Usually the algos hit me, or I lazily browse ft.com, or their email blast shove bitcoin/Strategy-related stuff to the top. Today, the five minutes I spent on Twitter (#1383936, #1401093) fucked me.

Background:

Michael Saylor’s Strategy has spent the last five years buying bitcoin. The company formerly known as MicroStrategy now holds nearly 713,000 tokens, funded with common stock, convertible debt, and preferred equity.

Strategy issued shares so aggressively that dilution started to erode the very premium that made the strategy viable. The stock peaked at $543 intraday on November 21 2024 and now trades below $150, even though bitcoin itself has declined by single-digit percentages in that time.

"Except the bitcoin itself has been roughly breakeven. Strategy’s average purchase price is around $76,000, which is close to today’s market price.""Except the bitcoin itself has been roughly breakeven. Strategy’s average purchase price is around $76,000, which is close to today’s market price."

oops. Again, he's kind of turning into Buffett here: big, clunky, out of touch, and buying the average return (worse, really, since he's biased/constrained to buying higher). Maybe he'll also, like, set up an annual event where shareholders can ask questions or something? (#973899)

The 1-year graph here is the most terrifying, but even if you were early to the MicroStrategy debacle, you're doing not-so-great:

...alas, no harm. Mistah Sailor will sit on his golden hoard and chill... (unlike some of the other scum, we might add)

None of this means Strategy is about to collapse. There is no near-term risk of a “run”. The company has $8.2bn in convertible debt, most of it currently out of the money and so repayment rather than conversion is more likely given today’s share price. The first maturity isn’t until 2028, with a $1bn investor put option in September 2027, meaning there’s no immediate liquidity crunch.

Even when every option is bad, we still have to choose. Management is in that position now. Issue equity and you’re diluting the common. Issue preferred stock or convertibles and you’re subordinating common stockholders and saddling them with more obligations. Do nothing and the company slowly suffocates under the weight of its capital structure. There is no version of inaction that makes the common stock an appealing buy. Management has no safe choices — only different paths to destroying shareholder value.

Only different ways to destroy shareholder value.

"bad entry!" I can hear the Saylor bois crying, not realizing that their glorious master expropriate their for all their fiat's worth."bad entry!" I can hear the Saylor bois crying, not realizing that their glorious master expropriate their for all their fiat's worth.

Oh, young, naive crybabies.

For a long time the market rewarded Saylor handsomely for the gambit, and the common stock is still far above where it traded in 2020. But it is hard to see the case for buying into a vehicle that has merely broken even on its investments over five years, whose capital structure subordinates common shareholders to layers of debt and preferred claims, and whose dividend costs can be sustained by issuing more stock or selling bitcoin at a loss.

P.S., I was thinking about this today. As a matter of corporate finance logic, shouldn't MSTR's share price be roughly zero now? (I suppose not... but it no longer has any value-add over an ETF -- and plenty of extra risk -- no profit delivered and much shareholder dilution. Not good, bro. At LEAST the mNAV should be 0.7-0.5; heavy discount warranted.)

https://archive.md/th778