When I was out last week (among other things, devouring Lyn's fiction book) I somehow missed that Craig Coben -- the resident Saylor-hater at FT, and thus recipient of everlasting Den love -- had a new one out: #1512950

Among the many lessons you can draw from the recent travails of bitcoin vehicle Strategy (formerly MicroStrategy), one of the most important is this: Don’t ask an AI chatbot to design your capital instruments.

It was sooo-so cool when he said it, and sooo-so forward-looking woop-woop AI when he launched it... and it's sooo-so cringy/pathetic now when it's all unfolding. Strategy doesn't, per TBL, unfold for bitcoin to go higher but aaah, it'd be music to my ears and fire to my soul

The result was the Stretch (STRC) perpetual preferred stock, which may go down as the first security specifically engineered to destroy the value of its issuer. It’s like having Hal 9000 as your corporate finance adviser.

When Strategy unveiled the Stretch in July 2025, management hailed it as the apogee of “digital credit” and emphasised that it would raise the dividend whenever necessary to keep Stretch trading at a $100 par value. Strategy has not been shy about issuing Stretch to buy ever more bitcoin. The total amount outstanding today is $10.5bn. The problem is that keeping Stretch at par has proved far more expensive than expected. Since the listing in July 2025, Strategy has raised the dividend five times, from 9 per cent to 11.5 per cent. Even that has not been enough. Stretch closed yesterday at $89, implying a current yield of roughly 13 per cent.

Problem isn't to raise money at 11.5% (or 13%)... lots of companies can do that. Problem is to make it work. Bitcoin purges the excesses, thank you very much.

One way to describe Stretch is as a “death spiral unconvertible”. In a classic death spiral convertible, the debt converts into a set dollar amount in stock. As the stock price falls, the company must issue more shares to satisfy the same debt obligation. The resulting dilution pushes the stock lower still, creating a viciously self-reinforcing cycle. Stretch has some striking parallels. There is no conversion into common stock, but when the preferred trades below par the company faces a quasi-commitment to raise the dividend in order to pull the price back towards $100. A higher dividend, however, increases Strategy’s cash obligations, which in turn requires either more stock issuance or bitcoin sales.

I don't know how many times I need to yell "DILUTION AS A SERVICE" for peeps to get it. These purchases are DIIILLLUUUUUTIVE. Hence, bagholders

In a traditional death spiral, the company consumes its equity. In Stretch’s case, it risks consuming the equity or the asset base that underpins the entire investment story.

Other options?

Selling common stock to fund ever-higher preferred dividends is hardly an attractive alternative. Strategy shares have fallen nearly 80 per cent from the all-time high reached in November 2024. The company could simply allow Stretch to drift lower, as it has with its other classes of preferred securities.

Bagholders. Dilution.

Man, I can't wait for this shit to fall apart.

"Stretch was marketed as an 'iPhone moment' for digital credit, but it has turned into something far more sinister for shareholders. Stretch’s appeal depends on management’s willingness to transfer larger and larger amounts of value from common stockholders to preferred ones.""Stretch was marketed as an 'iPhone moment' for digital credit, but it has turned into something far more sinister for shareholders. Stretch’s appeal depends on management’s willingness to transfer larger and larger amounts of value from common stockholders to preferred ones."

Have fun staying poor. Surely, the rest of us are. Should have bought SpaceX -- or, like, literally anything else.

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