the preferred stock price by increasing its dividend, but in a worst-case scenario, that might not work.

I don't have high hopes for MSTR, though, because the more Bitcoin he buys, the harder it becomes for people to pay high mNAVs. If he reaches one million Bitcoins, to pay a 1.2 mNAV, you'll have to wait until he buys another 200,000 Bitcoins to match the exposure.