Broken Den clock, doing/reporting on one thing and one thing only: We're on Saylor watch duty over here. #1513171, #1513175

Our cool pals over at Stony Chambers Asset Research have this research piece echoed via SeekingAlpha -- a cool little investing outlet I haven't frequented too much in recent years. (Apparently, the algos think I want this one; the algos are right, I do!)

If STRC remains below $95 into the reset window, Strategy is expected to recommend an increase of at least 50 bps. That would take the annual rate to 12%, or $12 per share per year on the $100 stated amount. At an $89 entry price, a $12 annual dividend equals a 13.5% yield on cost. A move back to $100 adds another 12.4% in price appreciation. This combination is the trade: high current income, a likely rate step-up, and recovery to the product’s intended trading level.

...proviiiiided you believe them, think Strategy's strategy sustainable. Caveats?

preferred equity is not a loan and these assets aren’t encumbered, but this point is meant to be illustrative

and:

This isn’t a legal collateral pledge and STRC holders do not have a direct lien on the BTC. Still, 3.1x is a meaningful cushion unless Bitcoin enters a much deeper and longer drawdown.

"Strategy wants STRC near par because STRC is intended to be their core financing instrument. [...] A broken STRC price clearly interrupts that model."Strategy wants STRC near par because STRC is intended to be their core financing instrument. [...] A broken STRC price clearly interrupts that model.

Correct. Flywheel no fly when mNAV below 1 or STRC not above $100.

This is perhaps the most important question. If the crash happened due to deteriorating fundamentals, then this would not be a good reason to buy in.

oopsies.

So the BTC selling narrative is basically media sensationalism with zero economic substance. Aside from that, there has been no material change.

eeeh... When you run a Ponzi, forever in need of new money to sustain your momentum, sensationalism and narrative is the whole game!

Clearly, whatever is “wrong” is not about Bitcoin at large or Bitcoin treasury companies at large, but about something specific to STRC. I think the move from $100 to below $90 likely started with forced selling. STRC had become an obvious carry trade, especially amongst less sophisticated investors.

The Distressed Stretch Carry TradeThe Distressed Stretch Carry Trade

the carry trade looks like this: buy the shares, finance part of it on margin, collect the high +10% dividend, pay the margin interest of around 8%, and assume the dividend-reset mechanism keeps the price near $100. The carry trade yields around 3% and it is pretty simple to do. [...] once an initial drawdown starts, margin buyers become forced sellers. It’s not always due to margin calls and broker-enforced liquidations, though this could be the case too. Many traders probably decided to cut loss once STRC reached certain levels, and then this loss cutting kept cascading.

I guess I believe this story?

The main long-term risk is Bitcoin. If BTC keeps falling, STRC can keep falling because the market will demand more yield and more downside protection. The BTC Rating cushion can shrink quickly when the underlying asset is volatile.

exactly.

Researcher concludes a Buy, but Den wouldn't touch that shit with a ten-foot pole.

I believe the Livingstons of the world (#1414564, #1425743) have pushed this play.

Fiat delenda est. Strategy too.