They're on a tear over there in FT land
"Saylor’s alchemy has now started to give way to arithmetic."
Bro, if they issue an STRU instrument we can get the abbreviations to spell "FUCKED"
- Strife
- Strump? Sctrum? Scrotum?
- Stretch
- Strike
- Stree (the euro-one, what's its name??)
- Stride
Spells fucked. Phu-uck... calm the fu-uck down...
Barely two months ago the market was debating whether Strategy (née MicroStrategy) might soon join the S&P 500. But if a week is a long time in politics, then two months is an eternity in crypto.
Today the conversation around Strategy has shifted from index inclusion to whether the company can survive — and what its troubles means for the wider crypto ecosystem
...and there's some annoying refinancing coming due... you know, the shit you gotta deal with when you're a Ponzi respectable treasury play:
The first test comes already at the end of next month, when about $120mn is due on its various preferred stock. Strategy reported that it only had $54mn of cash at the end of the third quarter, but it has since then received the proceeds of a €620mn of euro-denominated preference share sale, so it should easily be able to jump over this hurdle.
And there's more pressure on the common stock..., ouch, not looking good for the infinite money glitch:
Then JPMorgan analysts warned last week that Strategy could be removed from both the MSCI USA and Nasdaq 100. Up to $2.8bn of passive money could be forced to sell if MSCI proceeds, with potentially billions more following if other index providers adopt the same position. Passive funds hold about $9bn of the common stock.
Interesting formulation here ("to what amounted to"...what, so it wasn't a discount? Chickens coming home to root etc?)
For several years the premium was enormous, at one stage exceeding three times NAV. It remained at about twice NAV well into 2025. A chunky premium allowed Strategy to sell shares and buy bitcoin at what amounted to an economic discount, meaning that purchases were accretive for existing holders.
mNAV multiples are dead because
- ETFs are better in case people who actually believe in bitcoin want bitcoin exposure. No need for middlemen (#1288000, #1290309)
- issuing tons of share to take advantage of the free money tends to, um, reduce share price. Hurray.
The divergence suggested the market had already started to doubt the sustainability of the financial engineering long before crypto weakness added pressure. Without the premium, the mechanism stalls.
Without the magic of the summer's mNAV craziness, there is nada, browskies.
One structural weakness is the procyclical nature of Strategy’s buying. The company can raise the most capital when its own share price trades at a premium to the value of its bitcoin, which typically happens when bitcoin itself is strong.
"That means Strategy tends to buy aggressively when bitcoin is expensive but struggles to raise cash when prices fall."
Oops.
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