TY

Stevie's Dad. Hawkeye Fan. Macro Tourist.

[K A L E O @CryptoKaleo]

Strategy's $STRC problem:

Saylor has used the issuance of STRC to fund billions of dollars of Bitcoin purchases for the better part of the last year.

The pitch?

STRC sits above common shares with a $100 stated liquidation preference and have an attractive dividend of 11.5%, which gets bumped up gradually when the shares are trading below $99 avg.

It naturally incentivizes buyers because the liquidation preference is economically supported by Strategy's ~844K Bitcoin on the balance sheet after debt and senior preferred claims, and the effective yield rises as the STRC price falls (e.g. at $92 STRC the effective yield is 12.5%).

So, what's the problem?

Their total debt + preferred senior to common claims are roughly ~$22.2B. Most of which isn't a problem ~currently~ (but there are billions of dollars worth of notes that become puttable in 2027-2028... and if MSTR is below conversion economics or refinancing markets are closed, those become hard cash obligations).

Their preferred dividends are currently ~$1.7B annually. And they only have ~$900M cash on hand... so the runway math doesn't look great.

So where does the money come from?

The yield has to come from somewhere.

Their revenue from the software company alone is only ~$500M/yr. That doesn't come anywhere close to what's needed.

They realistically have two options for raising capital:

1) Sell more MSTR...

They currently have ~$26B common ATM capacity available to them, but the issue is they're currently trading at an mNAV well below 1 already. Tapping into this is incredibly dilutive for common shareholders.

2) Sell more Bitcoin...

Saylor already effectively broke the trust he's established for years to "Never sell Bitcoin" when he made a 32 BTC sale last week.

The sale was tiny, but it gave the market a concrete reason to price the possibility of future BTC sales.

But the primary purpose of STRC is to raise more capital to buy more Bitcoin, right?

So in order to buy more Bitcoin, they have to sell Bitcoin.

But we saw what the market did after a small 32 BTC sale. BTC took a massive hit in anticipation that there could be more sales... The machine is breaking.

Strategy can defer dividend payments though if they want, right?

Yes, but unpaid STRC dividends accumulate and then compound monthly. So this isn't a long-term viable option. Deferring STRC dividends preserves cash, but turns STRC from a cash-yield product into distressed preferred equity.

And if the payments aren't being made to STRC, will any investor have confidence to buy it at a discount?

And if STRC is carrying a massive discount, it effectively eliminates it as an option for Strategy to use to continue funding new BTC purchases...

e.g. if STRC is $70, they'd be selling $100 of future liabilities for $70 of current credit. Not a great trade.

Reminder that STRC's $100 is not a redemption peg. Holders cannot simply demand $100 back in normal conditions. The price is maintained by confidence, yield support and Strategy's desire to preserve the funding channel.

If this dynamic persists, the largest corporate buyer of Bitcoin could shift from accumulating to liquidity management via selling or make the common shareholders of MSTR carry the burden by diluting them substantially (for as long as that can last).

I could see this collapse happening fairly swiftly.

It doesn't mean that MSTR necessarily dies off or is forced to immediately sell all of their Bitcoin (that door could be opened early though with something like a change of control of the company, delisting, etc.)...

Not sure what the solution is, but one thing is certain:

I would not want to be holding $MSTR right now.

The risk is not that STRC instantly becomes worthless. The risk is that once STRC trades like distressed preferred equity, Strategy loses a major funding channel while its dividend burden and note put wall remain.

The flywheel effect and the fear from what we've seen with previous major collapses (e.g. Luna / UST, FTX, 10/10, etc.) could lead to something similar here.

This doesn't mean I'm bearish on Bitcoin. I actually think it'll create an insane buying opportunity.

MSTR isn't Bitcoin.

If it does fail, plenty of people will try to claim BTC failed along with it. We've seen it happen plenty of times with plenty of other names. Every time the people digging Bitcoin's grave were wrong. This time isn't any different.

[TY @TYMarkets]

@Nicolascole77 @Z06Z07 @PunterJeff No I read it, you're just making up nonsense to pretend it’s not a levered $BTC play. Call it what it is and quit lying to yourself.

[TY @TYMarkets]

@Nicolascole77 @Z06Z07 @PunterJeff Even if they can raise more equity, it will get increasingly more expensive and dilute current holders. This is a classic Ponzi. The math only works if BTC goes up

[TY @TYMarkets]

@Nicolascole77 @Z06Z07 @PunterJeff $MSTR is just a leveraged Bitcoin play. If Bitcoin goes down, the equity is going to get smoked. You are overthinking it.

[TY @TYMarkets]

@bennpeifert Happens….Cheers to owning the outcome, and great success ahead 🍻 👏

[TY @TYMarkets]

@adamtaggart @unusual_whales Real GDP was 2.0% in Q1 vs 5.6% Nominal. Inflation is killing consumer sentiment

[TY @TYMarkets]

@adamtaggart @unusual_whales GDP is growing at 4% due to inflation. It was headed sub-1% before the TrumpEpstein War. >75% of GDP is inflation, that’s nothing to cheer about Adam

[Molly Ploofkins @Mollyploofkins]

The difference between Iran and Vietnam is that Trump knew how to get out of Vietnam.

[Dina Esfandiary @DEsfandiary]

We took stock of what the #IranWar‌ achieved and well… the result isn’t great.

Full analysis via @TheTerminal

[TY @TYMarkets]

@eve_bouff Do any of these people actually go to the office? Downtown SF during work week was notably dead compared to NYC when I visited a month ago

[The Maverick of Wall Street @TheMaverickWS]

What Jeff Bezos didn't tell you is, Amazon received billions in tax credits & incentives to build its warehouses. An option that wasn't available for the mom and pop retail businesses Amazon got to destroy.

[Darius Dale @DariusDale42]

ALTERNATIVE VIEW: He’s being dishonest and doesn’t want the public to know how rigged the tax code actually is after decades of wealthy people paying billions of dollars in campaign financing to rig elections and legislation on their behalf.

Don’t watch this if you don’t want to find out the truth and get freaked out as a result: https://t.co/6kDPx90nGb.

Since Citizens United in 2010, federal election spending has totaled well over $100 billion cumulatively across presidential, congressional, party, PAC, Super PAC, and outside-group activity.

Do you think some of the smartest people in world history spent well over $100 billion for poops and giggles, OR do you think this was intentional capex designed to capture a high-ROIC opportunity similar to the current spending on AI infrastructure?

Wake up.

h/t @robtfrank at @CNBC

P.S. I’m not anti-billionaire; I may become one someday. I am, however, against people cheating to rig the system disproportionately in their favor at the expense of others. It shouldn’t be this easy to corrupt our democracy, nor should it be this hard for working-class families to get ahead.

[TY @TYMarkets]

Is Bezos tripping during this @CNBC interview? 🍄

[ayden @squatsons]

Thomas Massie’s defeat is the clearest sign that this country is no longer American.

Sad day for America, great day for foreign interests.

Bought and paid for.

[QE Infinity @StealthQE4]

So it was another Boomer win.

The young people were energized by Massie. He won them in a romp.

The GOP no longer pays attention to the future of this country. They ignore their interests.

The Boomer class and their self entitled interests win again

H/t @TheLaurenChen

[Woke Former Senator @WokeMitt]

This is how people who don’t believe in Jesus explain Christianity.

[Carrie Prejean Boller @CarriePrejean1]

Thomas Massie’s race in Kentucky is bigger than Kentucky. It’s a turning point for the entire country.

This is a race between:
America vs AIPAC
Blue collared workers vs billionaires
America first vs Israel first
Patriots vs pedophiles
Justice for victims vs protection for the powerful
The American people vs the machine
American citizens vs Miriam Adelson
Good vs. evil
Christ vs satan.

Will America be governed by the American people or by billionaire Israeli donor money buying our politicians to fund their endless wars and to keep our politicians as their slaves.

Over $35 million poured into this race to try to take down Thomas Massie.

Why?

Because he refuses to sell his voice, his vote, and his loyalty to billionaire political groups and Israeli foreign influence.

He stands up against pedophiles, glyphosate, endless spending, foreign wars, and AIPAC controlling our politicians.

THIS IS THE MOST EXPENSIVE RACE IN CONGRESSIONAL HISTORY.

Will our politicians serve the citizens who elected them or the foreign money that buys them?

Massie is one of the only men willing to stand up and say America should belong to Americans again!

That’s why the machine wants him gone.

We must RE-ELECT @MassieforKY @RepThomasMassie

If you truly want to honor Charlie Kirk, donate to his favorite Congressman Thomas Massie’s campaign.

https://t.co/T2U08GcSCI

Let’s show the world, America belongs to Americans! 🇺🇸

#ISTANDWITHTHOMASMASSIE

[Ben Hunt @EpsilonTheory]

If I may have a word here, if you’d be so kind … Fuck this shit.

[The Root @TheRoot]

A Louisiana resident who identified himself as Marshawn delivered a fiery, emotional speech to lawmakers during a state Senate hearing over redistricting Monday, accusing Republicans of trying to “cheat” Black voters out of political power.

[TY @TYMarkets]

@stoolpresidente @Ross_T_Evans