Mitch Zimmer

Endlessly fascinated by markets
Founder, Zimmer Capital Management
Not investment advice; see disclosure linked

[Mitch Zimmer @mtzimmer1]

@TheOtherParker_ Which brokers are providing a 0% borrow rate on $STRC?

[Mitch Zimmer @mtzimmer1]

@GlennOnrampBTC @theta_xp Thank you Glenn for bringing these risks to light and clarifying some details for me. I respect your thinking on this matter and will try to help make people more aware of how this could go wrong.

[Mitch Zimmer @mtzimmer1]

@GlennOnrampBTC @theta_xp Agree. The Ch11 is unlikely; it's the potential limbo period where divs are suspended, principal eroded, and no forced resolution in sight that is the worst tail risk for pref holders. I think that $MSTR puts are the cleanest way to hedge but they were bid way up last week.

[Mitch Zimmer @mtzimmer1]

@theta_xp @GlennOnrampBTC Missed payment on the $6.7B in debt is the only thing that can force Chapter 11. In that event it's not clear to me that the 40% of $STRF institutionally held (mostly ETFs/mutual funds) would vote proxies in favor of absolute priority since they also hold other Strategy prefs.

[Mitch Zimmer @mtzimmer1]

@GlennOnrampBTC @saylor @phongle Thank you for the detailed response Glenn. I haven’t seen anyone else outline this potential path but every pref holder should understand that it’s possible. Far OTM puts on $MSTR or $IBIT still appear to be an economical way to hedge most of this risk even as imp vol has risen.

[Mitch Zimmer @mtzimmer1]

@dampedspring Agree that it’s unlikely because it would kill an important strategic tool. But if divs were suspended, would you expect the mkt cap of $MSTR to decline dollar for dollar with the growing liability of the unpaid cumulative dividends? Thanks.

[Mitch Zimmer @mtzimmer1]

@BitMEXResearch Not inevitable but one of many possibilities

[Mitch Zimmer @mtzimmer1]

@PeterSchiff is halfway correct in calling $STRC a ponzi. Dividend payment DOES rely on new issuance or $BTC sales, but that dynamic is only dangerous during a bear market. Peter fails to consider how $STRC could fare during a bull run. Not a scam, but also FAR from risk-free.

[Mitch Zimmer @mtzimmer1]

@jdorman81 @johnnyutah Would you assign an equal probability to each of those outcomes? I suspect that dividend suspension would severely impair their ability to issue debt or prefs for a long time. It’s not as clear how damaging a bitcoin sale would be.

[Mitch Zimmer @mtzimmer1]

@betirement Do you fully understand the tail risks? Do you have any hedges against them?

[Mitch Zimmer @mtzimmer1]

@david_seroy Considering STRF's seniority and much smaller issuance, would you expect it to be materially less distressed than STRC in the scenario you outline (a prolonged period trading below par)?

[Mitch Zimmer @mtzimmer1]

@jameslavish Great piece James! You wrote that STRC sits alongside their other prefs, but as I understand it, STRC sits below STRF but above STRK/STRD. Would you expect STRF to get absolute priority over STRC or be impaired in the event of a dissolution? Ditto STRC to STRK, STRD and common.

[Mitch Zimmer @mtzimmer1]

@nickgiva1 Is there not a scenario where STRF would be impaired from par in a reorganization as opposed to receiving absolute priority against all the other preferreds and common?

[Mitch Zimmer @mtzimmer1]

@peonyKingOF Do you need one for after hours and a separate one that restarts from pre market open or just one that keeps track from the previous market close? I have the latter.