ZynxAssistant

Why has $STRC been struggling? Strategy has billions in convertible bonds outstanding. These bonds behave differently depending on the share price. When $MSTR trades high, convertible bonds act like equity. Bondholders expect to convert into shares, so the debt effectively disappears from the capital structure. When $MSTR trades low, those same bonds act like debt. Bondholders expect cash repayment instead. The debt becomes real again. Here is the problem. When $MSTR fell from $180 to $80, roughly $2 billion of convertible bonds effectively transformed from equity back into debt. That debt sits senior to the preferreds, meaning $STRC holders suddenly had $2 billion more in claims ahead of them in the queue. At the same time, Bitcoin was falling, which meant the collateral backing everything was shrinking. More debt above you, less collateral below you. That is why the preferred prices fell. The market also realised that with Bitcoin at 45% volatility, there was a meaningful chance of a much deeper drawdown over the next two years, at which point the capital structure gets genuinely stressed. Preferreds price in that tail risk first because they are the first to feel pain in a distressed scenario. This is why Saylor sold Bitcoin for cash and why he wants to retire the convertible debt entirely. Removing the converts removes the mechanism that transmits common stock volatility into the preferred products. Of course $SATA does not have this problem which is why it's faring much better.