MicroStrategy (MSTR)

• Shift in Debt Strategy: CEO Michael Saylor is moving away from issuing convertible debt. The reason cited is that this type of debt attracts hedge funds that perform arbitrage by buying the debt and simultaneously shorting MSTR stock, which puts downward pressure on the stock price.
• New Debt Philosophy: Saylor now wants debt holders who are "fully aligned" with the company and bullish on Bitcoin's long-term appreciation. This idea was potentially influenced by Simon Gerovich, the CEO of MetaPlanet.
• Unconventional Growth Model: MicroStrategy's primary growth method is not through revenue but by issuing its own securities (common stock and preferred shares) to the public.
  • The company sells these financial instruments for cash (fiat currency).
  • It then uses this capital to buy and hold Bitcoin, which is considered a fixed-supply asset.
• Contrarian to Traditional Finance: This strategy is the opposite of what most traditional companies do.
  • MSTR embraces dilution by issuing new shares to acquire assets and grow its balance sheet.
  • Traditional companies often engage in stock buybacks and pay dividends, which the podcast host describes as forms of "capital destruction."
• Market Cap vs. Stock Price Growth: The company's market cap has grown significantly faster than its stock price. The host notes a move from a $1 billion market cap to as high as $140 billion, while the stock "only" did a 30x. This is presented as a positive, suggesting the value captured by the company will eventually be reflected in the stock price.
• Future Catalyst - S&P 500 Inclusion: The host believes MSTR's inclusion in the S&P 500 is inevitable, much like Tesla (TSLA) was added in 2020 after a period of significant outperformance. This is seen as a long-term catalyst, though Saylor himself did not seem optimistic about the timing.

Takeaways

• Investors should view MSTR not as a traditional software company, but as a vehicle for acquiring Bitcoin using capital markets. Its "product" is its own stock and debt instruments.
• The shift away from convertible debt could be a bullish signal, as it may reduce the structural selling pressure on the stock from arbitrage funds.
• The potential for future inclusion in the S&P 500 represents a significant long-term catalyst that could force large index funds to buy the stock, potentially driving up the price.

Bitcoin (BTC)

• Core Asset: Bitcoin is the primary asset on MicroStrategy's balance sheet and the foundation of its entire corporate strategy.
• Primary Use Case: The discussion frames Bitcoin as a superior store of value. Citing Austrian economics, the host claims that storing value for the future (retirement, savings, etc.) accounts for roughly half of all human economic labor.
• Price Appreciation Mechanism: MicroStrategy's strategy of continuously raising capital to buy Bitcoin takes fiat currency from large, liquid pools and funnels it into a fixed-supply asset. This action is believed to increase the price of Bitcoin and establish it as the primary store-of-value asset in the capital markets.
• Risk Profile: The podcast suggests that owning MSTR common stock carries slightly more risk than owning Bitcoin directly.

Takeaways

• MicroStrategy's ongoing purchases provide a consistent source of demand for Bitcoin, acting as a potential long-term price support and driver.
• Investors who are bullish on Bitcoin as a long-term store of value may find MicroStrategy's strategy compelling, as the company is actively working to accelerate this thesis.

MicroStrategy Preferred Shares & Debt (STRD, STRF, CRK)

• The podcast refers to these instruments as "stride, strife, and strike" and also mentions CRK. These are different classes of preferred shares or debt issued by MicroStrategy.
• Key Innovation - Perpetual & Non-Redeemable: Unlike traditional preferred shares that companies can redeem (buy back) if they become too valuable, Saylor has structured these instruments to be non-redeemable.
  • This means they can be held "forever," just like a stock, and can appreciate in value indefinitely without the risk of being called away by the company.
• Collateral: This debt is backed directly by the Bitcoin on MicroStrategy's balance sheet, which Saylor considers "pristine collateral," in contrast to corporate debt backed by uncertain future cash flows.
• Bullish Outlook on Debt Value: Saylor believes this debt should trade at a premium to its face value (par). He has already sold debt where investors pay $125 for an instrument with a $100 face value.
  • He envisions a future where this debt becomes investment grade and could be sold for $170 or $180 for every $100 of face value.
• Target Audience: This debt is designed for a wide range of investors:
  • Retirees and others seeking income.
  • Investors who want Bitcoin exposure with potentially less volatility than the common stock (MSTR) or Bitcoin itself.
  • The FIRE (Financial Independence, Retire Early) community is highlighted as a key potential market due to the favorable tax treatment of qualified dividends in the U.S. An example given is generating $94,000 in tax-free income for a married couple.
  • Institutions, companies, and hedge funds that can more easily purchase debt than equity.

Takeaways

• These preferred shares offer a unique, lower-risk way to invest in the MicroStrategy/Bitcoin thesis compared to the common stock.
• The non-redeemable feature is a significant advantage for long-term investors, as it removes the cap on potential upside that exists with most preferred stocks.
• Investors, particularly those focused on income or tax efficiency (like the FIRE community), should investigate these specific debt instruments (STRD, STRF, CRK) as an alternative to traditional bonds or dividend stocks.

Future Investment Opportunities & Themes

• Foreign Currency Denominated Debt: Saylor is actively exploring issuing debt instruments denominated in foreign currencies, with the Euro mentioned as the most likely candidate, followed by the Yen.
  • This would allow European and other international investors to buy MicroStrategy's debt in their local currency.
  • Saylor would take on the currency risk, effectively betting against the Euro or Yen in favor of Bitcoin.
• New Financial Products: The core of MicroStrategy's business is creating and selling new financial instruments. The potential issuance of Euro-denominated debt would be the next step in this strategy.

Takeaways

• Investors, particularly those in Europe, should watch for announcements of a Euro-denominated preferred share or debt instrument from MicroStrategy.
• This move would broaden the company's access to global capital, potentially accelerating its Bitcoin acquisition strategy.