2D·

Little imagination

There is simply too little imagination why

$MSTR (-0.41%) should perform better than $BTC. Last year it was different. But now it is not enough to underpin the company value with BTC and then hope for a factor that drives up the market value. A premium, so to speak, on the $BTC (-1.48%). Why should you pay for the premium?

12 Comments

Stefan21@stefan_21

You pay the premium because Strategy continuously increases the BTC/share for you. They only buy if they can generate a BTC yield.

So you buy a box of BTC with Strategy, which is gradually filled with more BTC :)
Hence the premium.

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V7Hodl@V7Hodl

@stefan_21 How do you see the current discussion about proof of reserves?

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Stefan21@stefan_21

@V7Hodl I understand Saylor's reasoning. I also understand that the auditors check the stocks. You have to trust the management when you buy a share.
In principle, however, a proof of reserves would be desirable.
If the other BTC treasury companies publish a proof of reserves, I think Strategy will have to follow suit

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SemiGrowth@SemiGrowth

@stefan_21 But I don't quite understand that either. After all, the money for new BTCs is already included in the valuation. And if they take on debt, your shares are diluted.
If I start a company and have invested €100 in gold and have no cash, why should the company be worth more than €100 just because I say I'm financing another €100 of gold with debt? As a private investor, I can just as easily do that with minimal financing costs.

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Konstantin@Konstantin85

@SemiGrowth the financing is done via separate shares, bonds and regular shares. The play is only that BTC will gain massively in value in the future and thus the liabilities will play a very minor role compared to the stock. That's my idea of strategy and that's why I'm invested.

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SemiGrowth@SemiGrowth

@Konstantin85 I can do it myself (and much more cheaply). It also doesn't really matter which construct is used, as there are always liabilities or dilutions.
Why should I buy Strategy when I can simply go leveraged into BTC myself without a premium?

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Stefan21@stefan_21

@SemiGrowth First of all, issuing new shares is not debt for the company. Strategy issues new shares - thus diluting investors' stakes - but at the same time increases the BTC/share ratio. Even if you own less of the company, you still own more BTC/share. That's why investors put up with it. They want BTC gains and not fiat gains.

Strategy takes the BTC on the balance sheet and creates investment products for different markets. Strategy takes BTC as a "digital commodity", processes it and brings products to the market for various institutional investors, which in turn bring Strategy new capital, which Strategy in turn puts into BTC. There was no opportunity to participate in BTC in the convertible bond market before Strategy. There was also no such opportunity in the preference share market. The normal bond market will probably follow soon.

In addition, other investment products are being or have been built on Strategy, e.g. MSTY, which benefits from Strategy's volatility, sells options, and has given investors a dividend yield of 5-10% per month over the past year. A European equivalent is coming in June from Income Shares, for example.

You just can't play the game cheaper yourself :)
Strategy can borrow money at 0% interest - and you can't, I can't either. And to be honest, almost no other company can either. The convertible bonds are bought anyway and are oversubscribed every time. Why is that? Because investors can participate in the increase in BTC value without having to bear the full risk. If the share price is below the target when the bond expires, they get their money back.

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SemiGrowth@SemiGrowth

@stefan_21 but the BTC/share ratio is only rising because the share is so expensive.
Once Strategy falls, will all the bonds expire? And that would mean a lack of money for BTC, which could push the share price down further?

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Stefan21@stefan_21

@SemiGrowth No, the bonds have fixed maturities. The first matures in 2028 and can be paid out in shares from a price of $128 -> the price is currently well above that, so they would be safe for now. The next one matures in 2029 and can be paid out in shares from a price of 672.40$.
If the price is lower, they would have to pay back in dollars.

Until then, Strategy is safe for now - even a bear market would not be a major problem. Strategy will not be liquidated at Bitcoin price X as is often claimed, that's nonsense :D

In my opinion, it would be problematic if, for example, they had to service the bonds with USD but were unable to do so because, for example, the mNav is currently below 1 (e.g. after a BTC crash) and they are therefore unable to issue new bonds and perhaps also unable to sell new convertible bonds. They would then be forced to sell BTC and their business model would be screwed for the time being.

I'll be watching this very closely - but I don't see any realistic danger for Strategy until 2029. The next bonds would then be due in 2030, 2031 and 2032. That will be interesting to watch. But to be honest, I assume that the BTC price will continue to rise sharply until then and therefore the Strategy share would also have to continue to rise sharply and then they would actually have to be able to service all the bonds simply with new shares.
However, this would of course also reduce the BTC/share ratio somewhat - but would pay off the debt.
The requirement not to buy BTC without increasing the BTC/share ratio would not be broken :)

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Thomas@waldbrandgefahr

For me it is more logical to buy directly $BTC

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Stefan21@stefan_21

@waldbrandgefahr of course that's more logical :)
I just explained how the premium comes about.

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wealth_strategist_4343@wealth_strategist_4343

Thanks!
Y

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