They would pause the preferred dividends before selling the bitcoin.
Discussion
Thanks for clarifying. Fairly bulletproof in that case, but I guess the downside is they do that often enough or pause long enough that people start selling the stock classes and drive the price down.
They can also use cash flow from the software business towards dividend payments. STRD is non-cumulative perpetual, so they can just stop paying that if needed, and STRK can be paid with MSTR stock. That leaves STRF and STRC. STRF has a pretty small debt obligation, and STRC does not have a fixed interest rate, so they can lower the yield as needed.
Something really catastrophic would have to happen for them to sell bitcoin.
Maybe you can help me out with this one Lyn…
Rates remain unchanged but we can imagine a cut or two this fall and then a new Fed chair and an election cycle and a series of further cuts.
If money market yields are 4-5% one can imagine less apatite from investors to jump ship to a higher yielding preferred equity given that it’s this “crazy new bitcoin thing” that’s too scary.
But if we’re in an environment where rates are getting cut, yields are coming down, but bitcoin is pumping and the MSTR preferreds are 8-10%, one could imagine there’d be massive demand from yield starved investors.
Thoughts?