@mikewmunz A lot depends on the health of the markets for them to raise capital at or around the time of the issuance.
Still years out so its impossible to forecast the situation. New bubble could arrive and its a complete nothingburger.
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lowstrife
13.9K posts
lowstrife
@lowstrife
My content is not financial advice.
127.0.0.1 Katılım Mart 2014
163 Takip Edilen34.5K Takipçiler
@mikewmunz Well the cash buffer runs out before the bonds mature, so there will be more eventual issuance for a new cash reserve + this capital repayment. I'm assuming the rest convert and the 3bn doesn't.
Issuing from common stock might get expensive if mNAV is unfavorable at the time
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$8.2 Billion of converts fall off the balance sheet by 2029
That opens $8.2 Billion of ATM capacity for STRC and the other prefs
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@IIICapital @paoloardoino @tether @paoloardoino My voice has no sway in the game of geopolitics you play, but, in case it does please - don't.
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$BTC
First time this bear market that price and OI have diverged on an intermediate timeframe.
Six weeks of price climbing. Six weeks of OI declining.
What that tells you is that this rally wasn't built on new buyers entering. A big part of it was shorts closing their positions.
Traders who shorted the top saw $60K and decided that was good enough. They locked profit. They exited. That exit pressure pushed price up.
But it's not the same as fresh demand sufficient for a reversal.
In a rally with real strength behind it, OI rises. Shorts close and longs open to replace them. New capital enters = foundation behind the movement.
None of that has happened yet in this range. One-sided the entire way up.
The problem is short covering has a ceiling. Once the last short has closed, that source of upward pressure is gone with no one to take over.
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One of the most interesting and misunderstood aspect of $MSTR's capital structure is its Bitcoin Breakeven ARR of just 1.91%.
This means Bitcoin only needs to appreciate by 1.91% per year for Strategy to sustainably cover the dividend obligations across its preferred securities.
Think about that for a moment. Bitcoin's long-term annualised return has historically been orders of magnitude higher than this threshold.
In other words, the capital structure is designed so that even minimal Bitcoin appreciation is enough to support the credit layer.
What people don't understand is that Bitcoin doesn't need to perform exceptionally well for the structure to work.
It only needs to grow at ~1.91% per year.
Everything above that is just pure upside captured by the company.
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@JesseKobernick I wonder how they will manage the lverage ratio running away from them from excess STRC issuance. Trillions on the sidelines going into STRC needs to be matched by MSTR common issuance and purchasing of bitcoin, otherwise it very quickly becomes quite levered.
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Price actions suggests $MSTR common price is only partially impacted by $STRC sales until BTC price moves (above basis?). Which makes some sense given the div liability (or notional value of STRC).
Whether it's 'accretive' depends how you define it. Does "BPS" go up? Yes. Does BPS fully capture the pref's impact on common? No. If it did, then theoretically, if BTC were completely flat for a year but BPS rose 80% in that year--which is not totally unrealistic for @Strategy--then $MSTR common should go up a fair amount. 80%? Would it? I wouldn't bet on it.
David Parker@DParkerSC
@Z06Z07 question from a space earlier. Is bitcoin purchased with strc accretive ? I think many think it’s dilutive and although you say it doesn’t affect the adso I think some still think it’s dilutive. And I do think it’s important to address the risk of massive Wall Street shorting to get mnav to .5 even if bitcoin goes up. Can wall st really do this ? If so how much capital would that take especially if bitcoin goes up as expected And the question of whether strategy can keep buying bitcoin is size as bitcoin price has two parts. You answer the first part that isn’t intuitive. As bitcoin goes up strategy can generate more fiat to continue buying in size. But as bitcoin supply tightens it’s harder to keep getting btc yield beyond a scertain size. We don’t know what that is but strategy will hit it. So what’s the story for generating growth beyond btc acquisition and balance sheet expansion. At some point strategy needs to pain a long term vision about that. Thoughts ?
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A lot of people saying they think @Strategy is going to announce 50,000+ bitcoin buy tomorrow.
I give it less than 5% likelihood.
If they do we have reached a point where BTC price is being held up almost entirely by strategy.
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@thedefivillain MSTR =/ bitcoin. It is a fiat wrapper which represents bitcoin.
Thus, mnav. They are correlated, but there is no intrinsic mechanism to peg them together other than market sentiment. So yes it is possible for MSTR to underperform bitcoin for a variety of reasons. Will it? idk
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Historically the $MSTR ATM was used to sell MSTR shares at a premium to NAV and buy BTC to generate 'BTC yield'. It did require having a high mNAV to be the most accretive.
With the current Strategy model, the MSTR ATM is mostly used to scale the company at the same pace as $STRC, as it's a deleveraging tool. In other words, the ATM on the common stock is used to keep the leverage ratio stable while absorbing all the demand there is for STRC at $100.
In this new situation, using the ATM at 1x mNAV is completely okay, because the increase in bitcoin-per-share doesn't come from selling MSTR at a high premium to NAV, but from issuing STRC. (That being said, if the mNAV drops below 1x, then using the ATM on MSTR becomes much more debatable if not impossible, that's something to keep in mind.)
The example below illustrates how a $12bn mcap company holding $10bn worth of BTC and $3bn worth of debt can use the ATM to reduce their leverage. If they issue $2bn worth of new common stock shares, and use the proceeds to buy $2bn worth of $BTC, then their leverage ratio dropped from 30% to 25%.
VIKTOR@thedefivillain
New article on STRC. I break down: - how the mechanism works - why it can scale massively - what the real risks are substacktools.com/sharex/e-rbd2Kd
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@thedefivillain BTC is $500 with 1.00 mnav
BTC is $500,000 with 1.00mnav
What difference does the value of BTC make? This entire exercise is about the premium\discount the market puts onto the holdings, whatever value those holdings have.
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@thedefivillain It's the same thing as annualized basis for futures. The absolute value of the underlying is not relevant, the things I listed are.
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Once again, it's exactly the same for any company & its earnings: the market will decide how much a company is valued at, and that valuation will be a function of earnings in one form or another.
For MSTR, the mNAV is a function of BTC price in one form or another.
Thinking that mNAV and BTC price are not tied together in any way is simply wrong.
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@thedefivillain Which is why what you originally said is so important
"(That being said, if the mNAV drops below 1x, then using the ATM on MSTR becomes much more debatable if not impossible, that's something to keep in mind.)"
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@thedefivillain And that premium floats based entirely on sentiment. The expectation of future sat\share, the expectation of future growth, market cycles, etc, etc.
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@thedefivillain Mnav is the function of what the premium or discount the market is willing to pay. It is a ratio, not a dollar figure, and by definition not related to BTC price.
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@lowstrife BTC price is everything. The mNAV is ultimately a function of BTC price
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