Nah it’s $8.2B in convertible debt, or about 12% levered. This list everything on their website https://www.strategy.com/
Discussion
Sure but if Bitcoin is still $85k in early 2027 and their cash is almost gone they must either sell Bitcoin or issue shares at a potential discount to pay the bills. Or at some point in 2027 anyway.
That’s not exactly accurate. They have $1.4B in a cash reserve 21 months of dividends to support the preferred equities. They can tap the ATM on the at preset $8B of prefs even if the prefs don’t grow. They can sell covered calls against their BTC to also generate cash if BTC stays at $85k. They have stated if it stays flat they estimate needed to sell by 2065 based on a derivatives play (I have not checked math but I think it’s closer to 2040)
Kinda ignores the reality of how their growth engine actually works tho. To refill the burn they need to issue stock But if the stock is trading at a discount because of a stagnant market (which is what we're talking about here) that issuance becomes highly dilutive to shareholders. As for the ATM there, yup great when market is bullish, but you can't tap an ATM if there are no buyers on the other side of the trade who want to fund a stagnant asset. Phong Le even said in such as case better to sell Bitcoin rather than issue stock at a discount.
Basically the derivatives math only works if you assume high volatility continues. Which of course if we get back to that then they're fine. But if it stays pretty flat around where it is now the flywheel flys off.
Fair enough that the path to get to and from $85k to next year or even further matters for a derivatives strategy. So let’s assume MSTR is completely flat in perpetuity for next 5 years at $85k, no big rate reductions to lower their dividend payments and in 2028 they need to either issue equity or sell some BTC to fund current $0.9B burn rate (and let’s assume the 5 yrs of steady above market pref returns does not attract new capital). If mNAV is below 1 they sell BTC to do for next 2 years to get to 2030 that’s 3% of holding. So what - they need a 3% rise in BTC $ price after 5 years to stay flat? I only think this matters if you think BTC will not compound 20-30% CAGR over next 10-15 years with up to 5 year periods of sideways action. They can bridge 5-10 years if they have too and they will still have largest corporate stack by an order of magnitude.
It's a tale of two cities right, with the stock being city number two. If they become a zombie company that just sits on bitcoin without growing, the stock price will collapse because the current valuation is based on growth, not just holding. Your 20-30% CAGR, that’s a fair bet, but their current debt and preferred dividends (like the 10.5% rate on some of their 2025 issuances) are fixed costs. If Bitcoin goes sideways for 5 years, those costs compound against them. To stay flat they need bitcoin to basically outperform their weighted average cost of capital. If their capital costs 10% a year and Bitcoin does 0% for 5 years then investors would have been significantly richer just holding regular old bitcoin directly and avoiding the 10% annual fee (or however you wanna call it) of this financial engineering. ouch.
So if the cash shortfall in 2026 and 2027 is say $1B, and they sell bitcoin to cover, then okay (still assuming here price stays flat around current price). Then in 2029 what's the cash shortfall? 3 billion? 4 billion (it'll be big). And 2030 much the same. And of course this constant selling is going to impact the overall price.
So yeah, they don't die, but they become irrelevant. Or to say it another way, they become about as relevant as an old wallet with a ton of bitcoin in it whose owner has long since vanished. Which is fine I'll grant you, but it's not the current play.
Listen if you think BTC stops growing I concede this a a bad idea. However, their fixed costs (10.5% on $8B) are small relative to their capital stack ($58B btc) so they can bridge any market type short term. Those fixed costs are their product, so in a scenario where their prefs continue to grow rapidly as they are, they keep growing their capital stack faster than just holding BTC - this is easy to imagine if btc does 20-30 CAGR% over medium to long term. However it’s balanced by adding counterparty credit risk to operate, there is no free lunch.
I’m not saying you or anyone should invest or not, but to imply they have a risk of collapse in a growing or short term stagnant BTC market is wrong I think. Their structure makes sense relying on two key factors -> counterparty risk of operating the business + BTC going up. Either of these fail MSTR will fail too.
Thanks for the chat. 🙏
I'll agree with you there. This whole thread is in response to the assertion that "almost all of [the treasuries] are in the green down to ~60k", and that without any price rise MSTR is still sitting pretty.
Of course if the price keeps going up steady (or better yet jerkingly) then MSTR's model keeps working and it's all good.