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baggage

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wastewater

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tied

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I'm much obliged to such a pleasant stay.

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But now it's time for me to go.

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The autumn moon lights my way.

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But now I smell the rain and with it pain and it's heading my way.

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Oh, sometimes I grow so tired.

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But I know I'm not one thing I got to do.

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I rap it all.

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Now you're down, but tell me now, sing my song.

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I'm going round the world, I gotta find my girl on my way.

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I've been this way, take years to the day.

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I rap it all.

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I've got the queen of all my dreams.

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I've got no time to sing.

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Woo!

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Here we go.

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getting the lead out. We are back. True North, episode 33, the investment grade Bitcoin podcast.

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We are going to get after it. We're going to have some fun today. We've got a fun agenda

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and some of the original crew is back. We've got Ben Workman is back today,

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Adrian Morris, Dan Hillary, and we are going to cook. We've got a lot of fun information to go

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through and it is going to be a really good time. So appreciate you all for joining. And for those

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that are, for those of you that are new here, True North, the investment grade Bitcoin podcast,

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we talk about, we, we have shows every week on Wednesday, same time, 7.00 PM, 7.00 PM Pacific,

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10.00 PM Eastern. And we aim to talk about what's happening in the Bitcoin treasury landscape.

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What's at the cutting edge. And it's primarily about strategy, right? So strategy is at the

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cutting edge, they have a magnitude greater than any of these other Bitcoin treasury companies,

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and they're effectively creating the playbook for all of these other future Bitcoin treasury

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companies to evolve and grow into. So we are talking about the biggest story in all of finance,

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which is Bitcoin taking over the corporate balance sheet and companies adopting Bitcoin as a reserve

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asset and what that means from a collateral perspective and what optionality that provides

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you into the future. This is a transformational asset and the world is just now starting to

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realize how to use it and leverage it with a corporate balance sheet. So we get into the

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nitty gritty. We show some Excel spreadsheets. We talk about stocks. We talk about equities. We talk

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about fixed income stuff that could be boring to a lot of people. And we try to get some education

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out. We talk about financial backgrounds and we go through it. Everybody here has got a different

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background. The team's a bit bigger than this. And we kind of rotate people out over time. So

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So without further ado, I'm going to kick it over to Tim real quick.

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Ladies and gentlemen, what you're about to hear may be amazing, but it is not financial

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advice.

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It's for informational and educational purposes only.

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Jeff, back to you.

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Okay.

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This is not financial advice.

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And here we go.

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The agenda for today, we are going to talk about MSTR leverage update, Q3 update, a general

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lay of the land.

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What's happening here?

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going to zoom out and just talk about what's happening because this is the biggest story in

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all of finance. We want to just lay the land of what's going on. Earnings comps and estimates. So

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Q3, what's happening on the horizon? Q2 earnings call is expected at the end of July. We'll talk

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through that a little bit. Convertible and preferreds. Dan Hillary's got a bunch of data

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and analysis. We're going to talk about spreads, volume, delta. Dan's going to get into it as he

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usually does every week. He's been absolutely obsessed with the preferred equities and the

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of bonds recently. And if you don't follow Dan, follow Dan, he's a big thought leader on the

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preferred equity space. Get into S&P 500 debate and projections. Maybe we'll get into some moon

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math. We'll talk about what is the spectrum of probabilities and possibilities here.

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And before we dive into the leverage update and those things, I'm going to start with a quick

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clip from Michael Saylor just to give us a landscape of what's going on here. Because many

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these other corporations that are in the world are surrendering their capital to their shareholders

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via dividends or via stock buybacks and i i think it's a good way to set the lay of the land here

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so i'm going to start with michael and then we'll kick into conversation the conventional financial

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playbook is strip the volatility which strips the liquidity which you know surrender the capital

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Every Mag seven company brags about buying the stock back and upping the dividend.

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And I just watched on CNBC, a parade of every bank, every major bank in the country.

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We upped our dividend.

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We upped our buyback.

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We upped our dividend.

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And I'm looking on with horror because they think it's a good idea.

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These are the 20 best and brightest corporate financiers in the world, presumably trained

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at Princeton or Wharton or Stanford or Harvard and this and the best practice of the CFO of every one

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of these great companies is to surrender to the capital buy back the stock destroying the

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optionality destroying the volatility destroying the liquidity and we are doing the opposite and

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it's working and there's a little virus a fire that's spreading and at some point people are

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thinking, well, wait a minute, I'm a zombie and my life is hopeless. Or I inject Bitcoin,

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liquidity comes back to my stock, volatility comes back to my stock, a capital gets attracted to me.

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The world is not so hopeless anymore. And for the 40,000 publicly traded companies that are not

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NVIDIA and not JP Morgan, what hope do they have, guy? I'm giving them hope. Bitcoin is giving them

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hope and your choice is you're going to get ground into the dirt by the boot of a trillion dollar

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company that guy's electric electric totally electric explaining what what's happening so

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smooth right you've got everybody with this traditional financial framework you know they

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go get the cfa they are you know trained in finance over time via a textbook and this is

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the textbook if you have excess capital you return to your shareholders and you know everybody's been

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ingrained to think like this and now there's an alternative which has never existed before

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but like a viable alternative that's never existed before and you know it's a virus and

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it's spreading like wildfire so i want to get your thoughts on on it well like what do we think of

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that that was incredible i mean it he's highlighting the core problem that you've had with nearly

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every corporation, right? There's a problem that we have out there today where executives are scared

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to innovate because now the markets become so used to one way of operating. And that one way

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of operating has been strip the risk, strip the volatility, make things safe, hit the analyst

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estimates, right? Keep everything in order so nobody has to guess anymore. And when you take

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all the guesswork out you know you're taking all the surprises out he's right there's no there's no

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life there because there's nothing exciting that's happening if you always know what the outcome is

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going to be within a small degree of error you know it does it takes all the excitement out of

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putting capital into those types of investments and giving the the market something that is so

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counter to that right you're taking everything that they've learned everything all these cfos

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have learned, you're throwing it out the window and you're saying, no, we're going to take that

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volatility and we are going to ride that to the bank. That's what's going to make this entire

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thing work. That one thing you're afraid of, that's our identity now. We're the volatility play.

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And that's what we're going to be in the market. We're not the safe play. We're not where you come

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and park capital that you want to climb at a very small predictable percentage every year. This is

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where the excitement's going to happen. And if you want to participate in an ecosystem where

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innovation's happening, where people are going to think in ways that you are wildly uncomfortable

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with, where we're going to take the playbook and we're going to find the ways to maximize value

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through channels and using assets that you wouldn't even consider to touch,

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this is the asset for you, right? He's sending that message so loudly and now it's just catching

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on at such a pace which is incredible you know we were talking about this you know i mean go back a

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year when we started talking about all this and it was just such a weird conversation to even be

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having you know the market thought that we were all insane it looked like this would never work

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you know there's only one company doing it well now there's only two companies doing it well look

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how many companies are doing it now look at all the institutional investment capital that's coming

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into these deals. Why is that? Well, it's because the volatility is here. This is where the energy

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is, right? That volatility is the energy and that energy is here. It's in this ecosystem. It's in

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strategy. It's in all these companies that are out there in the Bitcoin treasury space right now.

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Bitcoin is the lifeblood of the markets at the moment. There's nothing else that's as exciting.

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And because of that, it's just absorbing all the capital from all these other plays right now.

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And for people that think that we are, you know, I keep hearing that we're saturated,

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right? There's too many of these now. So you don't realize how small this is. Yeah, it feels that way

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because you're seeing the announcements coming out. You're seeing all the new companies entering

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the market. They've all got plans to acquire Bitcoin. It sounds like a lot, but then, you know,

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go out to one of these websites that's tracking all these treasuries, take the total and back

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strategy out of it. And let me know how big this market is and whether we're saturated. We're not

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even close. And so as these companies start to achieve more and more scale, and we see more of

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them, you know, breaking into that 5,000, 10,000, 20,000, 30,000 Bitcoin, and they start launching

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more innovative structured products, this is just going to pick up steam. I mean, this thing's going

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to be full bore ahead. It was what was on the clip art, right? Nothing stops this train. And the train

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is getting loaded and there's more and more energy behind it now and i think it's just going to keep

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accelerating yeah i agree i don't think we're anywhere near saturated there's what over 50 000

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companies traded globally and 40 or 50 yeah and there's just over 120 150 bitcoin treasury companies

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so that's 0.002 yeah or something ridiculous like that 0.3 basis points there you go

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we're nowhere even remotely close to saturated. And to Ben's point, this is, and I think Ben,

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we talked about this when we were on with Swan, the announcements that keep coming out,

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I think it's throwing people, and that's what makes them think it's saturated. But I don't

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think we're in a bubble right now. I don't think that we are in risk of having a, you know,

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unforeseen Black Swan event with these companies blowing up. I think what we're seeing right now

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is the cheesy adage, this is an idea whose time has come with Bitcoin, right? And that's what

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Saylor is trying to put across. Get on with this, get on the adoption curve, enjoy this,

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what he refers to as a gold rush that we're seeing right now. We're in the accumulation phase,

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right? Every company is focused on accumulation. Every company is focusing on maximizing MNAV,

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maximizing Bitcoin per share, maximizing Bitcoin yield. But that's going to shift,

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And then the focus is going to be on NAV, in my opinion.

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And strategy already has the biggest boat when it comes to NAV.

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They're going to have the most Bitcoin.

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No one's catching them.

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Right now it's a race to number two.

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And then it's going to be a race to number three.

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And we're going to see the preferreds grow.

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We're going to see that the market is going to grow.

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We're going to see that the strategy economy becomes like a centerpiece of a new Bitcoin-driven economy right in the heart of traditional finance.

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and to say that we're saturated,

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I quite frankly think that by the time 2028 comes around,

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we might see that there's a thousand companies doing this.

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Oh yeah, maybe more.

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Maybe more, right?

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And we still won't be at a saturation point

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because at that point,

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if we take the 50,000, 45,000, whatever number,

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that's 145th or 150th of the market.

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Pick your poison.

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That's not saturation.

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That's an adoption curve, right?

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That's expansion of a new model.

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and I think that the market needs to get wise to this thing

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and the companies that are able to adopt

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and they're able to adapt will scale

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because just like what Saylor said with like NVIDIA,

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if you're not NVIDIA, if you're not Apple,

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if you're not Meta, what are you really going to do?

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You don't have a lot of options.

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If you want to scale, if you want to grow,

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I think that Bitcoin needs to be at the core

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of your balance sheet

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and you need to look at the different offerings,

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you need to look at the different ways

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you can scale that thing

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and try to innovate in those ways

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but saturation, no, we are right at the beginning of this thing.

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And I think it's just going to really, really explore from here,

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even with market corrections.

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I still don't see the 80% drawdown coming.

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I still don't think that we're going to see a massive bear market.

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You know, if war breaks out or something like that, that's, that's how I

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would, that's not something we can predict, but what sailor said, right?

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Said, winner's not coming back.

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Wait, winner's not coming back.

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Yeah.

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And he posted that he said, winner's not coming back.

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And it's very, very true because even if there is downward pressure in the market, the equities are going to absorb it, not Bitcoin.

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There's no rotation out of Bitcoin.

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It's just a reflexive rotation back in.

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And the companies are disincentivized to sell.

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So the capital is not going to fly out of the market in the ways it has in previous cycles.

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And we're doing this without stimulus.

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We're doing this with higher interest rates.

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We're doing this with tariff uncertainty.

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We're doing this with Iran.

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we're doing this with palestine we're doing this with israel we're doing this in ukraine we're doing

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this with russia there's all kinds of global macro headwinds that should be slowing this thing down

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it's just not so when when we really do get some stimulus when our interest rates come down this

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thing's going to run you know when a guy like sailor makes a statement like that right a

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definitive one where he says you know winner's not coming back you got to ask yourself if you're one

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of the viewing audience you know what might this guy know what's he know right what does that guy

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know yeah he's the guy that every person on earth that's thinking about putting bitcoin on their

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balance sheet is calling you can only make definitive statements like that so confidently

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when you are very comfortable in that structural bid that's building here right when you can see

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the capital that's coming when you can see all the regional plays spinning up across the world

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and you realize that this is no longer just going to be a US market centric approach This is now a worldwide movement for corporations and the capital from all these different economies is going to start funneling into Bitcoin And you see the buying happening

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and you're starting to see the absorption of this new Bitcoin supply that comes into the market,

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how quickly it gets bid up. With a lot of the news that came out over the last just several days or

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weeks, all the things you were mentioning, Adrian, that used to be a death blow. We would all have to

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We'll go over a few weeks and lick our wounds and just be miserable for a little bit and grind it out.

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And now Bitcoin kind of shrugs and it goes, that was fun.

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And it just starts going back up.

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Right.

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The bid's relentless out there.

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There's so many people buying.

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And it's incredible when you have this asset where this is happening that has that completely inelastic supply to the demand for it.

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People really discount what that means.

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I don't think a lot of people actually grasp what that means because it just doesn't seem like a real concept.

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I mean, there is no more of this that's going to enter the market at a certain point, right?

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Yeah.

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There's 21 million.

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It's all there's ever going to be.

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A bunch of it's already lost, you know, so there's way less than 21 million that are ever going to be out there.

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One company has more than 600,000 of them.

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And now you've got hundreds of these other companies coming in.

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They're siphoning capital out of the fixed income markets.

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They're just hitting the point where they're going to start innovating in that space and start bringing products that these fixed income buyers can't ignore.

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And you're one credit rating away from such a massive wave of capital coming in here.

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I mean, you go through these periods where, you know, you think you're bullish and then you start really looking at everything that's happening.

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And, you know, for me, it's been incredibly eye opening, right?

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When you get behind the curtain a little bit and, you know, you look at, you know, our core

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businesses, Bitcoin.

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So we're seeing it from the retail investors and the small businesses.

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But, you know, now we're, you know, working with these companies like Saquon's where they're,

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you know, standing up their treasuries.

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And so you're having those conversations.

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And now you're starting to get the calls from all these other companies.

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So I'm just starting to see, you know, the small peak of what's happening here.

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and it's already blowing my mind i mean it's hard to comprehend how much capital is out there

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and the types of deals that are getting structured and when you start thinking right when you look at

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them in isolation none of them seem like a big deal but then when you start looking weekly and

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you see you know now there's 10 companies buying at least 100 bitcoin a week it seems like you know

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and then you got strategy popping in and they're good for 4 000 to 15 000 just depends on what's

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going on that week, that's going to add up fast. And this Bitcoin is going to be coming off the

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market. And I don't know who's selling it on the other end, but it doesn't matter.

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Pockets are not as deep as what's coming here. Yeah. So, you know, I'm just, I just keep getting

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more and more bullish on this entire space. And, you know, I think that's what makes sailor, right?

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I'm not sure winter is coming back. And so sorry to cut you off, Jeff, but someone in the chat said

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no asset could fundamentally go up forever. That's true in a fiat model, but when you have

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mathematically derived model that is finite it can mathematically go up forever that's the fun of

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bitcoin and that's the fun of the way this thing is going to operate just look at any any stocks

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over time i mean any anything that's been around for a long time has pretty much gone up forever

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in perpetuity you zoom out and you look at it well that looks like pretty much forever to me

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correct you're right and i think the only 21 million are ever coming out yeah if the denominator

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is the us dollar yeah it's going up forever the dollar is programmed and managed to go down forever

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yeah at a rate of a minimum of two percent per year but it's more like six and the thing about

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it is is that and we can even rewind this back further i know i like to talk about uncle larry

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a lot but larry fink did not get into this to weather a 80 drawdown right and if we take a look

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at what happens the second ibid got approved we've been we chopped in 70 to 80 then we chopped from

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80 to 90 then we chopped from 90 to 100 now it looks like we're chopping 110 to 120 and it's

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just been kind of plotting along on the way in an upward trajectory and even going back to last year

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when the yen carry trade unwind right happened right bitcoin dropped down and it dropped and it

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went right back up within a matter of three days it was already turning back up germany sold 50 000

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bitcoin on the 4th of july probably the most the least liquid day in the entire year and the price

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dropped and then came back up rebounded within a month yeah it's being bid up and i what i'm

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trying to explain to people like whenever i talk to them because i got demons you guys get dms we

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all get dms about this stuff daily what is happening is that the institutions have fundamentally

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change the dynamics of this cycle and people are really underestimating what that means

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if institutions come are doing what we think they're doing and they're just bidding this thing

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up right we have the we have the corporations we have the institutions we have etfs all that fun

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stuff okay great what that means is retail is very very quickly going to be bit out if people don't

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start getting on and start understanding what's really happening here because retail has not

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arrived yet i i don't hear anything they may not they may not arrive that's that's what i'm getting

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they may not they actually take the other side i'll say retail has arrived they just arrived

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in their via equity equities yeah yeah there you go yeah they're doing it via the the bitcoin

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treasury companies yeah yeah i mean there's no doubt that you know the barrier to entry

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is really low when you can just use your brokerage account to go gain exposure and a lot of people

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are going to do that. What you hope is that as they manage to outperform Bitcoin, that they

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remember that what you're ultimately trying to do is end up with more Bitcoin. If it's the asset

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that works for all these companies, it's an asset that you should be holding yourself.

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And you do hope that people don't skip past that, right? Because I think that's an important message

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out there. For me, that's how it's always been. I know we've talked about this a million times, but

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Bitcoin is the foundation that makes all of this work. And so I want to hold Bitcoin myself. It's

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It's one of those few sovereign assets you can truly hold.

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And there's a huge amount of power in that.

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But it's a heck of a lot of fun to play in the equities market and really get deep in one industry and start really digging into the nuances between these companies and get to know the management teams and see how they're executing the strategy and see what the market responds to and what they don't.

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I mean, that's a huge amount of fun.

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So just that we even have the opportunity to try to outperform Bitcoin, there's no better time to be an investor right now.

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This is as fun as it gets.

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But Dan, this is something that you're probably going to want to talk about.

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I'm hearing more and more and more talk about the preferreds and the interest in them is growing rather significantly.

294
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To the point where guys that I'm talking to are saying, should I just go all in on strike?

295
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Should I just go all in on strike?

296
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Should I have a 50-50 allocation of Mr. Strike?

297
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And that happened in the course of three months?

298
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Oh, yeah.

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We're in infancy with the preferred equity instruments.

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And that is only going to expand and grow, especially with success, right?

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Success brings more success.

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And I mean, right now, already, the strategy preferred equity instruments are the most

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successful preferred instruments ever in history.

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Most liquid, most successful.

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and that's only going to continue. I think real quick, I wanted to rewind to what Saylor was

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talking about in that clip. And most companies are stripping out the volatility of their stock.

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They're giving dividends, they're surrendering capital and giving dividends and buying the stock

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back and getting rid of the volatility on the balance sheet. Just to put this into perspective,

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There are five companies over the last two years that have bought $670 billion of stock back.

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Five companies.

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So that's Apple, Google, Microsoft, NVIDIA, and Meta.

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So that's $670 billion where those companies said, we don't know what to do with this capital

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anymore.

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We are going to give it back to you via stock buyback or via dividend.

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The alternative was if they were to keep that capital on their balance sheet, if they kept

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it in dollars, it's declining rapidly over time. You have an opportunity to invest that into R&D

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and grow your business. So effectively, what that is signaling to the market is we are mature.

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We are a mature company and we don't know what to do with this capital. So we are going to give

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it back to you either via dividend or via buyback. Whereas if they were to keep that capital in a

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digitally 24-7 liquid 365 asset that's appreciating at 20%, 30%, 40%, 50% compound

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annual growth rate, that's power, right? $670 billion of power that's growing at 20% to 30%,

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40% GAGR. What can you do with that? That's optionality. That's financial leverage. That's

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financial strength. That's collateral. That could be $670 billion of collateral that was kept in the

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corporate wrapper to benefit the company into the future by the ability to continue growing

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their business. Instead, they said, we don't know what to do with this. We're giving it back to you.

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And that's what Saylor's saying. They're stripping out 100% of the volatility. Meanwhile,

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strategy is leaning into that volatility saying, we will buy this asset and add it to our balance

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sheet and shove volatility into our equity because that's giving us more financial strength to offer

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more products or go use different financial instruments that haven't existed before.

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And that optionality is what's adding significant value here to the balance sheet.

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It's the optionality of the most powerful collateral the world's ever seen.

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And that is continuing to grow incredibly rapidly.

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Well, do you remember the article I wrote last year, or is it two years ago now?

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The stock buybacks and speculative attacks article where I was talking about the fact

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that all the stock buybacks that happened in the last 25 years is probably over like

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close to $2 trillion.

337
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I wouldn't be surprised.

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It is absolutely mind boggling to think that a solid percentage of the market right now has been fueled by stock buybacks just because it had nothing else to do with it.

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Now, let's flip that.

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if people are saying that we're too, if people are saying that we're too bullish and whatnot,

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what happens when that money that usually is done, done in via stock buybacks and that volatility is

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sucked away and that optionality is sucked away. What happens when maybe 20% of that

343
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starts going into Bitcoin on a yearly basis? Right. Right. And I just mentioned the top

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five companies that did stock buybacks, right? I mean, I was doing some analysis on Intuit the

345
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other day. Intuit last year had $2 billion in stock buybacks. Intuit, it's like, yeah, I do my taxes

346
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on Intuit, but it's not a sexy company, right? Is anybody ever going to buy Intuit for its ability

347
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to go from $2 billion to $3 billion stock buyback? I mean, maybe, but there are other things that are

348
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far more sexy, that are growing incredibly rapidly that I would rather buy, and that's the market

349
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response. Now, the alternative that they have is they could not do the stock buyback and then add

350
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an asset to their balance sheet, which could give them future financial leverage to be more AI

351
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resistant, AI proof and leaning into this new capital environment. So there's a lot of companies

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like that, right? There are 40,000 publicly traded companies in the world. I don't know how many on

353
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the US, probably 10,000 publicly traded companies in the United States and 9,993 of them are crappy.

354
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underperform the S&P 500. So there's a lot of opportunity out there. And yeah, I think that's

355
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where we're headed. Dan, anything to add before we jump into some numbers here?

356
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Yeah, I think someone mentioned this idea of corporate balance sheet strength. And I think

357
00:27:37,824 --> 00:27:41,644
ultimately that's kind of something that Chano's has been talking about a little bit too, is the

358
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difference between an asset on a balance sheet underpinning the equity and the future-looking

359
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expectation of the equities market. And that's something he hasn't been able to understand

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necessarily within the case of MSTR. And something I've been thinking about is, and I apologize,

361
00:27:54,724 --> 00:28:01,244
this is a bit unrelated, but Strife, the 10% yielding senior preferred equity is almost like

362
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the expression of Chanos's trade of long the underlying and short the premium. Because if

363
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you're short the premium, you're short the future expectations of Bitcoin yield, but you're long

364
00:28:12,864 --> 00:28:17,824
the underlying asset and you're trying to capture a weird little arbitrage there of the premium

365
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collapsing. If you're long Strife, you're short by short, meaning you don't own the actual operating

366
00:28:24,464 --> 00:28:31,504
business of MSTR or the Bitcoin yielding functions. But you're long the credibility of the assets and

367
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the underlying assets and you're getting that small 10% yield as a result. And you're not

368
00:28:36,744 --> 00:28:42,184
directly long either asset. You're long the $10 coupon. So I've been thinking about that a lot.

369
00:28:42,184 --> 00:28:48,504
strife is almost it's like the arbitrage that chanos is trying to collapse and yield for himself

370
00:28:48,504 --> 00:28:56,184
is almost is spit out into the market uh in the form of strife product to uh to holders so i think

371
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it's kind of interesting it's not perfect but it's kind of interesting comparison yeah he would be

372
00:29:01,144 --> 00:29:06,744
much better off just buying strife right and strife wouldn't perform so the maximum upside

373
00:29:06,744 --> 00:29:12,584
on his trade if he's not levered is about 50 percent and obviously strife has performed that

374
00:29:12,584 --> 00:29:18,904
well uh since inception uh without and obviously the trade hasn't performed uh well it did perform

375
00:29:18,904 --> 00:29:23,944
when he put it on a 2 3m nav but now you know he's probably about up unless he's levered you know 10

376
00:29:23,944 --> 00:29:30,184
10 or so which is annual dividends worth of strife uh risk-free so i don't know kind of interesting

377
00:29:30,184 --> 00:29:33,864
to think about it was also interesting to find out that chanis's position was five percent of

378
00:29:33,864 --> 00:29:39,384
his portfolio which is so funny because everybody i'm not going to speak for everybody but most of

379
00:29:39,384 --> 00:29:47,224
the people probably here are 99 in bitcoin something something bitcoin related or uh

380
00:29:47,224 --> 00:29:52,744
you know bitcoin forward so it's it's just an interesting perspective thinking that you know

381
00:29:52,744 --> 00:29:57,464
he's talking about this trade so much but it represents you know five percent of his portfolio

382
00:29:57,464 --> 00:30:06,664
on a basis trade right that that has unlimited loss potential yeah and not at no point in the

383
00:30:06,664 --> 00:30:12,264
conversation was bitcoin yield brought up which is uh it sort of was it was glazed over but like

384
00:30:12,264 --> 00:30:17,384
bitcoin yield in my opinion is the fundamental underpinning of a forward-looking expectation of

385
00:30:17,384 --> 00:30:22,184
increased bitcoin per share and why a premium is kind of justified over a long period of time

386
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so i think that's part of the story and i would love to you know there's a concrete reason why

387
00:30:28,744 --> 00:30:34,184
that premium exists other than forward expectations of bitcoin price like as long as you see them

388
00:30:34,184 --> 00:30:39,544
continuing to acquire bitcoin per share it's it's a viable premium well and you gotta yeah go ahead

389
00:30:41,144 --> 00:30:44,344
yeah and leveraging the capital stack that wasn't brought up either and those are the two most

390
00:30:44,344 --> 00:30:48,264
fundamental things i think for a bitcoin a leverage bitcoin equity is like we were talking

391
00:30:48,264 --> 00:30:52,464
talking about this like years ago right we were talking about strategy has leveraged capital

392
00:30:52,464 --> 00:30:57,384
structure and it's paid for by the operating business which you get for free at 1M now so

393
00:30:57,384 --> 00:31:12,028
like that the point things are different now obviously and as things become different you have to look at Bitcoin yield and the actual different capital markets levers which they can pull And so it changed But regardless those two points don get hit on enough I think

394
00:31:12,448 --> 00:31:21,268
Yeah, the prefs didn't come up much or the leverage didn't come up much. Acquiring Bitcoin today for a future liability. That was a clear miss in that conversation with Pierre.

395
00:31:21,268 --> 00:31:28,228
Yeah. And the last thing is, I remember what interests me about strategy was I did all the

396
00:31:28,228 --> 00:31:33,628
calculations and I said the leverage in their capital structure, if Bitcoin goes to 200,000,

397
00:31:34,568 --> 00:31:40,908
1.3M NAV is justified because the debt melts away because it's USD and the Bitcoin NAV increases.

398
00:31:41,568 --> 00:31:48,168
And so your effective leverage premium on strategy's capital structure with an increasing

399
00:31:48,168 --> 00:31:53,048
Bitcoin price was 1.3 nav. And now how forward looking is that expectation into the future?

400
00:31:53,568 --> 00:31:58,468
Yeah. You start to think how forward looking, how much Bitcoin is strategy going to acquire

401
00:31:58,468 --> 00:32:03,588
and what is the price at that point in time? What is the terminal value of that? If they're

402
00:32:03,588 --> 00:32:06,448
going to continue to do this over time and they don't blow up, the probability of that is

403
00:32:06,448 --> 00:32:11,748
incredibly low. And what's the value of Bitcoin at that point in time in the future? Is it 2 million

404
00:32:11,748 --> 00:32:20,648
Bitcoin at 21 million dollars per Bitcoin. Right. I don't know what I don't know what that number is.

405
00:32:20,648 --> 00:32:24,328
And you start to think about, OK, if all equities are forward looking, why isn't strategy forward

406
00:32:24,328 --> 00:32:27,088
looking about how much Bitcoin they're going to accumulate and what the price of that Bitcoin is

407
00:32:27,088 --> 00:32:31,768
going to be at that future point in time? And that's something I'd like to think about a lot

408
00:32:31,768 --> 00:32:36,788
is this relative valuation between other equities and how are other equities compared? How are other

409
00:32:36,788 --> 00:32:42,308
equities valued and why is there those valuations on those equities like what is what is underpinning

410
00:32:42,308 --> 00:32:50,628
the valuation of those specific equities well i think yeah and i think oh i i think we are um

411
00:32:51,828 --> 00:32:56,548
and i don't want to derail the conversation i think we're underestimating the the power of how

412
00:32:56,548 --> 00:33:02,388
just high the multiple can go and i say that because uh strategy success is also going to be

413
00:33:02,388 --> 00:33:10,068
a direct function of bitcoin adoption and as bitcoin becomes more of a staple in the global

414
00:33:10,068 --> 00:33:18,308
marketplace that by itself will justify a premium regardless of the um necessarily under the necessary

415
00:33:19,428 --> 00:33:25,828
underlying dynamics of bitcoin yields bitcoin per share and whatnot i think strategies nav

416
00:33:25,828 --> 00:33:33,268
in the future is what's going to justify their a high m nav because when bitcoin reaches an escape

417
00:33:33,268 --> 00:33:37,828
velocity of adoption i think the multiple can go much higher than people are anticipating even

418
00:33:37,828 --> 00:33:43,908
even at a higher market cap because with all these preferreds with all of these um other

419
00:33:43,908 --> 00:33:48,708
offerings that they're they're inevitably going to have if you think about it they become

420
00:33:48,708 --> 00:33:57,628
a passive exposure vehicle for both fiat exposure for fiat gain and for passive bitcoin gain because

421
00:33:57,628 --> 00:34:02,208
the share price is going to represent the gain in the bitcoin price right so i think that the

422
00:34:02,208 --> 00:34:08,648
multiple is being underestimated because i think everyone is trying to pigeonhole it into a trad

423
00:34:08,648 --> 00:34:14,128
fi model that they can then project into the future but from from my perspective i think the

424
00:34:14,128 --> 00:34:18,528
the power of sentiment and adoption is being grossly underestimated and just how high this

425
00:34:18,528 --> 00:34:24,208
can go 100 i'm going to bring fong onto the screen with a quick video clip because i think this is

426
00:34:24,208 --> 00:34:29,328
very uh this hit this hits perfectly so i'm going to bring fong in for his perspective and then

427
00:34:29,328 --> 00:34:37,008
look over there so this is not unique to bitcoin first of all the idea of a multiple than that

428
00:34:37,008 --> 00:34:42,448
asset value and so so people call it alchemy i call it valuation there's a time when the models

429
00:34:42,448 --> 00:34:47,328
the traditional models don't work and you have to come up with a different way to value a company

430
00:34:47,328 --> 00:34:52,448
our belief is a good way to value the company is take the bitcoin yield and then take the bitcoin

431
00:34:52,448 --> 00:34:57,808
gain which is a function of bitcoin yield it's a dollar gain and take take a multiple on that we've

432
00:34:57,808 --> 00:35:04,688
projected right that this year our bitcoin dollar gain is going to be in the 25 billion dollar range

433
00:35:04,688 --> 00:35:11,408
and if we do that and you take a typical ebitda multiple or an earnings multiple and you say what's

434
00:35:11,408 --> 00:35:17,808
the company worth if they had produced 25 billion dollars in a bitcoin dollar gain perhaps you'll

435
00:35:17,808 --> 00:35:23,008
put a 20x multiple on that but what if what if that number is growing 50 a year should you put

436
00:35:23,008 --> 00:35:29,168
a 30x multiple on it 40x multiple it's not unreasonable and you would value strategy that

437
00:35:29,168 --> 00:35:35,168
then somewhere between 500 billion dollars and a trillion dollars and then you can go back and say

438
00:35:35,168 --> 00:35:42,848
well that versus our net asset value of 60 right maybe we should be a 10 you know 10x nav or 20x nav

439
00:35:42,848 --> 00:35:47,168
it's not alchemy it's this has been happening since the beginning of corporate finance and

440
00:35:47,168 --> 00:35:54,848
equity valuations is there's got to be a different way of looking at the enterprise value of a company

441
00:35:54,848 --> 00:36:00,128
than just looking at a straight you know what is the asset value that it's worth

442
00:36:00,128 --> 00:36:04,288
There you go.

443
00:36:04,288 --> 00:36:06,208
From the man himself.

444
00:36:06,208 --> 00:36:09,968
And someone in the comments is saying that market psychology has rewarded slower growth

445
00:36:09,968 --> 00:36:15,228
scale as slower growth of scale increases CMAG7 increasing PE ratios.

446
00:36:15,228 --> 00:36:18,308
Again, there's a fundamental difference.

447
00:36:18,308 --> 00:36:26,248
You have a fundamentally scarce depreciating issuance asset at the basis of this entire

448
00:36:26,248 --> 00:36:27,248
trade.

449
00:36:27,248 --> 00:36:33,408
just compare it to a mag seven on a fiat driven model when bitcoin is a scarce asset that can go

450
00:36:33,408 --> 00:36:39,808
up in perpetuity that changes the dynamic that that and that dynamic sentiment can continue to

451
00:36:39,808 --> 00:36:45,208
rise and sentiment can continue to demand a higher multiple as adoption increases and as market cap

452
00:36:45,208 --> 00:36:50,068
increases yeah and you start to think like if the value of a company is the value of its assets plus

453
00:36:50,068 --> 00:36:54,748
you know some future expectation of cash flow even if the cash flow doesn't you know hit the

454
00:36:54,748 --> 00:36:58,368
income statement, it's happening on the balance sheet in a tax advantaged way. It doesn't mean

455
00:36:58,368 --> 00:37:03,488
it's not cash flow, right? That cash flow is happening on a tax advantaged basis on the

456
00:37:03,488 --> 00:37:08,268
balance sheet as opposed to on the income statement. People don't really recognize that

457
00:37:08,268 --> 00:37:14,888
and they're missing that component. This is value that's being added to the balance sheet in a

458
00:37:14,888 --> 00:37:21,368
unique way that hasn't existed before. And so when you think about the value of the company being

459
00:37:21,368 --> 00:37:27,248
the value of its assets plus some future expectation on cash flow. Well, you've got to

460
00:37:27,248 --> 00:37:32,408
also take into consideration, as Fong said, that those assets are appreciating a 50% annual,

461
00:37:32,568 --> 00:37:37,008
you know, compound annual growth rate. So what's the value of the company four years from now?

462
00:37:37,408 --> 00:37:42,688
What's the value of the Bitcoin four years from now, 50% CAGR every year, plus what they're able

463
00:37:42,688 --> 00:37:50,588
to yield at that point in time down the road. And you start to compare the results from

464
00:37:50,588 --> 00:37:56,368
what's going to happen here at the end of Q2, at the end of July, when strategy posts their Q2

465
00:37:56,368 --> 00:38:02,788
financials, you're going to see a significant earnings report. And that's going to start to

466
00:38:02,788 --> 00:38:07,208
be compared to these other companies. And there's going to be questions on like, how do I value this?

467
00:38:07,248 --> 00:38:11,328
This value conversation, while everybody in the comments and everybody on Twitter has been fighting

468
00:38:11,328 --> 00:38:17,088
about this for the last 18 months, this value conversation hasn't even started. We're in year

469
00:38:17,088 --> 00:38:23,008
one, basically, of this, how do you value this company? And we're going to be doing this for

470
00:38:23,008 --> 00:38:29,428
the next decade during the gold rush of the Bitcoin gold rush. I really think that part of

471
00:38:29,428 --> 00:38:33,368
what the market's going to struggle with for a while is, you know, they're going to see the

472
00:38:33,368 --> 00:38:37,008
massive earnings that comes out this quarter, right? That's going to be the first eye-opener

473
00:38:37,008 --> 00:38:43,668
to this. But the response is going to be, well, it's not sustainable earnings, right? It's volatile

474
00:38:43,668 --> 00:38:49,508
earnings. It could be down next quarter. But I think where that starts to shift is when you see

475
00:38:50,148 --> 00:38:55,988
several years in a row of quarter after quarter after quarter of performance. And I think that

476
00:38:55,988 --> 00:39:01,428
that time is coming because with all the capital flowing into Bitcoin, I think you're hitting that

477
00:39:01,428 --> 00:39:04,868
point where that structural bid underneath Bitcoin is going to keep pushing it higher.

478
00:39:05,508 --> 00:39:08,868
And these companies that are holding it on the balance sheet are going to keep showing more and

479
00:39:08,868 --> 00:39:14,468
more profits quarter after quarter after quarter. And eventually you can't say, well, that was a

480
00:39:14,468 --> 00:39:18,788
fluke. You have to actually look at it structurally and go, what's happening in the world that's

481
00:39:18,788 --> 00:39:25,748
making this effective? What's going on? What am I missing? And what you're missing is the

482
00:39:25,748 --> 00:39:31,028
denominator currency. And you have to look at the debasement effect and the fact that some companies

483
00:39:31,028 --> 00:39:34,708
are smart enough to get out in front of that and capitalize on it and generate value for their

484
00:39:34,708 --> 00:39:39,188
corporations and for their shareholders, they're not going to be penalized forever.

485
00:39:39,988 --> 00:39:47,748
And we've been very myopic in the way that we're willing to value organizations. For so long,

486
00:39:47,748 --> 00:39:52,388
we've only really valued them on the basis of what they do on the income statement.

487
00:39:53,188 --> 00:39:57,988
And that income statement needed to result from the investment that you're putting into these

488
00:39:57,988 --> 00:40:02,308
operations and the market starts to see that as sustainable earnings because you're building a

489
00:40:02,308 --> 00:40:07,028
model that can generate sustainable earnings we think this becomes repeatable quarter after quarter

490
00:40:07,748 --> 00:40:12,868
and it's really just now that it feels like bitcoin's really hitting that adoption moment

491
00:40:13,588 --> 00:40:19,348
where you're starting to look at it and go you know it might not be as erratic moving up but

492
00:40:19,348 --> 00:40:24,388
it's starting to feel like this thing's going to grind higher for a very long time and when that

493
00:40:24,388 --> 00:40:28,468
happens and when those earnings start flowing through to those income statements and they have

494
00:40:28,468 --> 00:40:33,888
have to digest it and make excuses quarter after quarter, that becomes a harder question to answer.

495
00:40:34,428 --> 00:40:38,808
Because if the US dollar is going to continue to devalue or pick your currency, right, whichever

496
00:40:38,808 --> 00:40:43,088
jurisdiction these companies are in, if all these fiat currencies are going to keep grinding lower

497
00:40:43,088 --> 00:40:49,428
and lower in value forever by design, because we've got a consumption-based world, right,

498
00:40:49,448 --> 00:40:54,328
all these economies are really based on incentivizing the consumers to spend. And in order to incentivize

499
00:40:54,328 --> 00:40:59,708
consumers to spend. You have to devalue the currencies that they're holding and make sure

500
00:40:59,708 --> 00:41:04,528
that they are intimately aware that if they decide to hold onto this cash and wait until next year,

501
00:41:04,548 --> 00:41:07,768
it's going to buy them less than it would buy them right now. So right now you better spend it.

502
00:41:08,668 --> 00:41:12,348
So, you know, when that starts to get out and people realize that that's the model,

503
00:41:12,608 --> 00:41:17,388
right? That's what we're taking advantage of. You're mismanagement. We're betting on the only

504
00:41:17,388 --> 00:41:21,648
sure thing in the universe. The only thing that we can really bet on is that you're going to have

505
00:41:21,648 --> 00:41:26,428
to play games with the currency and you're going to have to devalue it. And that's your only way out.

506
00:41:26,868 --> 00:41:32,388
And we found a solution and these corporations found a solution and they're pressing this trade

507
00:41:32,388 --> 00:41:35,868
as hard as they possibly can. And they're going to continue to do this into the future.

508
00:41:36,108 --> 00:41:42,268
And we're going to use whatever fiat debt instruments you'll offer because we know that

509
00:41:42,268 --> 00:41:47,508
that currency is devaluing and we've got the one with the completely fixed supply where all the

510
00:41:47,508 --> 00:41:51,628
demand in the world can show up at the doorstep and we can't create any more of it. That's the

511
00:41:51,628 --> 00:41:56,288
bet we're going to make. And that's a pretty good bet in my mind. So I think it's just a matter of

512
00:41:56,288 --> 00:42:03,148
time here before people move out of the excuse making realm and they start confronting reality

513
00:42:03,148 --> 00:42:07,628
of what they've been watching for years and they've known, but it's just felt like a foregone

514
00:42:07,628 --> 00:42:12,468
conclusion that they just have to accept. But it doesn't have to be accepted anymore and it's not

515
00:42:12,468 --> 00:42:17,928
being accepted anymore. And companies are now getting creative about ways to take advantage of

516
00:42:17,928 --> 00:42:22,548
that and it's going to accelerate at a massive pace. These preferreds, we've hardly scratched

517
00:42:22,548 --> 00:42:27,328
the surface. People look and they think strategy's already won the preferred game and it's over and

518
00:42:27,328 --> 00:42:32,848
no one needs to launch anymore. Look at how many duplicates there are for any of the corporate bond

519
00:42:32,848 --> 00:42:37,448
products that are out there. All these corporate fixed income products, right? They copy each other

520
00:42:37,448 --> 00:42:43,228
all the time. People have this propensity for diversifying and they'll pick up products that

521
00:42:43,228 --> 00:42:47,388
could be the same product, but a different profile, a different underlying operating company. There's

522
00:42:47,388 --> 00:42:55,388
so much room to siphon the capital out of that you know 300 trillion dollar market that we're just

523
00:42:55,388 --> 00:43:00,508
getting rolling here yeah i'm gonna jump i'm gonna jump to some data but go ahead jump in there adrian

524
00:43:00,508 --> 00:43:04,908
while i pull this up yeah because the best point is not just going to be strategy that's doing these

525
00:43:04,908 --> 00:43:09,628
preferreds right so strategy got out the gate first metaplanet's probably going to do them

526
00:43:09,628 --> 00:43:15,068
sellers already whispering about doing them smarter web i just um interviewed andrew webley he's said

527
00:43:15,068 --> 00:43:21,068
that he had a conversation with sailor and they were talking preferreds just imagine a world where

528
00:43:21,068 --> 00:43:26,988
you have strategy being the preferred of choice for bitcoin exposure in the us meta planet in

529
00:43:26,988 --> 00:43:35,468
japan smarter web in the uk maybe blockchain group for the broader european market a secondary

530
00:43:35,468 --> 00:43:40,988
option could be similar in the us scale that over time and just imagine how much money they can

531
00:43:40,988 --> 00:43:47,468
siphon away from the markets just with just with the first absolutely and and that's not including

532
00:43:47,468 --> 00:43:55,868
everything else so it to ben's point this this is the nascent state of this we are in the gold rush

533
00:43:55,868 --> 00:44:02,028
the adoption the adoption curve the accumulation phase whatever euphemisms we want to use that's

534
00:44:02,028 --> 00:44:06,748
where we are right now and um in four years time it's going to look very different and in four

535
00:44:06,748 --> 00:44:11,868
years time i think that's when nation states started to get involved as well and then all

536
00:44:11,868 --> 00:44:18,588
hell's gonna break loose so yeah by the way we're 45 minutes into this and we haven't even acknowledged

537
00:44:18,588 --> 00:44:25,228
that today was the second highest close ever all-time high market cap it was all-time high

538
00:44:25,228 --> 00:44:29,548
i thought you said it was the first or is it not no it's the second all-time high market cap it's

539
00:44:29,548 --> 00:44:34,828
the second highest all-time high close oh close nobody's talking about it right that's how

540
00:44:35,628 --> 00:44:40,508
just normal and you know people are now chasing all these super pumps right now and you know but

541
00:44:41,388 --> 00:44:46,108
strategy is just quietly doing what you knew it would start doing and it's going to start grinding

542
00:44:46,108 --> 00:44:53,148
up and we're not that far i mean the highest close ever is what 473.83 473 yeah so less than

543
00:44:53,148 --> 00:45:00,428
twenty dollars a share away i mean it's on the move yeah absolutely okay i want i want to hit

544
00:45:00,428 --> 00:45:04,668
on this this is earnings estimate this is a pro forma from q2 we've hit on this uh quite a bit

545
00:45:04,668 --> 00:45:13,108
recently. So as of Q2, the Bitcoin price closed at $107,778. So the gain that strategy held on

546
00:45:13,108 --> 00:45:20,588
their balance sheet from Q2 alone was $14 billion. The estimate net income from that gain is $11.1

547
00:45:20,588 --> 00:45:29,208
billion. So this equates to about $39.50 earnings per share. And Ben, I brought this up to hit on

548
00:45:29,208 --> 00:45:34,428
your point earlier. It's like there's going to be this commentary of, oh, but those earnings are

549
00:45:34,428 --> 00:45:37,648
volatile and that might go down and then it's going to go back up.

550
00:45:37,648 --> 00:45:38,748
Then it's going to go down.

551
00:45:38,748 --> 00:45:44,568
And I mentioned I was doing some analysis on Intuit earlier and Intuit.

552
00:45:44,888 --> 00:45:49,968
If you look at the last four years of their net income, the last four years of their net income is $8 million,

553
00:45:50,628 --> 00:45:53,188
$9 million or not $9 billion.

554
00:45:54,888 --> 00:45:57,668
Strategies has made $14 billion in Q2.

555
00:45:58,408 --> 00:46:01,588
And you look at you look at Q3, where we're at with Q3,

556
00:46:01,588 --> 00:46:07,268
And they're already sitting on a $6.4 billion gain and a net income estimate about $5 billion.

557
00:46:07,408 --> 00:46:11,908
So you add that together, you're looking at $15 billion net income so far in Q2, Q3,

558
00:46:12,068 --> 00:46:17,588
not accounting for the gain that was added to retained earnings in 2024.

559
00:46:18,988 --> 00:46:25,348
So you start to look at some relativities here and you're like, okay, do I care that

560
00:46:25,348 --> 00:46:41,932
it volatile if I going to outperform the last seven years of this other equity And you start to look at the size of Intuit right Intuit got a billion market cap It is the

561
00:46:41,932 --> 00:46:44,892
78th largest publicly traded company

562
00:46:45,672 --> 00:46:48,272
in the United States, I think in the in the world,

563
00:46:48,272 --> 00:46:52,072
this is including foreign companies, it's the 78th, the largest publicly traded

564
00:46:52,072 --> 00:46:54,772
company in the world.

565
00:46:54,772 --> 00:46:56,392
Where the hell is Lind?

566
00:46:56,392 --> 00:46:58,492
Oh, that's a UK company.

567
00:46:58,492 --> 00:47:01,452
Yeah, it's including foreign companies as well.

568
00:47:01,652 --> 00:47:04,172
So this is largest, largest assets on the planet.

569
00:47:06,132 --> 00:47:07,812
So you start to think about the relativity there.

570
00:47:07,812 --> 00:47:10,612
It's like, do I care about the volatility if it's that big?

571
00:47:10,972 --> 00:47:17,012
Right. Like the yeah, if it falls, you know, 50% cut it in half

572
00:47:17,012 --> 00:47:19,652
and it's still outperforming.

573
00:47:19,652 --> 00:47:22,292
All of the, you know, the net income of all of these other companies.

574
00:47:22,492 --> 00:47:24,892
So I start to not care if I'm taking a

575
00:47:24,892 --> 00:47:30,692
Bitcoin is also transforming this view of quarter over quarter results.

576
00:47:30,692 --> 00:47:33,192
And you start to think about the world a little bit longer.

577
00:47:33,192 --> 00:47:33,452
Right.

578
00:47:33,452 --> 00:47:38,292
You've got a year over year results and four years over four year results.

579
00:47:38,592 --> 00:47:42,792
Thinking about Bitcoin cycles and it really changes that dimension

580
00:47:42,892 --> 00:47:45,092
of how you view time and results.

581
00:47:45,732 --> 00:47:48,992
And if you're looking over a longer time horizon,

582
00:47:49,992 --> 00:47:52,632
that could be more valuable than looking over a shorter time horizon.

583
00:47:54,892 --> 00:47:59,392
And while we're here on the spreadsheet, we'll talk about leverage because we hit on this every week.

584
00:47:59,552 --> 00:48:05,092
So as of today, 7-16-2025, Bitcoin held on balance sheet $601,550.

585
00:48:05,252 --> 00:48:09,372
They purchased another 4,500 Bitcoin over the last week.

586
00:48:09,972 --> 00:48:13,452
The Bitcoin price when I started this was $118,750.

587
00:48:14,252 --> 00:48:18,872
So strategy is holding $71 billion worth of Bitcoin on their balance sheet,

588
00:48:18,872 --> 00:48:24,852
which again, that seems like it's hard to wrap your head around $71 billion.

589
00:48:25,632 --> 00:48:36,632
That's $100 million, 710 times. Think about how big a million is. Think about how big 100 million

590
00:48:36,632 --> 00:48:42,652
is. And now think about 100 million, 710 times. That's what they're holding on their balance sheet.

591
00:48:42,752 --> 00:48:47,312
That's power. You look at the debt held on balance sheet, they've got $8.2 billion of debt,

592
00:48:47,312 --> 00:48:51,592
$3.5 billion of preferred stock. So the net capital that they hold on their balance sheet is

593
00:48:51,592 --> 00:48:58,712
$59.6 billion. You look at the leverage ratio, 16.4%. So if anybody tells you that strategy is

594
00:48:58,712 --> 00:49:02,252
over levered, you could point them directly to the numbers. You could point them to the strategy

595
00:49:02,252 --> 00:49:06,852
website where they show their debt coverage ratio. They show you all the statistics updated 24,

596
00:49:06,852 --> 00:49:11,312
7, 365. So you can understand the financial strength of the company every single day.

597
00:49:11,312 --> 00:49:17,712
something that's never existed before. And so what would it take in order for

598
00:49:19,872 --> 00:49:26,752
strategy to start to even be concerned? The price of Bitcoin would need to go down to $19,500

599
00:49:27,872 --> 00:49:31,712
and stay there for an extended period of time for the assets to be worth less than the liabilities

600
00:49:31,712 --> 00:49:39,312
held on the balance sheet. So as I've said in the past, if the price of Bitcoin goes down to $19,500,

601
00:49:39,312 --> 00:49:45,352
dollars, everybody in our team, everybody that is in the Bitcoin treasury space is doing,

602
00:49:45,492 --> 00:49:52,312
they're selling everything that they could touch in order to buy the Bitcoin, buy all the Bitcoin.

603
00:49:52,772 --> 00:50:00,112
So I think the likelihood of that is incredibly low. And yeah, you've got this fundamental asset,

604
00:50:00,252 --> 00:50:04,172
Bitcoin, being different than any of these other altcoins, these altcoin treasuries. This is an

605
00:50:04,172 --> 00:50:09,052
asset without an issue or that the SEC is effectively deemed a commodity that you can

606
00:50:09,052 --> 00:50:14,972
capitalize your balance sheet on, as opposed to some of these other altcoins that have marketing

607
00:50:14,972 --> 00:50:21,872
teams or CEOs or infrastructure that is fundamentally different to a decentralized system like Bitcoin.

608
00:50:24,032 --> 00:50:26,472
Okay, I'll pause there. Anybody else?

609
00:50:27,492 --> 00:50:31,572
You know, every time we look at this stuff, and I just popped over to the strategy website because

610
00:50:31,572 --> 00:50:36,792
I've been a little busy, so I've not been able to go through because I know they put out all this cool information out there.

611
00:50:36,892 --> 00:50:46,332
But when you think about just how different these companies are than a lot of them, our junk bond competitor is 6.1 times over collateralized.

612
00:50:46,932 --> 00:50:49,292
That's our junk bond competitor, right?

613
00:50:49,432 --> 00:50:49,872
Stride.

614
00:50:50,552 --> 00:50:54,412
That's how unique these preferred products are that these companies are putting out.

615
00:50:54,412 --> 00:51:01,132
And you don't have any other companies out there in the market that are this focused on credit quality.

616
00:51:01,572 --> 00:51:09,512
I mean, that is hugely over collateralized and it makes that product so strong relative to what it's supposed to compete against.

617
00:51:09,512 --> 00:51:21,052
Right. You're supposed to compete against the bonds that have really high risk and they're in shaky companies and they've got to offer you high payments because they're not a credit worthy business and you don't know if they're going to survive.

618
00:51:21,372 --> 00:51:23,772
Here you've got one that has the assets, right?

619
00:51:23,892 --> 00:51:25,332
It's effectively asset back credit.

620
00:51:25,332 --> 00:51:32,172
they're going to pay you $10 a share and they're 6.1 times over collateralized. And that's what's

621
00:51:32,172 --> 00:51:39,872
competing with junk bonds. That's unique. That's incredibly unique. The market is not digesting

622
00:51:39,872 --> 00:51:44,292
this at all. And it might've been you, Dan, that was talking about the fact that like stride,

623
00:51:44,372 --> 00:51:50,672
you're just baffled by how it's trading below par at the moment. And I think that's right. It is

624
00:51:50,672 --> 00:51:54,272
crazy when you think about it. You look at the credit quality of our lowest credit

625
00:51:54,272 --> 00:52:00,212
preferred instrument and the spreads on that, and there's a mispricing. So you got to ask yourself,

626
00:52:00,552 --> 00:52:05,992
are we wrong with all the transparency, with all the data, knowing the asset, being able to watch

627
00:52:05,992 --> 00:52:12,072
the asset in real time, or is the market just closing its eyes and plugging its ears and saying,

628
00:52:12,192 --> 00:52:17,812
don't tell us about anything new. That's not how we do it here. But that's what creates opportunity.

629
00:52:17,812 --> 00:52:24,792
If you're not willing to go out and spend a lick of time understanding the products you're looking at, you deserve to underperform.

630
00:52:26,092 --> 00:52:30,132
These are available and these are powerful products, all of them that are getting launched.

631
00:52:30,232 --> 00:52:33,132
And there's just going to be more of them that are coming into the market.

632
00:52:33,372 --> 00:52:40,252
And these other companies are going to take advantage of those regional jurisdiction arbitrages and the tax inefficiencies of different jurisdictions.

633
00:52:40,472 --> 00:52:42,972
I mean, this is about to get way more creative.

634
00:52:42,972 --> 00:52:48,852
Saylor put out the foundational ones that are recognizable and familiar to all the major

635
00:52:48,852 --> 00:52:49,752
capital in the market.

636
00:52:50,332 --> 00:52:54,552
And that was huge because he's the first player of scale that's going to be out there.

637
00:52:54,692 --> 00:52:59,092
He's going to be the first onboarding place for a lot of this institutional capital out

638
00:52:59,092 --> 00:53:00,112
of the fixed income market.

639
00:53:00,652 --> 00:53:05,512
But there is so much opportunity for these other companies to come in and target different

640
00:53:05,512 --> 00:53:07,052
pockets of that capital pool.

641
00:53:07,052 --> 00:53:15,872
And if they all focus on maintaining really strong credit quality like this, these things are going to be unstoppable.

642
00:53:16,652 --> 00:53:18,292
I mean, this is real-time data.

643
00:53:18,572 --> 00:53:21,312
It's real-time monitoring of the risk position in your portfolio.

644
00:53:21,552 --> 00:53:23,392
It's liquid markets you can get in and out of.

645
00:53:24,012 --> 00:53:26,412
This is a dream to hold in a portfolio.

646
00:53:26,592 --> 00:53:32,912
And you can structure portfolios now, and most of us have, just around these Bitcoin companies and the products that they're offering.

647
00:53:32,912 --> 00:53:33,312
Yeah.

648
00:53:33,632 --> 00:53:35,472
You only have to be an expert in one.

649
00:53:35,472 --> 00:53:37,832
And you don't even have to be an expert in one area.

650
00:53:37,832 --> 00:53:43,132
You need to be able to go to the company's website that has implemented radical transparency

651
00:53:43,132 --> 00:53:48,772
and just review the numbers for yourself and ask yourself, how risky is this product to

652
00:53:48,772 --> 00:53:48,952
me?

653
00:53:49,112 --> 00:53:51,892
If I put this in my portfolio, what risk am I taking on?

654
00:53:52,752 --> 00:53:58,112
And then if you go look and if you're holding a junk bond ETF and you can confidently look

655
00:53:58,112 --> 00:54:02,732
me in the eyes and say, I understand all the risks associated with this basket of junk

656
00:54:02,732 --> 00:54:08,572
bonds that are paying me six and a half or seven percent, you know, Godspeed, you know, good idea.

657
00:54:08,952 --> 00:54:09,852
I don't believe you.

658
00:54:11,432 --> 00:54:18,692
Yeah, the and I'll tell you, now that I'm also behind the curtain, I'm having conversations with

659
00:54:18,692 --> 00:54:25,872
people in suits that have managed capital for a very long time and they do not know what's going

660
00:54:25,872 --> 00:54:30,812
on here. They have significant experience with preferred equities or convertible bonds,

661
00:54:30,812 --> 00:54:37,092
and they had not even heard of the instruments that strategy has in the market.

662
00:54:38,252 --> 00:54:42,552
And that blew me away. These are professionals. These are professionals doing,

663
00:54:43,232 --> 00:54:47,252
you know, managing capital. Now you've got this company that's, you know, going on this

664
00:54:47,252 --> 00:54:53,732
meteoric rise and we think it's, you know, I personally think this is the biggest story in

665
00:54:53,732 --> 00:55:00,032
all finance, but it's also just very misunderstood and also not getting a lot of attention. So from

666
00:55:00,032 --> 00:55:05,652
that perspective, I think we're still incredibly early. And, you know, Dan, just, just because we

667
00:55:05,652 --> 00:55:09,872
have 26,000 viewers on right now, I think it could be helpful just to give a lay of the land of the

668
00:55:09,872 --> 00:55:16,132
preferreds. Like, what are the preferreds? How do they work? And some basic understanding of the

669
00:55:16,132 --> 00:55:21,512
preferred instruments? Because I think, I don't think we can explain it enough because it takes

670
00:55:21,512 --> 00:55:25,992
a long time for these instruments to click for people. And I know for me, it took a couple of

671
00:55:25,992 --> 00:55:30,192
months for Dan it took a couple of months it just everybody is learning this at a different pace

672
00:55:30,192 --> 00:55:35,652
and I think it's helpful to explain if you want to give it a run yeah uh am I lagged am I good

673
00:55:35,652 --> 00:55:43,152
you guys hear me you're good I could hear you um yeah yeah I think okay later Adrian Adrian good to

674
00:55:43,152 --> 00:55:50,472
see you the key difference is the diff is the dividend clause in strife and strike versus stride

675
00:55:50,472 --> 00:55:55,272
and that's the what are what are the instruments start with what are the instruments full overview

676
00:55:55,272 --> 00:55:56,272
Yeah, full overview.

677
00:55:56,272 --> 00:55:59,392
Well, strategy has a bunch of Bitcoin on their balance sheet, and I like to think of it as

678
00:55:59,392 --> 00:56:00,392
a rectangle.

679
00:56:00,392 --> 00:56:02,392
Hey, Soleil.

680
00:56:02,392 --> 00:56:05,632
I like to think of the strategy's capital stack as a rectangle, and that way you can

681
00:56:05,632 --> 00:56:07,032
prioritize different instruments.

682
00:56:07,032 --> 00:56:12,352
So you've got a 60 plus billion dollar rectangle, and at the top of that stack are these convertible

683
00:56:12,352 --> 00:56:13,352
notes.

684
00:56:13,352 --> 00:56:18,672
They're unsecured senior convertible notes, but in the case of liquidation, they have first

685
00:56:18,672 --> 00:56:23,452
claim over the assets of the corporation, that strategy, and they're fixed.

686
00:56:23,452 --> 00:56:25,972
That liability is outstanding and fixed.

687
00:56:25,972 --> 00:56:27,392
It doesn't move.

688
00:56:27,392 --> 00:56:30,272
Below that sits Strife, which is the crown jewel.

689
00:56:30,272 --> 00:56:35,532
There's a $2.1 billion ATM authorized for that instrument, and it pays a $10 dividend

690
00:56:35,532 --> 00:56:36,612
at par.

691
00:56:36,612 --> 00:56:42,672
If those dividends are ever missed, then there's clauses in the actual preferred equity offering

692
00:56:42,672 --> 00:56:48,072
that make it such that strategy has to pay those dividends or else Strife holders can

693
00:56:48,072 --> 00:56:51,092
appoint a board member and make sure those dividends are paid.

694
00:56:51,092 --> 00:56:55,492
dividends will compound against the corporation in the case that they're not paid so there's a lot

695
00:56:55,492 --> 00:57:00,132
of legal protections for strife holders sitting below that is the convertible preferred strike

696
00:57:01,332 --> 00:57:06,452
again that's just a lower coupon payment cumulative dividends which means dividends must get paid and

697
00:57:06,452 --> 00:57:11,172
there's protections for shareholders and they have the convertible option and then junior to that so

698
00:57:11,172 --> 00:57:17,812
again converts strife strike stride the difference between stride and strife and strike are the

699
00:57:17,812 --> 00:57:22,972
the cumulative dividend clause. Those dividends are non-cumulative. So if strategy happens to

700
00:57:22,972 --> 00:57:29,112
miss one of those dividend payments, they are not obligated to pay it back in full with a certain

701
00:57:29,112 --> 00:57:36,712
amount of interest to those STRD holders. And this makes it the credit worthiness of that security

702
00:57:36,712 --> 00:57:41,812
different and allows them to add more leverage with the security without jeopardizing the credit

703
00:57:41,812 --> 00:57:48,252
quality of the corporation. And finally, there's a really important clause about the liquidation

704
00:57:48,252 --> 00:57:52,952
preference or the actual outstanding liability, which is kind of too technical to get into,

705
00:57:53,112 --> 00:57:59,992
but that's how it sits in the capital stack. So in short, they have collateralized their

706
00:57:59,992 --> 00:58:06,132
Bitcoin held on balance sheet by offering three publicly traded preferred equity instruments

707
00:58:06,132 --> 00:58:14,792
that have various different risk return metrics that are publicly tradable and senior to the

708
00:58:14,792 --> 00:58:20,572
common stock, MSTR common stock. So each one of those instruments has reduced upside,

709
00:58:20,812 --> 00:58:27,772
but also reduced downside. They've used contractual terms to adjust the risk profile

710
00:58:27,772 --> 00:58:31,872
of these different instruments, effectively collateralized by the corporate balance sheet,

711
00:58:31,872 --> 00:58:35,072
which is all of the Bitcoin.

712
00:58:35,072 --> 00:58:37,172
So.

713
00:58:37,172 --> 00:58:39,272
In doing that,

714
00:58:39,272 --> 00:58:42,112
any additional any excess risk

715
00:58:42,712 --> 00:58:44,612
that each one of these instruments

716
00:58:45,712 --> 00:58:49,432
has any excess risk and any excess upside

717
00:58:49,892 --> 00:58:52,932
is delivered to the MSTR common stock shareholders.

718
00:58:52,932 --> 00:58:55,332
That is where you get this Bitcoin yield, right?

719
00:58:55,932 --> 00:58:58,632
Any excess risk is getting delivered

720
00:58:58,632 --> 00:59:01,632
to the MSTR common stock shareholder via excess

721
00:59:01,632 --> 00:59:07,812
Bitcoin. That's why Bitcoin per share for MSDR is continuing to grow. And you think about these

722
00:59:07,812 --> 00:59:16,272
instruments are far more accretive than ATMing. ATM is a stock issuance on MSDR. They're far more

723
00:59:16,272 --> 00:59:19,952
accretive. The ATM on each one of these individual preferred instruments is far more accretive

724
00:59:19,952 --> 00:59:25,832
because the liability is paid out over time into the future. And the interest rates that they've

725
00:59:25,832 --> 00:59:30,312
got to pay on those instruments, because the price of the stock is traded up, the interest rates are

726
00:59:30,312 --> 00:59:35,352
going down means the amount of capital that they're able to raise relative to the liabilities

727
00:59:35,352 --> 00:59:45,432
and increasing over time. Good work. Good work. And it's underrated the idea that like,

728
00:59:45,432 --> 00:59:51,352
so they're highly accretive as on a Bitcoin per share basis for common equity holders.

729
00:59:51,352 --> 00:59:56,552
Yes. They also are highly beneficial to common equity holders because it takes

730
00:59:56,552 --> 01:00:03,512
the atm pressure off the common for a sustained bitcoin yield and it's not that necessarily the

731
01:00:03,512 --> 01:00:09,592
atm issuance is terrible in in the sense that it's dilution right moving strike warrants for other

732
01:00:09,592 --> 01:00:15,272
sorts of different jurisdictions are dilution as well the thing about atm issuance is it can be used

733
01:00:15,272 --> 01:00:19,832
in a predatory way by shorts whether that be convertible note holders that are shorting the

734
01:00:19,832 --> 01:00:25,272
stock or just shorts that are looking to short the stock and then buy with the atm mechanism

735
01:00:25,272 --> 01:00:30,952
and so when the atm is not being used on the common it's beneficial to us and price action

736
01:00:30,952 --> 01:00:36,392
and kind of sentiment rise and and have expansion so all that's really really good news

737
01:00:39,192 --> 01:00:43,272
speaking of the convertible bonds i don't i feel like we've really talked about those in forever

738
01:00:43,272 --> 01:00:47,672
because there's so many other things going on and i think people are sleeping a little bit on the

739
01:00:47,672 --> 01:00:52,872
fact that there's about 3.2 billion dollars worth of those bonds that are basically equity right now

740
01:00:52,872 --> 01:00:55,912
where they are already eligible to convert.

741
01:00:56,192 --> 01:00:58,552
So if those holders decide that they want to convert

742
01:00:58,552 --> 01:01:00,192
and the stock price stays high

743
01:01:00,192 --> 01:01:01,852
and they've got no way to trade around it

744
01:01:01,852 --> 01:01:03,752
and they're just locked in that equity position,

745
01:01:04,432 --> 01:01:08,072
you could see $3.2 billion coming out of the highest level

746
01:01:08,072 --> 01:01:08,992
of the capital stack,

747
01:01:09,072 --> 01:01:11,792
which makes the credit quality of all the preferreds

748
01:01:11,792 --> 01:01:12,492
that much better.

749
01:01:12,992 --> 01:01:15,852
In my mind, what it also does is free up capacity

750
01:01:15,852 --> 01:01:18,132
in the event that he's cooking up a new preferred.

751
01:01:18,712 --> 01:01:21,212
If all of a sudden you've got $3.2 billion available,

752
01:01:21,212 --> 01:01:25,892
you could launch another product, get another ATM out there. And I wouldn't put it against him.

753
01:01:25,892 --> 01:01:31,372
Right. He said that he's targeting products that can be applied internationally. Who knows? I don't

754
01:01:31,372 --> 01:01:36,552
know what the product's going to look like. He's over there slamming the ATM or the, not the ATM,

755
01:01:36,752 --> 01:01:41,952
the AI until it gives him the right answer. Yeah. He's, you can be sure he's out there on that boat

756
01:01:41,952 --> 01:01:46,432
somewhere just screaming at chat GPT until he gets it right. What about this? What about this?

757
01:01:46,432 --> 01:01:57,272
But you take $3.2 billion out of the highest level of the capital structure and you start shifting into the preferreds instead of re-upping the convertible bonds, that becomes pretty powerful.

758
01:01:58,272 --> 01:02:01,532
And that's kind of where I think that he's going here.

759
01:02:01,532 --> 01:02:07,732
You're seeing them start to put a lot more focus on scaling up the preferreds.

760
01:02:07,776 --> 01:02:10,596
through the ATMs, getting more liquidity out into those markets.

761
01:02:11,056 --> 01:02:15,036
And if they want a bigger boost to the yield numbers, I could see them launching another

762
01:02:15,036 --> 01:02:16,276
preferred.

763
01:02:16,976 --> 01:02:22,996
And if they're taking the longer term view where they're looking at this and saying,

764
01:02:23,056 --> 01:02:27,276
maybe we don't need the convertible bond right now to get our leverage ratio back up higher

765
01:02:27,276 --> 01:02:31,356
at this stage because of how accretive all these new products we're putting into the market are,

766
01:02:31,436 --> 01:02:34,416
maybe we can afford to lever up a little slower.

767
01:02:34,416 --> 01:02:39,056
right it's going to take us a little more time to scale these preferred products but it's going to

768
01:02:39,056 --> 01:02:43,856
be so much more creative to the metrics than us launching a new convertible bond is that you might

769
01:02:43,856 --> 01:02:48,656
not see that 3.2 billion get replaced through another convert you might just see it roll into

770
01:02:48,656 --> 01:02:53,056
a new preferred product or maybe they just go faster on scaling the ones that they have but

771
01:02:53,056 --> 01:02:58,176
that's a lot of capacity that's a lot of leverage capacity that has the potential to come off the

772
01:02:58,176 --> 01:03:03,536
books at any time right it's been convertible for a long time already so if those holders now that

773
01:03:03,536 --> 01:03:06,376
that we're at the second highest close ever.

774
01:03:06,376 --> 01:03:08,176
You know, if the price sticks up here,

775
01:03:08,176 --> 01:03:10,896
I'm not gonna be surprised to see those fall off the books

776
01:03:10,896 --> 01:03:14,176
and the credit quality on every product just got better.

777
01:03:14,176 --> 01:03:16,596
And that 6.1 on our junk bond equivalent

778
01:03:16,596 --> 01:03:17,936
is gonna be quite a bit higher from there.

779
01:03:17,936 --> 01:03:22,496
So, you know, there's a lot of maneuverability here.

780
01:03:22,496 --> 01:03:24,736
And that multiple on Strife

781
01:03:25,876 --> 01:03:28,696
or the senior credit instrument only increases

782
01:03:28,696 --> 01:03:31,376
with the converts being wiped off the balance sheet.

783
01:03:31,376 --> 01:03:33,236
So I was just doing a little bit of looking

784
01:03:33,236 --> 01:03:45,156
there's about 1.05 billion of strife outstanding. And there's 8.2 billion total notional value of

785
01:03:45,156 --> 01:03:51,016
converts above strife in the capital structure. So there's 70 billion worth of Bitcoin,

786
01:03:51,396 --> 01:03:57,776
subtract out the 8 billion. You have 1 billion of senior strife. That's almost 60 times over

787
01:03:57,776 --> 01:04:03,536
collateralized as it sits now. If you were to wipe out the converts from the top of that capital

788
01:04:03,536 --> 01:04:08,516
stack, now you're sitting at a 70x over collateralized instrument until the rest of the

789
01:04:08,516 --> 01:04:12,996
ATMs offered. But those numbers, again, the credit worthiness of all those preferred instruments

790
01:04:12,996 --> 01:04:17,856
just increase and increase as those converts are cleared off the balance sheet. And it seems like

791
01:04:17,856 --> 01:04:22,956
strategy wants Strife to sit superior in the capital structure. So it seems like that will be

792
01:04:22,956 --> 01:04:26,936
at the top. So what credit rating would you give Strife at that point then, Dan?

793
01:04:27,776 --> 01:04:35,456
you're sitting in the agency how are you rating strife yeah yeah if i was in the agency i'd

794
01:04:35,456 --> 01:04:39,776
probably say it's a rat poison and it may go to zero well then you got to ask who are the rats

795
01:04:40,576 --> 01:04:47,776
yeah exactly i don't know who's it poisoning traditional financial system let's talk about

796
01:04:47,776 --> 01:04:52,176
these converts a little bit more because i think this is a good topic actually before we get on

797
01:04:52,176 --> 01:04:59,096
that somebody asked about moving liquidation on strike and strife. Moving liquidation was a

798
01:04:59,096 --> 01:05:04,276
technical solution to a technical problem. If you think about why any liquidation would exist,

799
01:05:04,556 --> 01:05:09,416
that means there is some sort of bankruptcy that would exist. There's some sort of bankruptcy that

800
01:05:09,416 --> 01:05:15,236
means the financial strength of the Bitcoin has fallen so drastically to a point in time that

801
01:05:15,236 --> 01:05:21,356
they are unable to pay the liabilities into the future. That means the liquidation preference

802
01:05:21,356 --> 01:05:26,796
would effectively fall to the liquidation floor of $100. So I think it was a technical solution

803
01:05:26,796 --> 01:05:33,476
to a technical problem, I think relating somewhat to tax or the infrastructure of how the ATM was

804
01:05:33,476 --> 01:05:40,176
designed relative to the preferred stock. So I don't think it's anything to necessarily

805
01:05:40,176 --> 01:05:47,496
freak out about. It's more of just a conceptual, technical change to the dynamic

806
01:05:47,496 --> 01:05:55,436
of how the preferreds are offered. I'm going to jump into convertible debt because I think this

807
01:05:55,436 --> 01:06:00,136
is interesting since we hit on this. And if you go on strategy's website, strategy.com,

808
01:06:00,176 --> 01:06:03,176
you can look at the debt, you can look at all the convertible bonds, you can look at the maturities.

809
01:06:03,676 --> 01:06:08,396
But I think the things that are valuable here are the notional value. So you look at the 3 billion

810
01:06:08,396 --> 01:06:16,236
2029 and the 2 billion 2030B, and you look at the conversion price of these two instruments.

811
01:06:16,236 --> 01:06:22,796
So these were both issued, like one was right in November, like at the peak, what was it?

812
01:06:23,316 --> 01:06:23,956
1121.

813
01:06:24,196 --> 01:06:26,076
And another one was in February, 221.

814
01:06:26,336 --> 01:06:31,376
So $5 billion within the last seven-ish months have been issued.

815
01:06:32,096 --> 01:06:34,996
And that makes up five part of eight.

816
01:06:35,556 --> 01:06:37,216
A majority, what was that?

817
01:06:37,296 --> 01:06:41,416
66%, a majority of the outstanding convertible debt that's out on the balance sheet.

818
01:06:41,536 --> 01:06:44,336
Now, if you look at, why do I look at conversion price?

819
01:06:44,336 --> 01:06:51,816
because if you look at all of them, with the exception of these two, the, uh, the 2029,

820
01:06:52,096 --> 01:06:59,576
$3 billion one, a $672 conversion price, the 2032 billion is a $433 conversion price.

821
01:07:00,136 --> 01:07:05,336
Now, if you think back to how these convertible bonds work, like these convertible bond arbitrage

822
01:07:05,336 --> 01:07:13,416
are hedging consistently. Like when the value of the bond is near the conversion price,

823
01:07:13,416 --> 01:07:18,776
there's a lot of opportunity to hedge the value of the bond relative to the value of the equity.

824
01:07:18,776 --> 01:07:23,416
And I'm going to come back to this image that I drew here a while back after a conversation with

825
01:07:23,416 --> 01:07:27,376
Richard Byworth, where if you look at the conversion price being this yellow line right

826
01:07:27,376 --> 01:07:32,936
in the middle and this green line being the convertible bond price and this blue line being

827
01:07:32,936 --> 01:07:41,336
the price of the equity, you can see that as the value of the bond is near conversion, if you look

828
01:07:41,336 --> 01:07:46,696
this green highlighted zone here above the red line being the bond floor there's a significant

829
01:07:46,696 --> 01:07:50,936
gap of ability to hedge back and forth between the value of the bond and the value of the equity

830
01:07:51,576 --> 01:07:56,056
and so this is called the high gamma zone when there's a lot of discrepancy between the value

831
01:07:56,056 --> 01:08:04,296
of the bond about the value of the equity and as you see the value of the bond get further out of

832
01:08:04,296 --> 01:08:10,616
them or in get further in the money effectively go higher up on the curve here you could see the gap

833
01:08:10,616 --> 01:08:15,416
between the convertible bond price and the price of the equity gets much smaller. So your ability to

834
01:08:15,416 --> 01:08:21,336
hedge is reduced drastically. So that's why we talk about these convertible bonds being in the

835
01:08:21,336 --> 01:08:27,496
money, because if you look at them, all of them, with the exception of these two, $183 conversion

836
01:08:27,496 --> 01:08:33,016
price, $149 conversion price, $232 conversion price, $204 conversion price. And this is what

837
01:08:33,016 --> 01:08:39,656
Ben is alluding to here, that these are so deep in the money, they're likely going to be retired

838
01:08:39,656 --> 01:08:43,096
at some point here in the near future and effectively removed from the balance sheet.

839
01:08:43,096 --> 01:08:48,296
And right then you would have, what, $3 billion of capital that can no longer

840
01:08:48,296 --> 01:08:54,056
effectively hedge across the discrepancy between the price of the bond and the price of the equity.

841
01:08:54,056 --> 01:08:59,816
It's moving very similar to the equity. Now, these two instruments, as we get further out

842
01:08:59,816 --> 01:09:04,856
of the money here, what do we close at? $4.55 today. This is starting to get further and further

843
01:09:04,856 --> 01:09:09,696
in the money. And there starts to be a lot less hedging pressure from these two instruments.

844
01:09:09,856 --> 01:09:16,076
You've got basically $3 billion hedging all the way up to $672 and above. And you've got $2 billion

845
01:09:16,076 --> 01:09:22,616
that's hedging around 433, while the rest of this is likely fully hedged out and effectively trading

846
01:09:22,616 --> 01:09:28,836
their equity. So as you get further up the curve here, you've got less people that are going to be

847
01:09:28,836 --> 01:09:35,236
trying to arb the delta between the value of the bond and the value of the underlying equity.

848
01:09:36,496 --> 01:09:40,336
And if you flip back to your chart, Chad, there, Jeff, if you still have it up.

849
01:09:40,796 --> 01:09:47,416
So most of those are kind of up in that top right portion of this. So you can see that green,

850
01:09:47,676 --> 01:09:52,296
the arb trade in there where there's very little room to be trading. That's what we mean

851
01:09:52,296 --> 01:09:58,076
when we say they're effectively equity, right? There's really no trading left to be done there.

852
01:09:58,076 --> 01:10:03,996
they either need the price to draw way down so that it comes back down closer to that conversion

853
01:10:03,996 --> 01:10:09,996
price where it opens up more capability for them to trade that. And then even the two, that one

854
01:10:09,996 --> 01:10:14,796
that's got a 433 conversion price, if you look, you'd be just to the right of the conversion price

855
01:10:14,796 --> 01:10:19,436
in there. So there's still a lot of room there for trading. So there's no incentive to convert.

856
01:10:19,536 --> 01:10:25,836
And they couldn't convert right now either. The rule on that is it's got to trade at 130%

857
01:10:25,836 --> 01:10:31,256
of the conversion price for 20 days out of a 30-day rolling period. So that hasn't happened yet

858
01:10:31,256 --> 01:10:37,096
on the one with a $433 strike price. So that one's not eligible to convert right now anyways.

859
01:10:37,616 --> 01:10:42,716
So there's $5 billion that's ineligible to convert that's still in the zone where these

860
01:10:42,716 --> 01:10:47,676
guys can trade this and make money on it. But the rest of them are much higher up to the right there

861
01:10:47,676 --> 01:10:50,896
where there's very little room for them to trade these. They're effectively equity.

862
01:10:51,416 --> 01:10:55,816
There's carrying costs associated with holding the short positions that they had and eventually

863
01:10:55,816 --> 01:11:00,416
you convert and you wipe out your short position with the equity that gets delivered to you.

864
01:11:00,556 --> 01:11:04,836
So that's where we're at on the $3.2 billion of the bonds. That's why I'm saying that those are,

865
01:11:05,016 --> 01:11:10,756
at some point here, if the price stays high, are likely to end up converting here at some stage.

866
01:11:11,576 --> 01:11:15,676
The other ones still have time, right? The price still needs to go much higher before those are

867
01:11:15,676 --> 01:11:21,416
convertible. Right. And I think that's why we saw a lot of the juice squeezed out of the

868
01:11:21,416 --> 01:11:27,556
MSTR to IBIT relativity over the last five months is because you had $5 billion of ARB

869
01:11:27,556 --> 01:11:35,536
that was happening in the 200s and 300s underneath the conversion price from the $670 convertible

870
01:11:35,536 --> 01:11:41,316
bond and the $433 convertible bond. So there was just a lot of activity here happening

871
01:11:41,316 --> 01:11:49,036
from the vol junkies, the convertible ARB traders. And as that begins to get hedged out

872
01:11:49,036 --> 01:11:57,696
further and further and there's less ability to have an ARB trade, there's more pressure on the

873
01:11:57,696 --> 01:12:03,056
stock going upwards because there's less people selling the stock artificially via an ARB trade

874
01:12:03,056 --> 01:12:10,076
over time. And they've been shorting, right, to hedge that out. So once those roll off,

875
01:12:10,236 --> 01:12:15,236
those short positions will get released. Yes. Go ahead, Ben.

876
01:12:15,236 --> 01:12:20,956
Yeah, I was just going to say it doesn't quite work like that, but they'll get released. They'll

877
01:12:20,956 --> 01:12:25,496
get wiped off the books with the shares that get delivered to them, right? So it'll net out at

878
01:12:25,496 --> 01:12:30,256
their broker when the shares from converting the bonds get delivered. It'll net out that short

879
01:12:30,256 --> 01:12:36,116
position. So a lot of people are always thinking that one, those shares are going to get delivered

880
01:12:36,116 --> 01:12:39,456
and there's a huge amount of selling pressure that's going to enter the market, right? That's

881
01:12:39,456 --> 01:12:43,316
always the FUD that happens when you hear about any of these converting. They're getting a lot

882
01:12:43,316 --> 01:12:47,956
shares delivered to them now they're going to sell them into the market the reality is that's

883
01:12:47,956 --> 01:12:53,876
not what's happening right those shares are coming into their broker and they're holding a negative

884
01:12:53,876 --> 01:12:59,716
share position right they've sold short and the shares they receive net out that short position

885
01:12:59,716 --> 01:13:05,476
and it washes to zero so there's no big you know share dumping event that happens but that's what

886
01:13:05,476 --> 01:13:10,356
pops up every single time but it really becomes bookkeeping at the broker level yeah so most of

887
01:13:10,356 --> 01:13:14,836
their sell pressure has already happened it's not most of the cell pressure happens immediately when

888
01:13:14,836 --> 01:13:21,076
these bonds are issued so we've talked a lot about the uh the hedging period right or the pricing

889
01:13:21,076 --> 01:13:26,356
period yeah and during that pricing period effectively you know 50 we'll call it round

890
01:13:26,356 --> 01:13:30,436
numbers about half of the shares that are associated with the bond that they're issuing

891
01:13:30,996 --> 01:13:36,516
during that you know three four hour window where they're pricing the bonds will be sold short so

892
01:13:36,516 --> 01:13:42,316
So about half of those shares typically get sold the first day when they're pricing that bond.

893
01:13:42,496 --> 01:13:47,396
And then the rest of them get sold incrementally as the price of MicroStrategy goes higher.

894
01:13:47,556 --> 01:13:50,736
They put on more and more short positions to match that delta.

895
01:13:50,996 --> 01:13:53,696
So, yeah, it's fascinating.

896
01:13:54,096 --> 01:13:56,676
And I feel like we haven't talked about this stuff in a long time.

897
01:13:56,756 --> 01:13:58,936
We covered it for a very long time early on.

898
01:13:59,096 --> 01:14:01,136
These were the only products we were interested in.

899
01:14:01,496 --> 01:14:05,416
And now he's tossed some new things out that's got Dan off and working here.

900
01:14:05,416 --> 01:14:10,496
Dan's got to be pretty close to becoming the smartest guy on these preferred products that's out there.

901
01:14:11,136 --> 01:14:14,876
I remember having these conversations in September, October.

902
01:14:15,896 --> 01:14:17,836
The converts were all there was to talk about.

903
01:14:18,036 --> 01:14:20,456
In October, yeah, we were wrapping our head around this.

904
01:14:20,616 --> 01:14:21,036
We were like, wow.

905
01:14:21,036 --> 01:14:22,556
It shows how small-brained we were, right?

906
01:14:22,916 --> 01:14:27,476
We weren't killers out here working with AI, designing new products,

907
01:14:27,476 --> 01:14:30,776
and we're just trying to catch up on the ones that he's issued a bunch of for years.

908
01:14:31,156 --> 01:14:33,196
We weren't thinking very creatively at the time.

909
01:14:33,196 --> 01:14:36,396
So now we can data dump all that information, right?

910
01:14:36,396 --> 01:14:37,796
We don't need it for the test anymore.

911
01:14:37,796 --> 01:14:38,796
Bingo.

912
01:14:38,796 --> 01:14:40,796
Just get rid of it.

913
01:14:40,796 --> 01:14:46,196
What I think is helpful to think about is which one of those instruments are better for the

914
01:14:46,196 --> 01:14:49,196
common stock shareholder, convertible bond or the preferred equity?

915
01:14:49,196 --> 01:14:54,096
I think that's good to like a good exercise to think about when you're, you know, I've

916
01:14:54,096 --> 01:14:57,196
seen a lot of people saying, you know, sailor needs to add more leverage.

917
01:14:57,196 --> 01:15:01,196
And it's like, well, okay, well, what type of leverage?

918
01:15:01,196 --> 01:15:02,696
And Ben, as you alluded to here,

919
01:15:02,696 --> 01:15:04,156
if you've got a convertible bond

920
01:15:04,156 --> 01:15:06,196
and they're shorting 50% of their issuance

921
01:15:06,196 --> 01:15:07,236
right away on day one,

922
01:15:07,236 --> 01:15:09,736
or 70% of the issuance right away on day one,

923
01:15:09,736 --> 01:15:13,696
that's 70% dilution on day one,

924
01:15:13,696 --> 01:15:17,256
70 cents on the dollar dilution for that $3 billion.

925
01:15:17,256 --> 01:15:19,516
So they're effectively, you know,

926
01:15:19,516 --> 01:15:24,196
you get $5 billion issued in the last seven months,

927
01:15:24,196 --> 01:15:27,696
you effectively got $4 billion of stock

928
01:15:27,696 --> 01:15:28,776
that was sold on the market

929
01:15:28,776 --> 01:15:30,576
in a very short period of time.

930
01:15:30,576 --> 01:15:33,636
So those shares are effectively floating around.

931
01:15:33,756 --> 01:15:34,336
That's liquidity.

932
01:15:34,556 --> 01:15:37,456
That's a pool of liquidity of shares that's floating around within the market.

933
01:15:38,176 --> 01:15:45,196
Whereas the preferred equity, when that capital is issued, they're able to buy Bitcoin day one.

934
01:15:46,156 --> 01:15:50,876
And that dividend isn't payable until the next quarter.

935
01:15:50,876 --> 01:15:57,176
And then these are quarterly dividends paid into the future.

936
01:15:57,176 --> 01:16:04,436
but there's generally probably far less shorting that's going on maybe maybe not on strike maybe

937
01:16:04,436 --> 01:16:08,576
there's some arb opportunity on strike people are arving back and forth there yeah i'm so curious to

938
01:16:08,576 --> 01:16:12,696
hear to see how that plays out yeah i gotta talk to some more people i'm gonna make some phone calls

939
01:16:12,696 --> 01:16:22,496
um but yeah that dilution is happening over time and it's not getting arbed out consistently right

940
01:16:22,496 --> 01:16:26,856
there's it's a completely different buyer that's buying the convertible bond than that's buying the

941
01:16:26,856 --> 01:16:32,596
preferred instruments and they have different behavior and they have different behavior in the

942
01:16:32,596 --> 01:16:39,256
market and they operate differently. I think just something to be aware of. Yeah. I was one of those

943
01:16:39,256 --> 01:16:43,176
people that was like, had my fingers crossed, hoping we'd see a bunch of convertible bond deals.

944
01:16:43,176 --> 01:16:48,076
I wanted like rapid fire. I wanted that leverage ratio to just pump back up to like 20% or

945
01:16:48,076 --> 01:16:55,736
something. Because my theory is that the implied vol is dependent on a higher leverage ratio.

946
01:16:55,736 --> 01:17:01,676
but um you know i came around once i started realizing that that the bond traders aren't

947
01:17:01,676 --> 01:17:07,816
necessarily like on our side like you said they're hedging immediately um and shorting out most of

948
01:17:07,816 --> 01:17:13,136
that position and then they're incentivized to do it again and again and again every time the the

949
01:17:13,136 --> 01:17:20,616
price pumps so um yeah i've i've kind of reversed on that on that idea yeah i think that in in the

950
01:17:20,616 --> 01:17:25,816
early days, there was some utility around the convertible bonds and building that liquidity

951
01:17:25,816 --> 01:17:31,736
profile under the equity, right? Because now you know you have people that are trading around your

952
01:17:31,736 --> 01:17:45,380
share price movement So if you trying to build liquidity in your equity I think that they serve the utility But I think most companies now are going to skip convertible bonds entirely I think that they seeing how much more creative

953
01:17:45,380 --> 01:17:51,000
it is to go into these preferred products. And the fact that these preferred products build a

954
01:17:51,000 --> 01:17:57,660
resilient business model in a bear market, and they give you a product that has more value because

955
01:17:57,660 --> 01:18:02,320
of that yield, where the market's still going to have a demand for yield, even if we're in a Bitcoin

956
01:18:02,320 --> 01:18:07,800
bear market, I think that you're going to see most of these companies now going from building scale

957
01:18:07,800 --> 01:18:13,060
initially with equity offerings, whether it's pipes or pipes plus ATMs or however they do it.

958
01:18:13,500 --> 01:18:18,660
And then they're going to start moving straight into the preferred market because you can now

959
01:18:18,660 --> 01:18:25,560
maximize for shareholder accretion now that this market's proven out and you can start running the

960
01:18:25,560 --> 01:18:29,280
math. And what's really interesting with the preferred products, particularly the perpetual

961
01:18:29,280 --> 01:18:35,880
preferreds, and I know Sailor said this a bunch of times, is that you can only do this with a

962
01:18:35,880 --> 01:18:41,420
permanent asset, right? The fact that Bitcoin can live forever is the only reason they can make

963
01:18:41,420 --> 01:18:46,780
these perpetual. And I think a lot of these companies now, you know, they're not going to

964
01:18:46,780 --> 01:18:52,480
go in with massive scale right out of the bat, right off the bat, because I think it's important

965
01:18:52,480 --> 01:18:57,900
to show the market that you're being thoughtful about how you're deploying these. And strategy

966
01:18:57,900 --> 01:19:01,940
just happened to deploy them when they were, you know, what, an $80 billion market cap,

967
01:19:02,000 --> 01:19:03,600
maybe when the first one came out, right?

968
01:19:03,600 --> 01:19:07,500
They had massive scale and relative to their scale and the liquidity around their equity,

969
01:19:07,500 --> 01:19:10,340
it was very trivial for them to launch these.

970
01:19:11,000 --> 01:19:15,240
But I do think that you need some level of scale first before the market's going to trust

971
01:19:15,240 --> 01:19:18,160
it so that you've got that credit quality around the product, right?

972
01:19:18,160 --> 01:19:22,180
So you can maintain something like an eight to one Bitcoin rating, right?

973
01:19:22,200 --> 01:19:23,920
Or over collateralization on the product.

974
01:19:23,920 --> 01:19:31,500
So I think companies are going to be very thoughtful in terms of how they start to issue these products into the market and how they choose to scale them up.

975
01:19:31,700 --> 01:19:40,200
But I think as a result, you might actually see some weird things happen, like for a while, maybe the premiums in the convertible bond market just to get these companies to issue them.

976
01:19:40,240 --> 01:19:44,700
Because keep in mind, these are goldmine products for these convertible arm traders.

977
01:19:45,420 --> 01:19:51,340
right? Once you get a taste of, you know, doing your delta hedging on an instrument that has,

978
01:19:51,340 --> 01:19:56,700
you know, 70 to 90 vol and now you got to go back and you got to try to get convertible bonds of

979
01:19:56,700 --> 01:20:02,300
something with, you know, 20 to 30. Like imagine the letdown, right? They were pulling forward

980
01:20:02,300 --> 01:20:08,220
profits and returns years because they could trade it so frequently. Whereas when you get into these

981
01:20:08,220 --> 01:20:12,380
other equities where their executives are stripping out volatility and stripping out the risk and

982
01:20:12,380 --> 01:20:13,720
and there's nothing exciting happening,

983
01:20:13,720 --> 01:20:15,440
and the equity does never move,

984
01:20:15,440 --> 01:20:17,300
they can't do that much trading.

985
01:20:17,300 --> 01:20:19,380
So you could get this weird scenario

986
01:20:19,380 --> 01:20:21,840
where there's pockets of companies that decide

987
01:20:21,840 --> 01:20:23,820
that maybe for a while they're gonna specialize

988
01:20:23,820 --> 01:20:25,060
in the convertible bond market

989
01:20:25,060 --> 01:20:26,640
because there's a void there, right?

990
01:20:26,640 --> 01:20:30,840
Strategy, if they leave and they take billions of dollars

991
01:20:30,840 --> 01:20:32,360
that were coming into their products

992
01:20:32,360 --> 01:20:34,620
and they just never replace them,

993
01:20:34,620 --> 01:20:36,460
you know, there's a vacuum in that market

994
01:20:36,460 --> 01:20:37,660
that somebody is gonna fill.

995
01:20:37,660 --> 01:20:40,340
And maybe that means that you start seeing those premiums

996
01:20:40,340 --> 01:20:42,140
that they're able to raise the capital going up to,

997
01:20:42,140 --> 01:20:48,380
know, 60, 70, 80 percent so that they can get access to the volatility profile of these

998
01:20:48,380 --> 01:20:52,540
Bitcoin treasury company equities. I mean, you could see weird things happen. So I'm very interested

999
01:20:53,260 --> 01:20:57,980
to watch how these markets play out because there's just a lot of directions this can go.

1000
01:20:57,980 --> 01:21:03,900
But if you look at incentives of who it is that's managing these capital, they need returns,

1001
01:21:03,900 --> 01:21:07,660
right? That's how they're judged. And they've had really good returns if they've been getting

1002
01:21:07,660 --> 01:21:13,240
allocations to the micro strategy convertible bonds. And if that dries up and they're back to

1003
01:21:13,240 --> 01:21:17,600
just the regular trading, you might see those returns start dropping off quickly. And they're

1004
01:21:17,600 --> 01:21:21,820
going to be knocking on every Bitcoin treasury company's door, asking them or begging them to

1005
01:21:21,820 --> 01:21:27,560
issue convertible bonds. And maybe the terms loosen. Maybe the market softens because we have

1006
01:21:27,560 --> 01:21:32,140
seen the market harden pretty drastically. If you look at some of the Bitcoin treasury companies

1007
01:21:32,140 --> 01:21:38,140
have taken on convertible debt, they're secured by the Bitcoin over collateralized, and there's

1008
01:21:38,140 --> 01:21:43,340
technical margin calls. Whereas that's fundamentally different than strategies convertible bond that

1009
01:21:43,340 --> 01:21:48,620
doesn't have, it's not encumbered by the Bitcoin, or the Bitcoin isn't encumbered at all. So there's

1010
01:21:48,620 --> 01:21:54,700
completely separate and those are contractual terms that if the market softens on those,

1011
01:21:56,140 --> 01:21:59,660
that might start to be a lot more attractive to the market, right?

1012
01:21:59,660 --> 01:22:05,100
I think one thing for people to be aware of when they're watching all these deals happen

1013
01:22:06,380 --> 01:22:11,900
is the capital that's available for new companies in particular coming out,

1014
01:22:11,900 --> 01:22:18,860
that expands and contracts really quickly. And it's almost entirely driven by whether the last

1015
01:22:18,860 --> 01:22:25,660
deal that was made in the market was successful or not. And you saw this happen when DJT came out,

1016
01:22:25,660 --> 01:22:30,620
when True Social did their raise and that did not perform for those pipe investors at all.

1017
01:22:31,420 --> 01:22:36,140
And the capital dried up. People weren't looking at that investment because you see one of those

1018
01:22:36,140 --> 01:22:40,860
that really doesn't perform and then they go, maybe it's over. Maybe there's not the excitement

1019
01:22:41,580 --> 01:22:45,580
around these. Maybe investors aren't flocking to these Bitcoin treasury companies that are

1020
01:22:45,580 --> 01:22:49,500
raising capital and getting ready to acquire Bitcoin anymore. And maybe this isn't where to

1021
01:22:49,500 --> 01:22:53,580
deploy. But when you see a bunch of them come into the market and they perform really, really well,

1022
01:22:54,140 --> 01:22:59,420
that access to capital expands and there's more capital available at better terms.

1023
01:22:59,420 --> 01:23:03,340
But when they don't perform, you see the terms tighten up, you see less favorable terms in the

1024
01:23:03,340 --> 01:23:09,340
market. It's harder to get access to that capital. And so you're going to see these expansion and

1025
01:23:09,340 --> 01:23:14,860
contraction phases for companies entering the market. And it's all going to depend on what

1026
01:23:14,860 --> 01:23:19,740
stage we're at. If the most recent deal was a blockbuster home run and these investors were

1027
01:23:19,740 --> 01:23:24,220
making a bunch of money they're going to want to re-up and redeploy it into the next deal but if

1028
01:23:24,220 --> 01:23:28,300
they don't perform then the companies are going to have to get creative how they raise capital

1029
01:23:28,300 --> 01:23:32,700
that's so true and so you're going to you're going to have this bitcoin volatility and that's going

1030
01:23:32,700 --> 01:23:36,620
to be that's going to be a wave that's happening over time and then you're going to have traditional

1031
01:23:36,620 --> 01:23:43,020
financial capital market uh peaks and troughs of capital coming in the door at different times

1032
01:23:43,020 --> 01:23:46,860
and those might be opportunistic depending on certain times in bitcoin's volatility

1033
01:23:46,860 --> 01:23:48,860
And, oh, wow.

1034
01:23:48,860 --> 01:23:49,860
Yeah.

1035
01:23:49,860 --> 01:23:50,860
The market's evolving.

1036
01:23:50,860 --> 01:23:51,860
Yeah.

1037
01:23:51,860 --> 01:23:52,860
Holy moly.

1038
01:23:52,860 --> 01:23:53,860
Quickly.

1039
01:23:53,860 --> 01:23:54,860
Yeah.

1040
01:23:54,860 --> 01:23:56,860
Now you're going to have a lot more people that want those deals.

1041
01:23:56,860 --> 01:23:57,860
Right?

1042
01:23:57,860 --> 01:24:03,860
I mean, 12 months ago, there was one company that wanted that product.

1043
01:24:03,860 --> 01:24:06,860
And that was strategy.

1044
01:24:06,860 --> 01:24:15,860
And now you've got, you know, 20, 30 that want that product and that could buy that product.

1045
01:24:15,860 --> 01:24:19,720
but maybe they don't unless the terms, unless everybody, you know, holds out on terms.

1046
01:24:20,300 --> 01:24:23,460
Wow. Yeah. That's a really interesting point. That market is going to evolve

1047
01:24:23,460 --> 01:24:32,680
because the vol junkies are greedy and they will definitely drop terms to come to the table there.

1048
01:24:33,480 --> 01:24:35,980
Wow. Good point. Huh?

1049
01:24:36,260 --> 01:24:44,300
Any chances strategy takes on a non-convertible bond, just straight debt, like signature loan type stuff?

1050
01:24:45,860 --> 01:24:47,240
I don't think so.

1051
01:24:47,380 --> 01:24:54,900
Yeah, he said he would take it on as a secondary measure if they couldn't raise preferred equities.

1052
01:24:56,160 --> 01:24:59,120
Because if it was the same interest rate as the preferreds, I don't see what the difference would be.

1053
01:24:59,160 --> 01:25:00,720
Or maybe there's unknown negatives.

1054
01:25:01,340 --> 01:25:06,760
Duration and a liability to pay back at a specific point in time.

1055
01:25:07,940 --> 01:25:15,500
So let's just say you did an eight year deal and I don't know, $5 billion at 6% interest.

1056
01:25:15,500 --> 01:25:19,340
they give you that $5 billion, you got to pay them that $5 billion at that future point in time.

1057
01:25:19,460 --> 01:25:27,180
So maybe it makes sense at a certain point in time, depending on the liquidity and different

1058
01:25:27,180 --> 01:25:31,740
capital markets and their ability to use capital in different ways, but probably less attractive.

1059
01:25:32,380 --> 01:25:37,880
Because the reason the preferred equities are so attractive is that they're perpetual.

1060
01:25:39,540 --> 01:25:40,220
They're forever.

1061
01:25:40,260 --> 01:25:43,000
And even that kind of deal would have to go above strife, right?

1062
01:25:43,000 --> 01:25:45,140
And you're saying they probably don't want that to happen.

1063
01:25:45,500 --> 01:25:48,500
It would change the credit quality.

1064
01:25:48,500 --> 01:25:49,500
It would change.

1065
01:25:49,500 --> 01:25:50,500
Exactly.

1066
01:25:50,500 --> 01:25:52,500
And it'd be an uncertainty for like strife holders.

1067
01:25:52,500 --> 01:25:54,500
I think it would be a pretty bad look.

1068
01:25:54,500 --> 01:25:56,500
That's a good point.

1069
01:25:56,500 --> 01:25:58,500
Yeah, that's a really good point.

1070
01:25:58,500 --> 01:26:03,500
One question that's come up a bit is in the chat is the, when are these going to get rated?

1071
01:26:03,500 --> 01:26:08,500
It's an unknown when these preferred equity instruments are going to get rated.

1072
01:26:08,500 --> 01:26:14,500
I know that team is working pretty, pretty diligently and trying to get these instruments rated, but that the market needs to be a little bit more.

1073
01:26:14,500 --> 01:26:16,580
The market needs to evolve.

1074
01:26:17,020 --> 01:26:19,680
There needs to be more people offering these products in the market.

1075
01:26:20,020 --> 01:26:24,640
There needs to be a history of dividends paid at a future point in time.

1076
01:26:24,640 --> 01:26:35,500
There needs to be a history of Bitcoin's performance, probably a little bit more global and U.S. adoption from equity markets.

1077
01:26:35,600 --> 01:26:37,020
Maybe the S&P 500, right?

1078
01:26:37,080 --> 01:26:41,140
The S&P 500 is going to have to review what's going on here with strategy.

1079
01:26:41,140 --> 01:26:45,640
and it's going to become very apparent very quickly

1080
01:26:45,640 --> 01:26:49,620
that they need to determine their view on Bitcoin.

1081
01:26:49,800 --> 01:26:51,140
And I don't think they've got it yet.

1082
01:26:52,020 --> 01:26:54,240
Obviously Coinbase and Tesla are in the S&P 500,

1083
01:26:54,240 --> 01:27:01,740
but I don't think that's an implicit acceptance

1084
01:27:01,740 --> 01:27:03,320
of Bitcoin held on the balance sheet.

1085
01:27:03,580 --> 01:27:09,060
So yeah, I think this is going to evolve over time,

1086
01:27:09,080 --> 01:27:09,840
but it just takes time.

1087
01:27:10,060 --> 01:27:11,000
It takes other people in the market.

1088
01:27:11,140 --> 01:27:14,980
And it takes success over a significant period of time

1089
01:27:14,980 --> 01:27:16,140
for people to understand, you know,

1090
01:27:16,140 --> 01:27:17,620
what is the risk profile here?

1091
01:27:17,620 --> 01:27:20,600
Although I think that's where there's significant opportunity

1092
01:27:20,600 --> 01:27:23,700
in these products is you see, you think about what are the,

1093
01:27:23,700 --> 01:27:25,700
what is the risk profile of these instruments

1094
01:27:25,700 --> 01:27:28,500
relative to everything else that I could get in the market.

1095
01:27:28,500 --> 01:27:32,420
You know, all of these other dividend paying stocks,

1096
01:27:33,360 --> 01:27:38,360
Chevron, PG&E, Boeing, your Home Depot,

1097
01:27:39,140 --> 01:27:40,320
whatever that may be relative

1098
01:27:40,320 --> 01:27:41,920
to what I can get over here with this instrument

1099
01:27:41,920 --> 01:27:43,780
with no physical risk,

1100
01:27:43,780 --> 01:27:45,620
everything starts to look a lot better.

1101
01:27:48,260 --> 01:27:52,000
So Dan, I know you prepared some data on the preps.

1102
01:27:52,000 --> 01:27:53,400
Do you wanna go through that real quick?

1103
01:27:53,400 --> 01:27:55,700
Maybe 10 minutes on it?

1104
01:27:55,700 --> 01:27:56,920
Yeah, definitely.

1105
01:27:56,920 --> 01:27:58,400
I have that weekly,

1106
01:27:58,400 --> 01:28:02,140
it's kind of turned into a weekly volume update.

1107
01:28:02,140 --> 01:28:03,920
Yeah, yeah, yeah, let's check that out.

1108
01:28:03,920 --> 01:28:05,560
Share that, cool.

1109
01:28:05,560 --> 01:28:06,720
Let me share my screen.

1110
01:28:10,320 --> 01:28:15,360
I also love all the comments that are showing up saying that Dan's room smells of rich mahogany.

1111
01:28:20,100 --> 01:28:22,420
Can you see this?

1112
01:28:23,820 --> 01:28:24,740
Yeah, let me throw it up there.

1113
01:28:28,780 --> 01:28:30,240
Sorry, I'll monitor the chat.

1114
01:28:33,200 --> 01:28:36,520
This is just my weekly kind of overview of...

1115
01:28:36,520 --> 01:28:38,140
Yeah, can you make it a little, just a tad bigger?

1116
01:28:38,640 --> 01:28:39,560
Let's see.

1117
01:28:40,320 --> 01:28:41,300
Oh, no, that's fine.

1118
01:28:41,460 --> 01:28:41,840
That's fine.

1119
01:28:41,960 --> 01:28:43,500
I want to keep the column headers in there.

1120
01:28:43,840 --> 01:28:44,240
Yes, there you go.

1121
01:28:44,300 --> 01:28:44,680
That's fine.

1122
01:28:44,840 --> 01:28:45,020
Yep.

1123
01:28:45,260 --> 01:28:45,580
Yeah.

1124
01:28:45,780 --> 01:28:49,920
So there's three weeks of update since we last ripped here.

1125
01:28:49,920 --> 01:28:54,000
And obviously at the quarter end, we saw no ATM issuance.

1126
01:28:54,280 --> 01:28:59,920
So most importantly, we've got the strike volume in dollars, strife volume in dollars,

1127
01:29:00,120 --> 01:29:04,120
so strike then strife, ATM then percent ATM.

1128
01:29:04,240 --> 01:29:08,140
And this is really key, I think, for understanding how these things are being issued into the

1129
01:29:08,140 --> 01:29:08,440
market.

1130
01:29:08,600 --> 01:29:09,840
And it's a lot different than common.

1131
01:29:10,320 --> 01:29:27,660
So let's use last week as an example. And we saw 29, and these numbers are rough, but 29% of the weekly traded volume of strike was issued as ATM, 24% of strife.

1132
01:29:27,660 --> 01:29:33,420
those are overestimating a bit but the point being is you know you can see this theme go

1133
01:29:33,420 --> 01:29:42,720
go back into history here with 26 36 20 11 when we were doing our rigorous analysis on the atm

1134
01:29:42,720 --> 01:29:51,140
issuance in october november really not october but november december strategy rarely issued more

1135
01:29:51,140 --> 01:29:56,860
than seven percent of weekly traded volume as atm and if they did so it was like a monster week

1136
01:29:56,860 --> 01:30:03,320
So they're able to somehow maintain the price of these securities while issuing massive amounts relative to the trade volume.

1137
01:30:04,380 --> 01:30:17,500
And I think the one that's really interesting to watch is Strike, because as Ben and you, Jeff, and Soleil have already mentioned, there's going to be cool ARB opportunities, convertible hedging opportunities that arise with Strike.

1138
01:30:17,640 --> 01:30:24,760
So I see the volume of Strike increasing dramatically as the price of MSCR approaches that conversion price.

1139
01:30:24,760 --> 01:30:31,220
So I think it'll be really interesting to watch what they're able to do here in terms of issuance relative to weekly volume.

1140
01:30:35,280 --> 01:30:43,180
Yeah, it's really unique because it's one of those few instances where you can go really hard on the ATM and not damage the market.

1141
01:30:43,660 --> 01:30:44,020
Self-healing.

1142
01:30:44,360 --> 01:30:46,000
It's the self-healing products, right?

1143
01:30:46,060 --> 01:30:49,180
If you drive the price down, the yield goes up, you find more buyers.

1144
01:30:49,180 --> 01:30:56,280
and that's just a huge advantage that strategy has right now that none of the other companies

1145
01:30:56,280 --> 01:31:00,820
do because they don't have these products in market is when you have that they can be aggressive

1146
01:31:00,820 --> 01:31:08,220
you know 20 to 30 percent of weekly traded volume is massive for an atm it's insane absolutely it's

1147
01:31:08,220 --> 01:31:14,380
crazy yeah and as you're you know that starts to compound on itself right you know because the next

1148
01:31:14,380 --> 01:31:20,940
week now you've added 25 you know more out there and now they're hitting that another 25 it just

1149
01:31:20,940 --> 01:31:25,980
keeps going and going and going so these products are going to scale we're just in the very early

1150
01:31:25,980 --> 01:31:31,020
days right now but you know and maybe dad one of these one of these weeks when you're poking

1151
01:31:31,020 --> 01:31:34,860
through the numbers that'd be fun to do is to project it out and just say if they just keep

1152
01:31:34,860 --> 01:31:40,780
hitting 20 a week on this atm how much are they raising three months from now because i think the

1153
01:31:40,780 --> 01:31:45,180
numbers get pretty staggering pretty fast and you know where it's going to come right it's going to

1154
01:31:45,180 --> 01:31:49,580
end up in in strike because that's where they've got the massive atm open they're telling you where

1155
01:31:49,580 --> 01:31:57,420
they're effectively planning to raise right strife has what 2.1 billion and strike has 21 and stride

1156
01:31:57,420 --> 01:32:02,460
as what they open there 4.2 or something 4.2 something like that yep so you can see where

1157
01:32:02,460 --> 01:32:08,060
they're going to be focusing and to your point dan you know when the price of msdr starts running up

1158
01:32:08,060 --> 01:32:11,980
there's probably going to be a lot of demand for strike and they're going to be able to issue a ton

1159
01:32:11,980 --> 01:32:18,380
of that so i'm expecting to see that ramp up really really quickly it's good the arbitrage

1160
01:32:18,380 --> 01:32:21,820
is going to be like insane right when you think about that and that's the thing i keep coming back

1161
01:32:21,820 --> 01:32:28,300
to you like let's say mstr gets to 650 a share then you're sitting at you know 50 out of the

1162
01:32:28,300 --> 01:32:35,340
money strike on strike for lack of a better term that's similar to any of the converts issued and

1163
01:32:35,340 --> 01:32:45,460
And if you look at the kind of value of strike relative to a convert at that point in time, like strike will be massively, massively valuable at that MSTR price.

1164
01:32:45,880 --> 01:32:48,480
But then they're also going to be ATMing a lot of it.

1165
01:32:48,480 --> 01:32:52,360
So the harder the ATM, the better the value buy of strike is.

1166
01:32:52,880 --> 01:33:01,120
So the more incentivized people will come in to be long strike and short MSTR for, again, they probably won't be short MSTR.

1167
01:33:01,120 --> 01:33:19,044
But every time they they ATM strike strike becomes more attractive relative to MSTR at these higher MSTR prices So it like tough to understand the money is going to start pouring into it Yeah It so reflexive right The whole thing

1168
01:33:19,184 --> 01:33:24,324
everything benefits everything. And I don't know if it's better to hold strike or MSTR there.

1169
01:33:24,664 --> 01:33:27,144
That's really the question. I'm trying to figure out myself.

1170
01:33:27,564 --> 01:33:31,724
But this is what leads me to believe that they have no intention of replacing these convertible

1171
01:33:31,724 --> 01:33:36,044
bonds, right? When you start looking at that volume that they're pushing on the ATMs here,

1172
01:33:36,044 --> 01:33:40,884
and the scale when that starts to compound it's not going to take them that long to get to billions

1173
01:33:40,884 --> 01:33:45,884
of dollars in capital raised yeah when they do it's just going to be that much more powerful

1174
01:33:45,884 --> 01:33:51,364
with every weekly raise that they do so you know i think that this is the path now i think it's

1175
01:33:51,364 --> 01:33:55,644
going to be pretty much all prefs you know the convert market's always there for him

1176
01:33:55,644 --> 01:34:01,284
and if he does need that injection if he feels really under levered and they've got just massive

1177
01:34:01,284 --> 01:34:05,864
capacity out there and huge over collateralization you know of course they could always lean back to

1178
01:34:05,864 --> 01:34:12,264
that if they needed to. But this is clearly the path. This is where he's going to focus. And I

1179
01:34:12,264 --> 01:34:17,024
think we're going to see this ramp up in a big way. But doing those projections to look at,

1180
01:34:17,024 --> 01:34:21,264
you know, compounding, how long does it take them to get through the $21 billion strike issuance?

1181
01:34:21,684 --> 01:34:26,524
I'm guessing it's a lot shorter than people think. Oh, yeah. If you just look at this rate,

1182
01:34:26,564 --> 01:34:33,764
right? I mean, they raised $141 million last week on a product that's five months old.

1183
01:34:33,764 --> 01:34:42,864
right and or an instrument class that is five months old never existed before and they're

1184
01:34:42,864 --> 01:34:48,644
they're raising 141 million dollars in a week you're like oh my god this is the rate of change

1185
01:34:48,644 --> 01:34:54,844
here is just massive yeah so like i just took that 141 and ran it out and i think it was

1186
01:34:54,844 --> 01:35:01,284
no i forgot how many it was but call it 14 weeks before they were raising a billion dollars a week

1187
01:35:01,284 --> 01:35:05,784
if it just keeps going at that same percentage of volume and the volume keeps scaling.

1188
01:35:07,104 --> 01:35:08,064
That's massive.

1189
01:35:08,404 --> 01:35:09,264
A billion a week.

1190
01:35:09,604 --> 01:35:10,464
Oh my God.

1191
01:35:10,584 --> 01:35:11,324
That's massive.

1192
01:35:11,504 --> 01:35:12,204
Oh my God.

1193
01:35:13,644 --> 01:35:14,524
And then they're going to issue that.

1194
01:35:14,524 --> 01:35:21,504
And again, if they're doing that, everyone owning, like if the arbitrage is great enough,

1195
01:35:22,044 --> 01:35:26,904
then anyone owning MSTR, like if they're ATMing hard enough, the arbitrage exists such that

1196
01:35:26,904 --> 01:35:33,604
Anyone owning MSTR is incentivized to switch over to strike, which only makes the buy pressure

1197
01:35:33,604 --> 01:35:34,564
on strike that much more.

1198
01:35:34,724 --> 01:35:35,404
It's really crazy.

1199
01:35:35,684 --> 01:35:37,724
Which also makes MSTR more valuable.

1200
01:35:38,884 --> 01:35:39,364
Exactly.

1201
01:35:39,724 --> 01:35:39,884
Right?

1202
01:35:40,004 --> 01:35:43,404
Because it's just, it's shoving more capital on the balance.

1203
01:35:43,584 --> 01:35:48,684
I mean, you know that they're going to be taking that new capital and just buying more

1204
01:35:48,684 --> 01:35:52,264
Bitcoin, which is going to shoot Bitcoin rocket higher.

1205
01:35:53,944 --> 01:35:55,044
Yeah, exactly.

1206
01:35:55,164 --> 01:35:55,524
Exactly.

1207
01:35:55,524 --> 01:35:58,584
I really think Strikes the main story in terms of their ATM.

1208
01:35:58,784 --> 01:36:00,424
Like, Strikes, they got out the door.

1209
01:36:00,604 --> 01:36:01,524
It's like, whatever.

1210
01:36:01,744 --> 01:36:02,984
Like, they're going to issue the whole ATM.

1211
01:36:03,544 --> 01:36:04,284
People love it.

1212
01:36:04,404 --> 01:36:06,584
The credit rating, the credit spread will continue to drop.

1213
01:36:06,724 --> 01:36:07,104
Like, whatever.

1214
01:36:07,744 --> 01:36:09,964
It'll become investment grade, and then there'll be $3 billion.

1215
01:36:10,224 --> 01:36:10,904
Yeah, that would be good.

1216
01:36:11,164 --> 01:36:11,944
It's just whatever.

1217
01:36:12,104 --> 01:36:12,904
Like, okay, that's going to happen.

1218
01:36:13,284 --> 01:36:17,424
Strikes, they've essentially signaled to the market, yeah, we'll use it in times of distress,

1219
01:36:17,644 --> 01:36:19,024
and we'll try to issue it, whatever.

1220
01:36:19,184 --> 01:36:21,524
But, like, the main story on the press is Strikes.

1221
01:36:21,524 --> 01:36:29,084
and that and i think it real things really get interesting between 500 mstr and 700 mstr

1222
01:36:29,084 --> 01:36:38,064
and then mstr yeah it's it's that uh it's that this period exactly yeah where the bond where

1223
01:36:38,064 --> 01:36:43,584
the bond the price of the convertible preferred equity may not move as fast as mstr is moving

1224
01:36:43,584 --> 01:36:49,644
but anybody that holds mstr they may find arb opportunities where they're like oh all the

1225
01:36:49,644 --> 01:36:54,144
yields high over here and it's underpriced, I might move from here to there.

1226
01:36:54,804 --> 01:36:58,384
Exactly. And I think that's going to be a vortex of capital.

1227
01:36:58,764 --> 01:37:03,884
And so, and then the ATM it, the ATM that new capital going from here to there.

1228
01:37:04,444 --> 01:37:06,064
I kind of wish they didn't sometimes.

1229
01:37:06,064 --> 01:37:12,844
And then they buy more Bitcoin, which creates more excess return, excess volatility on the balance

1230
01:37:12,844 --> 01:37:17,044
sheet. In which case, maybe it looks more attractive to come back to MSDR.

1231
01:37:17,764 --> 01:37:18,184
Exactly.

1232
01:37:18,184 --> 01:37:33,204
I don't know if this week that we had with the dividend reinvestments when the prices all went crazy on these prefs, you know, part of me, I was thinking, you know, maybe they were just asleep at the wheel and they didn't really contemplate how much of that would try to get reinvested.

1233
01:37:33,264 --> 01:37:37,624
And so they weren't ready to capitalize with enough new shares to issue out there to absorb it.

1234
01:37:38,024 --> 01:37:46,784
The other part of me thinks they knew exactly what was going to happen and it pushes it up and it makes it that much more creative when you think that you're raising more and more capital.

1235
01:37:46,784 --> 01:37:53,264
and the dividend obligations are less at those higher prices relative to the amount of capital

1236
01:37:53,264 --> 01:37:58,304
you're raising. So it just made every one of those, it kind of repriced them, which I know

1237
01:37:58,304 --> 01:38:02,984
isn't actually great for fixed income investors, right? The institutional fixed income investors,

1238
01:38:02,984 --> 01:38:09,044
that type of volatility is not great. But for strategy raising capital, while most of these

1239
01:38:09,044 --> 01:38:13,964
fixed income investors can't allocate to it anyways, because it doesn't have a rating yet,

1240
01:38:13,964 --> 01:38:17,424
and they're a little draconian in their measures over there,

1241
01:38:18,144 --> 01:38:20,344
it just made it all that much more creative for them

1242
01:38:20,344 --> 01:38:22,284
to really keep hitting these preferred products

1243
01:38:22,284 --> 01:38:25,664
because now they're not issuing them at par anymore.

1244
01:38:25,784 --> 01:38:28,904
Now they're issuing them when they were $120, $130, right?

1245
01:38:28,944 --> 01:38:30,204
20, 30% above par.

1246
01:38:31,304 --> 01:38:32,924
And so the amount of capital they're collecting

1247
01:38:32,924 --> 01:38:34,784
relative to the obligation of the dividends

1248
01:38:34,784 --> 01:38:37,104
became that much more favorable.

1249
01:38:38,104 --> 01:38:41,784
So you might see that they might shut these things down

1250
01:38:41,784 --> 01:38:43,604
every time dividends are getting reinvested.

1251
01:38:43,964 --> 01:38:47,804
layoffs maybe it's a blackout period maybe that's just how they align maybe it just happened to be

1252
01:38:47,804 --> 01:38:51,724
a blackout period because there's information coming out who knows i don't have the answer to

1253
01:38:51,724 --> 01:38:57,404
that but it was fascinating to watch what happened because i do think that's what happened i think

1254
01:38:57,404 --> 01:39:05,724
that an astounding amount of people one were reinvesting or two realized they didn't turn on

1255
01:39:05,724 --> 01:39:11,564
dividend reinvestment so they were self-reinvesting during that period and you just had a ton of demand

1256
01:39:11,564 --> 01:39:15,724
with not that much supply the market wasn't that liquid yet there's just not that much of it trading

1257
01:39:15,724 --> 01:39:20,924
and the people that are holding it are just holding it because we were buying it at 85 right it's been

1258
01:39:20,924 --> 01:39:27,564
a great investment so and i mean and i mean the price was running even before that dividend hit

1259
01:39:27,564 --> 01:39:34,284
the accounts too so i think really that the the difference or the move from etm 30 of the volume

1260
01:39:34,284 --> 01:39:40,924
to atming none of the volume really hit the market hard goes to show you the crazy like the demand for

1261
01:39:40,924 --> 01:39:45,324
these things and then if you look at the after hours trading like on most days especially during

1262
01:39:45,324 --> 01:39:51,084
that week you see the price just bump up after hours which is kind of weird to see it super

1263
01:39:51,084 --> 01:39:56,684
illiquid after hours but but you know now they are hitting the atm and it really hasn't dragged them

1264
01:39:56,684 --> 01:40:02,284
down all that much so it's it's pretty impressive i mean they they repriced higher they haven't come

1265
01:40:02,284 --> 01:40:06,844
back down i think a lot of people were expecting it i was expecting that they'd come down further

1266
01:40:06,844 --> 01:40:12,364
than they have but uh you know this is highly accretive to raise through these channels right

1267
01:40:12,364 --> 01:40:18,844
now and i think that that's the reason why they're gonna take the patience route and not go take on

1268
01:40:18,844 --> 01:40:22,524
any more debt they don't need to they're gonna stick the course with these preferreds they're

1269
01:40:22,524 --> 01:40:27,164
gonna keep scaling and building these markets and we're just gonna watch those volumes climb and

1270
01:40:27,164 --> 01:40:33,964
climb and climb yeah most of those holders of strike but we're probably and actually probably

1271
01:40:33,964 --> 01:40:40,524
strife too they're not living off the dividends like you know they might be in 30 or 40 years but

1272
01:40:40,524 --> 01:40:47,804
they're probably all in a drip because they just don't need the money oh absolutely yeah and a lot

1273
01:40:47,804 --> 01:40:52,284
of them like you had to be aware of these products to even be in them now right so a lot of the people

1274
01:40:52,844 --> 01:40:57,804
that got them were in that ipo you know they were buying them through their brokerage accounts when

1275
01:40:57,804 --> 01:41:03,404
they were offered at these massive discounts and you know you still even at that time it takes a

1276
01:41:03,404 --> 01:41:07,864
a little bit to really digest these products because they were so new to figure out just how

1277
01:41:07,864 --> 01:41:12,864
valuable they were. And now you look back and go, oh my God, those were so mispriced. Like you should

1278
01:41:12,864 --> 01:41:16,424
have just thrown everything in them because you could just see the writing on the wall. Like there's

1279
01:41:16,424 --> 01:41:23,484
no way an over collateralized product that's, you know, this credit quality should be anywhere near

1280
01:41:23,484 --> 01:41:28,104
this pricing, right? The market just didn't know what was going on. And so they got priced at a

1281
01:41:28,104 --> 01:41:33,384
discount. And so far being involved in any of the launches on these has been an amazing trade.

1282
01:41:33,404 --> 01:41:35,144
for a fixed income product, right?

1283
01:41:35,204 --> 01:41:37,524
Who would have thought you'd be getting, you know, 30, 40%

1284
01:41:37,524 --> 01:41:40,604
on a fixed income product in, you know, a couple months.

1285
01:41:40,964 --> 01:41:41,884
It's pretty wild.

1286
01:41:42,204 --> 01:41:45,864
Yeah, going from distressed to like normal bond.

1287
01:41:46,064 --> 01:41:47,924
They were priced as if they were distressed

1288
01:41:47,924 --> 01:41:50,124
and now they're in this like normal bond price.

1289
01:41:52,064 --> 01:41:53,464
Yeah, and stride is below par, right?

1290
01:41:53,944 --> 01:41:54,184
Yeah.

1291
01:41:54,464 --> 01:41:54,744
Still?

1292
01:41:55,464 --> 01:41:57,624
So like once they pay their first dividend,

1293
01:41:58,344 --> 01:41:59,904
maybe it never trades below par again.

1294
01:42:00,704 --> 01:42:03,004
Once they prove that they're actually going to pay it,

1295
01:42:03,404 --> 01:42:08,784
yeah i kind of think that when it becomes real yeah yeah yeah i think you could see something

1296
01:42:08,784 --> 01:42:12,984
very similar right because that first dividend payments you know it's going to be higher than

1297
01:42:12,984 --> 01:42:17,264
the uh 250 a share right because there's a little extra time on it because of when it launched so

1298
01:42:17,264 --> 01:42:21,224
it's going to be more like what the strife one was and you know that's a good dividend so you'll

1299
01:42:21,224 --> 01:42:26,524
probably get people you know buying it up leading into that to get the dividend because you know

1300
01:42:26,524 --> 01:42:30,144
these are unique products you got to remember it's not like when a stock pays a dividend and that

1301
01:42:30,144 --> 01:42:35,924
you know, cash is gone. That's not how these are valued. So it doesn't detract from the price of

1302
01:42:35,924 --> 01:42:39,744
the holding. So people are definitely going to be bringing capital into these right before the

1303
01:42:39,744 --> 01:42:43,784
dividends pay, because it doesn't adjust down the same amount as the dividend it pays out.

1304
01:42:47,744 --> 01:42:58,044
Bingo. We're at hour 42 in. I've got some moon math and some conceptualization of S&P 500

1305
01:42:58,044 --> 01:43:03,884
inclusion, just capital structure, just things to think about and what this might look like.

1306
01:43:05,964 --> 01:43:09,504
There's a lot of questions on if it's priced in. That's a good question. I have no idea. I don't

1307
01:43:09,504 --> 01:43:14,864
think so personally, because I don't think there's enough information in the market right now. There's

1308
01:43:14,864 --> 01:43:20,544
no specific financial report that's come out to market saying that strategy does qualify. It's

1309
01:43:20,544 --> 01:43:25,004
just technical speculation at this point, even though people that are following this closely

1310
01:43:25,004 --> 01:43:30,344
understand that the change in financial accounting rules should result in a very large Q2 earnings

1311
01:43:30,344 --> 01:43:37,924
release. So with that preface, this is not financial advice, just thinking about what this

1312
01:43:37,924 --> 01:43:45,564
could look like, I think is valuable. And I know I've shared this in the past on some past episodes,

1313
01:43:45,564 --> 01:43:53,464
but let's get into it. And this is, I'll try to explain this quickly. And I've shown this in the

1314
01:43:53,464 --> 01:44:01,924
past. So strategy was included in QQQ in November of last year. In my opinion, it was pretty clear

1315
01:44:01,924 --> 01:44:04,744
that it was front run just looking at the amount of capital that came in the door in November.

1316
01:44:05,604 --> 01:44:10,164
Obviously, there was a huge election that happened in November as well. So I think the question of

1317
01:44:10,744 --> 01:44:15,944
which event caused more capital to come in the door, I would say it's probably QQQ,

1318
01:44:15,944 --> 01:44:23,224
but there was some additional energy as there were in all stocks when it was very clear that

1319
01:44:23,224 --> 01:44:28,564
Trump was going to win in the election. So I think QQQ probably weighed a bit heavier

1320
01:44:28,564 --> 01:44:34,424
for MSTR relative to some other stocks because it was just the same timing, just how it worked.

1321
01:44:35,024 --> 01:44:39,824
So there's about $500 billion of capital that's following QQQ. This information is from

1322
01:44:39,824 --> 01:44:47,024
ChatGPT. And at the time, the allocation that strategy got to the QQQ was 0.35%. So that would

1323
01:44:47,024 --> 01:44:52,044
result in roughly $1.75 billion of buy side volume that's coming in on the stock.

1324
01:44:52,044 --> 01:45:21,724
As you may recall, or people may remember, they raised about $17 billion in 45 days from 1111 to 12 to 16. So effectively, the multiple on the capital that was raised is about 10. So which means that it's a function of liquidity, right? There's only a certain number of shares that's tradable in the market that are liquid at any one point, because a lot of people are just holding the stock and just sitting back. And so as that capital comes in the door, that pushes market cap higher, which results in less shares being purchased and the price of the stock going up.

1325
01:45:22,044 --> 01:45:26,964
So they raised $17 billion on $1.75 billion of capital flow coming in the door.

1326
01:45:29,244 --> 01:45:34,964
And so we think about, okay, what does this look like for the potential of the S&P 500?

1327
01:45:35,284 --> 01:45:39,824
So there's about 10x the amount of capital that's falling to S&P 500 relative to QQQ.

1328
01:45:39,944 --> 01:45:44,324
So if you think about going from, it's an order of magnitude, going from 500 billion to 5 trillion.

1329
01:45:44,324 --> 01:45:47,664
And I've plugged in an allocation of 0.34%.

1330
01:45:47,664 --> 01:45:54,064
This would be roughly equivalent to Qualcomm, which is about the 56th largest publicly traded

1331
01:45:54,064 --> 01:46:01,204
company. Right now, strategy's ranked about 80th. So I could put in a smaller relative valuation

1332
01:46:01,204 --> 01:46:11,544
here with lows or something smaller, but a 0.34% allocation can result in roughly $17 billion of

1333
01:46:11,544 --> 01:46:15,824
capital flow coming into the stock. Now, this is likely going to happen in dark pools, going to

1334
01:46:15,824 --> 01:46:20,924
happen in different transactions. And we may not see it. It may not cause the stock to move at all.

1335
01:46:21,284 --> 01:46:26,264
But I think that there's potential for a significant volume to come into the stock here

1336
01:46:26,264 --> 01:46:35,464
and front run inclusion as it becomes apparent that they technically qualify from an earnings

1337
01:46:35,464 --> 01:46:41,704
perspective. So I think there's a lot of potential capital coming in the door, very similar to how

1338
01:46:41,704 --> 01:46:47,584
the inclusion happened with Tesla back in 2021, where a lot of capital came in the door and the

1339
01:46:47,584 --> 01:46:52,844
stock mooned as soon as their earnings report was released. And it showed that they had three

1340
01:46:52,844 --> 01:46:56,904
positive earnings periods in a row. And it looked like the fourth was going to be positive based on

1341
01:46:56,904 --> 01:47:03,124
the communication to the market at that time. At that point in time, the market cap of Tesla went

1342
01:47:03,124 --> 01:47:09,404
from about 300 billion, I think about $150 billion up to a trillion dollars in six months,

1343
01:47:09,404 --> 01:47:14,444
seven months. And this is all before Tesla was included in the S&P 500. There was a lot of

1344
01:47:14,444 --> 01:47:18,904
speculation. This was a huge controversial event. Go back and look at the market cap. It was front

1345
01:47:18,904 --> 01:47:23,664
run. Everybody, this capital came in the door early. And with that capital coming in the door

1346
01:47:23,664 --> 01:47:31,744
early, that pushes the market cap higher, which makes the inclusion relativity even more dynamic.

1347
01:47:31,744 --> 01:47:38,304
And with the valuation being so high already, it resulted in this kind of reflexive amount of

1348
01:47:38,304 --> 01:47:41,484
capital that was coming in the door for Tesla. And I think we're in a similar type situation

1349
01:47:41,484 --> 01:47:48,744
potentially with MSTR. And when you think about the incentives here and why this was important

1350
01:47:48,744 --> 01:47:53,204
for Tesla relative to other companies that can include in the S&P 500, there's very little

1351
01:47:53,204 --> 01:48:00,544
incentive to sell to passive strength here. If this is a long-term decade plus 20-year hold,

1352
01:48:02,044 --> 01:48:06,024
there's very little incentive to sell to passive index funds that are coming in the door.

1353
01:48:06,024 --> 01:48:10,204
If you think that Bitcoin's going higher, you think that MSTR is likely going higher.

1354
01:48:10,364 --> 01:48:13,404
If you think they're going to continue to raise capital and everything right here that we've

1355
01:48:13,404 --> 01:48:18,184
talked about for the last hour and a half is bullish, then there's incentive to hold for the

1356
01:48:18,184 --> 01:48:22,564
long term. Whereas you think about other companies that get included in the S&P 500, they all get

1357
01:48:22,564 --> 01:48:27,684
front run, like Lululemon. Go back and look at Lululemon. It was front run. I've seen included

1358
01:48:27,684 --> 01:48:33,704
in the S&P 500, the price tanked because institutional capital is smart. They saw it.

1359
01:48:33,704 --> 01:48:53,508
They front run passive index funds and then that capital left to look for better opportunity costs of capital So what can that multiple look like here in the future If they looking at getting billion in the door there going to be a significant ability to potentially monetize

1360
01:48:53,508 --> 01:48:57,548
that capital that's coming in the door on the MSTR ATM and buy a significant amount of Bitcoin

1361
01:48:57,548 --> 01:49:01,268
and potentially a very short time horizon, similar to what happened in November last year,

1362
01:49:01,428 --> 01:49:05,548
where they capitalized on the ATM because they saw all this energy coming in the stock.

1363
01:49:05,548 --> 01:49:12,588
And that ultimately put them in position to be able to offer these high leverage, high torque preferred instruments into the market.

1364
01:49:12,708 --> 01:49:16,828
So there's like a very, very important event that happened.

1365
01:49:17,568 --> 01:49:19,588
And there's significant potential.

1366
01:49:19,728 --> 01:49:23,388
If you just keep the same multiple here, the market cap could could double.

1367
01:49:23,808 --> 01:49:25,988
It could double in a short period of time.

1368
01:49:26,068 --> 01:49:31,448
Not saying it is, but there is potential for significant energy to come into the stock, significant Bitcoin to be purchased.

1369
01:49:31,448 --> 01:49:35,228
and if significant Bitcoin is being purchased, we're probably going to price into new all-time

1370
01:49:35,228 --> 01:49:43,028
high territory. So yeah, I think this is a really exciting time. I think it's an exciting time to be

1371
01:49:43,028 --> 01:49:47,168
following what's going on here. It's exciting time to know, have some asymmetric information or feel

1372
01:49:47,168 --> 01:49:51,328
like you know you have some asymmetric information because not a lot of people are paying attention

1373
01:49:51,328 --> 01:49:58,068
to this. And you look at these Q2 earnings estimate of potential $10 to $11 billion of net

1374
01:49:58,068 --> 01:50:04,848
income coming in the door, being posted as a gain, you start to comp that to other stocks.

1375
01:50:05,368 --> 01:50:10,028
And I posted this the other day. I think it was really funny. You compare this to a company like

1376
01:50:10,028 --> 01:50:16,308
Palantir, which I like to laugh at. It's an interesting one. It's another cult-like stock.

1377
01:50:17,088 --> 01:50:21,848
Palantir is another cult-like stock. There's a very significant retail base that loves Palantir.

1378
01:50:22,468 --> 01:50:26,308
But you sit back and you look at the financials of the company and you can't help but compare them.

1379
01:50:26,308 --> 01:50:31,068
They're different companies, different infrastructure, different, you know, doing different things.

1380
01:50:31,768 --> 01:50:37,428
But Palantir's revenue in the trailing 12 months is $3.1 billion. You compare that to the amount

1381
01:50:37,428 --> 01:50:42,608
of capital that Strategies raised in the last 12 months, which is $34.5 billion. That's an order

1382
01:50:42,608 --> 01:50:50,168
of magnitude different. The net income. So Palantir made $571 million of net income in the last 12

1383
01:50:50,168 --> 01:50:56,988
months. And MSTR, you look at the last 12 months, they made $18.5 billion. So strategies made $17.9

1384
01:50:56,988 --> 01:51:01,888
billion more net income than Palantir over the last 12 months. And you look at the market caps

1385
01:51:01,888 --> 01:51:10,208
and these look mispriced, right? Palantir $351 billion and MSTR $128 billion as of today.

1386
01:51:11,208 --> 01:51:19,828
Boom. So a $223 billion delta. You look at PE ratio. So the price of the stock relative to the

1387
01:51:19,828 --> 01:51:24,688
earnings PE ratio for Palantir is about 617 PE ratio for MSTR is about seven.

1388
01:51:25,288 --> 01:51:29,608
MNAV multiple on net asset value for Palantir 60, MNAV for MSTR two.

1389
01:51:30,308 --> 01:51:33,568
And Palantir doesn't hold any Bitcoin. So

1390
01:51:35,168 --> 01:51:39,588
it seems kind of obvious to me, but I mean, what do you, what do you guys think?

1391
01:51:39,808 --> 01:51:43,648
And the last, the last thing I'm going to show here, this is a screen capture from Bloomberg,

1392
01:51:44,968 --> 01:51:48,068
which I have a Bloomberg terminal. So watch out. We've got some more data.

1393
01:51:48,068 --> 01:51:49,868
We had some more data coming to the door.

1394
01:51:51,068 --> 01:51:52,108
It's going to be good.

1395
01:51:52,108 --> 01:51:53,608
Yeah, we're going to have some more data coming.

1396
01:51:53,608 --> 01:51:55,008
It's going to be really good.

1397
01:51:55,008 --> 01:52:00,808
And this is MSTR earnings per share Q2 25

1398
01:52:01,348 --> 01:52:05,888
earnings per share estimate six, six tenths of a cent.

1399
01:52:07,288 --> 01:52:09,128
Asleep at the wheel.

1400
01:52:09,128 --> 01:52:12,388
Six tenths of a cent.

1401
01:52:13,068 --> 01:52:14,928
That's insane.

1402
01:52:14,928 --> 01:52:18,768
And they're going to they're going to post a 30, 36 to 40 billion,

1403
01:52:19,288 --> 01:52:23,388
$36 to $40 earnings per share and the analyst estimate.

1404
01:52:23,388 --> 01:52:26,428
And this is across four estimates was six tenths of a cent.

1405
01:52:28,928 --> 01:52:30,868
Talk about a miss, right?

1406
01:52:31,068 --> 01:52:32,928
How are people how are people not seeing this?

1407
01:52:33,888 --> 01:52:35,388
That's crazy.

1408
01:52:37,288 --> 01:52:38,028
I don't know.

1409
01:52:38,028 --> 01:52:39,468
Do you guys talk to other people about this?

1410
01:52:39,468 --> 01:52:41,468
I can't talk to other people about this anymore.

1411
01:52:41,468 --> 01:52:43,328
I'm like, I'm too I'm too far.

1412
01:52:43,328 --> 01:52:45,868
I got to stay in my circle so people think I'm crazy.

1413
01:52:46,068 --> 01:52:49,548
But like, what are you guys seeing?

1414
01:52:49,728 --> 01:52:51,068
Is anybody else seeing this?

1415
01:52:51,688 --> 01:52:54,468
I mean, you're talking to 37,000 people about it right now.

1416
01:52:54,788 --> 01:53:00,348
So in our weird little circle here, luckily our circle's gotten bigger and bigger as time has gone on.

1417
01:53:00,408 --> 01:53:05,828
So we feel a little less crazy than when it was just, you know, a couple of guys screaming in the darkness of night about this.

1418
01:53:05,988 --> 01:53:10,228
But yeah, I mean, there's definitely mispricings all over.

1419
01:53:10,228 --> 01:53:13,948
And you look at that comparison with Palantir, and I think that's a good one.

1420
01:53:14,068 --> 01:53:17,848
You know, one, you got all these people investing in what's probably going to build Skynet one day.

1421
01:53:17,988 --> 01:53:21,348
But, you know, it's such a murky business model.

1422
01:53:21,568 --> 01:53:23,888
You can't possibly wrap your head around it.

1423
01:53:23,928 --> 01:53:29,628
There's no transparency into where those revenues are coming from, what the government contracts are, what they're actually doing.

1424
01:53:29,968 --> 01:53:30,508
You don't know.

1425
01:53:31,028 --> 01:53:31,648
You have no idea.

1426
01:53:32,488 --> 01:53:37,548
But people are willing to give that a 617 times multiple or whatever it was.

1427
01:53:37,548 --> 01:53:38,068
Yeah.

1428
01:53:38,068 --> 01:53:50,928
And then you've got strategy building the most rock solid balance sheet on sovereign digital capital that's going to go up forever relative to its nemesis fiat currencies.

1429
01:53:51,428 --> 01:53:55,828
So it's going to continue to be profitable year after year after year.

1430
01:53:56,568 --> 01:53:58,988
And people shrug it off.

1431
01:53:59,608 --> 01:54:02,028
But this is why we're here, right?

1432
01:54:02,028 --> 01:54:07,568
These are the types of mispricings that you look at and, you know, you go, what's crazier?

1433
01:54:08,068 --> 01:54:15,268
617 times multiple on a company you couldn't possibly explain the business model of and somehow

1434
01:54:15,268 --> 01:54:21,348
convincing me that that's a better bet than me knowing exactly the value of the assets that the

1435
01:54:21,348 --> 01:54:26,628
company i'm investing in holds knowing exactly how they execute the strategy knowing what tools they

1436
01:54:26,628 --> 01:54:32,228
have in the market seeing exactly how much they're accumulating or yielding to my shares

1437
01:54:32,228 --> 01:54:36,648
I've got full transparency. I'm eyes wide open into what I'm investing in.

1438
01:54:37,468 --> 01:54:44,148
People that are over in Palantir are guessing and hoping and, you know, funding their overlords one day, I guess.

1439
01:54:44,148 --> 01:54:49,788
I mean, it's wild when you get into these and you start pricing these. You just you can't make sense of it.

1440
01:54:50,448 --> 01:54:57,068
And that's part of the reason that I know that we're still early and this market is not saturated.

1441
01:54:57,068 --> 01:55:01,528
and there's going to be a huge amount of opportunity because the rest of the capital

1442
01:55:01,528 --> 01:55:05,528
is going to continue to melt away and people are going to chase into, you know,

1443
01:55:05,668 --> 01:55:07,908
I feel like capital keeps concentrating now.

1444
01:55:08,368 --> 01:55:13,328
Like it's concentrating more and more into these fan favorite stocks,

1445
01:55:13,688 --> 01:55:15,228
you know, like Palantir and Tesla.

1446
01:55:15,468 --> 01:55:17,848
And you're just, you know, it's a bet on innovation,

1447
01:55:17,848 --> 01:55:20,268
but for a lot of them, you don't even know what you're betting on.

1448
01:55:20,788 --> 01:55:23,548
But more capital is moving in there because, you know,

1449
01:55:23,548 --> 01:55:29,868
those are accepted by the market as high growth potential one day. But you're giving them this

1450
01:55:29,868 --> 01:55:37,388
multiple as if that growth has been here for five decades already. Meanwhile, strategy holds the most

1451
01:55:37,388 --> 01:55:44,728
digital capital of any company in the world. It's probably going up 20 to 30% a year. It's going to

1452
01:55:44,728 --> 01:55:49,228
keep yielding gains to the shareholders. They're going to keep transacting and siphoning fiat

1453
01:55:49,228 --> 01:55:54,748
capital out of the system and onboarding it into bitcoin i still like the analogy of the loading

1454
01:55:54,748 --> 01:55:58,988
dock right they're the loading dock for all the capital to come and move into the bitcoin network

1455
01:56:00,348 --> 01:56:05,708
i'll take that bet because i know what i'm investing in i'm not investing in hopes and

1456
01:56:05,708 --> 01:56:10,508
dreams and what could be i know what i hold i know what the company i'm investing in holds i

1457
01:56:10,508 --> 01:56:16,508
know what their strategy is i hear from their executives all the time you know that's where

1458
01:56:16,508 --> 01:56:22,888
where I want to put capital. I can trust that. I can't trust shadow shadowy business models.

1459
01:56:22,888 --> 01:56:30,168
And trust me, bros, that doesn't work. Trust me, bro. I have a contract with the CIA. Trust me.

1460
01:56:30,768 --> 01:56:34,248
The most ridiculous number on that chart you shared was the zero Bitcoin.

1461
01:56:35,248 --> 01:56:41,248
That's their one opportunity to have infinite Bitcoin per share yield. And then it's downhill

1462
01:56:41,248 --> 01:56:44,928
from there. But once you're on zero, you know, while you're still on zero, you're just

1463
01:56:44,928 --> 01:56:51,808
getting you know getting ready to get left behind the thousand iq move here is for palantir to open

1464
01:56:51,808 --> 01:56:59,568
up a trillion dollar atm and arb that premium and buy bitcoin that's what they should be doing

1465
01:57:00,128 --> 01:57:05,568
a trillion dollar atm yeah i mean heck why not the other one nvidia is now a four trillion

1466
01:57:05,568 --> 01:57:09,088
dollar company which is crazy first four trillion dollar company ever the world's ever seen

1467
01:57:09,088 --> 01:57:13,488
and they did a $50 billion buyback last year.

1468
01:57:13,728 --> 01:57:15,288
They're probably going to do another one.

1469
01:57:15,948 --> 01:57:16,448
Golf clap.

1470
01:57:16,988 --> 01:57:21,148
And it's going to go to $5 trillion faster than people realize.

1471
01:57:21,268 --> 01:57:22,528
Like we're going to see a $5 trillion company.

1472
01:57:22,708 --> 01:57:24,828
We might see a $5 trillion company this year.

1473
01:57:25,788 --> 01:57:26,648
It's possible.

1474
01:57:27,728 --> 01:57:29,628
And people are going to have to wrap their head around that.

1475
01:57:29,768 --> 01:57:31,208
What is a $5 trillion company?

1476
01:57:31,348 --> 01:57:32,448
How do we get here?

1477
01:57:32,548 --> 01:57:33,608
How do we get a $5 trillion?

1478
01:57:34,028 --> 01:57:37,208
Like what is this thing worth?

1479
01:57:37,308 --> 01:57:38,228
Why do I hold it?

1480
01:57:38,228 --> 01:57:44,828
why does it work like that? And that's the conversation I'm here for, right? You're

1481
01:57:44,828 --> 01:57:53,708
comparing these historically sexy business models to something that is, to a finance business model,

1482
01:57:54,188 --> 01:58:01,268
which is a bit harder to wrap your head around, probably technically less sexy. If you ask me,

1483
01:58:01,328 --> 01:58:06,428
I think this is the coolest story of all time, but it's not like they're not making, the product is

1484
01:58:06,428 --> 01:58:15,868
a financial product. They're not shooting stuff up into space that generates internet

1485
01:58:15,868 --> 01:58:21,588
for everybody on the planet. It's different. They're creating these financial instruments

1486
01:58:21,588 --> 01:58:25,028
that are actually really good to benefit all of humanity. It solves the retirement problem,

1487
01:58:25,208 --> 01:58:30,488
solves the retirement crisis. These are actually really valuable products that insurance companies

1488
01:58:30,488 --> 01:58:37,208
should hold pension funds should hold banks should hold and it could it could save jobs even right

1489
01:58:37,928 --> 01:58:41,688
people that manage pensions or insurance companies right if your insurance company goes out of

1490
01:58:41,688 --> 01:58:44,808
business because you didn't manage your liabilities appropriately because you didn't have any bitcoin

1491
01:58:44,808 --> 01:58:50,168
exposure boom you incinerate jobs like the insurance company goes away jobs are incinerated

1492
01:58:50,168 --> 01:58:55,928
at my old job i literally had companies that were on the verge they went out of business because they

1493
01:58:55,928 --> 01:58:59,368
they couldn't meet their liabilities they couldn't afford the reinsurance they couldn't do the whole

1494
01:58:59,368 --> 01:59:02,648
thing. But if they would have Bitcoin, I think they would have survived, which is just a crazy

1495
01:59:02,648 --> 01:59:07,568
dynamic. Like all of those jobs, that community, the people that work there in that small town

1496
01:59:07,568 --> 01:59:14,128
now have to go find other things to do. And these products are going to be really instrumental in

1497
01:59:14,128 --> 01:59:18,268
how like the world is shaped in the future. Like this, this company is going to be so

1498
01:59:18,268 --> 01:59:25,508
useful. The total addressable market is the entire world, which is not a professional services

1499
01:59:25,508 --> 01:59:32,708
company right now with how rapidly ai is evolving i'm standing up a balance sheet strategy here

1500
01:59:32,708 --> 01:59:39,428
pretty quick yeah yeah right just just look at what you can do with these ai tools it's unbelievable

1501
01:59:40,308 --> 01:59:43,588
and that's going to disrupt that i mean i used to be in management consulting

1502
01:59:44,388 --> 01:59:48,628
do you know how easy it would have been to do that job with the tools that are available today

1503
01:59:48,628 --> 01:59:52,868
you know you're doing it you know these people are going in and you do a three-month assessment

1504
01:59:52,868 --> 01:59:55,828
and you're paying millions of dollars for it for a strategy.

1505
01:59:56,248 --> 02:00:00,928
And in an afternoon, I could have 50 different strategies created for me

1506
02:00:00,928 --> 02:00:03,728
with all the input variables, with access to all the data.

1507
02:00:03,968 --> 02:00:06,348
I mean, it's incredible what can be done now.

1508
02:00:07,348 --> 02:00:10,648
And I think that you're going to have more companies that,

1509
02:00:10,808 --> 02:00:15,128
whether they know it or not, they need a balance sheet strategy

1510
02:00:15,128 --> 02:00:17,248
to protect themselves so they have a future

1511
02:00:17,248 --> 02:00:22,548
because their future is eroding around them at warp speed right now.

1512
02:00:22,548 --> 02:00:26,928
And a lot of them just don't see it or they have to pretend they don't see it.

1513
02:00:27,888 --> 02:00:37,108
Right. You've got to keep up the the illusion that you think that what you're doing is the most valuable thing in the market and other corporations are going to be willing to continue to pay for it.

1514
02:00:37,108 --> 02:00:47,748
But companies are going to become very cost conscious to these things when they realize the power and when they get a handful of people that can effectively weaponize AI for maximum productivity.

1515
02:00:47,748 --> 02:00:54,208
So you've got to start finding ways to buy optionality for your future before that future

1516
02:00:54,208 --> 02:00:58,288
gets rug pulled from under you and it's gone. And that's going to happen quick.

1517
02:00:59,288 --> 02:01:05,328
Yep. Somebody else asked here, July 31st is earnings. I believe that's correct. That's what

1518
02:01:05,328 --> 02:01:08,788
it shows in the Bloomberg terminal. I think it was July 31st. That's going to be a party. Is

1519
02:01:08,788 --> 02:01:14,468
that a Wednesday? You and your Bloomberg terminal. I'm over here at my Bloomberg terminal.

1520
02:01:14,468 --> 02:01:17,968
Honestly, it's so hard.

1521
02:01:17,968 --> 02:01:18,848
It's so hard.

1522
02:01:18,848 --> 02:01:20,348
It's just a whole new ecosystem.

1523
02:01:20,348 --> 02:01:21,668
I got to learn how to use it.

1524
02:01:21,668 --> 02:01:24,808
It's got to watch some YouTube videos and slam chat GPT.

1525
02:01:25,728 --> 02:01:29,128
The 31st is a Thursday, so maybe we'll have to do a

1526
02:01:31,508 --> 02:01:34,708
True North now or watch it live or talk about it afterwards.

1527
02:01:34,708 --> 02:01:37,348
The 30th, but they just have the call the 31st.

1528
02:01:38,308 --> 02:01:39,588
I think it's the same day.

1529
02:01:39,588 --> 02:01:41,388
I think it comes out the same day that they have the call.

1530
02:01:42,428 --> 02:01:42,708
Yeah.

1531
02:01:42,708 --> 02:01:43,048
Does it?

1532
02:01:43,048 --> 02:01:43,548
Okay.

1533
02:01:43,548 --> 02:01:47,148
yeah i think so my platform had a different date so i definitely need to double check that that's

1534
02:01:47,148 --> 02:01:52,028
what i yeah i don't think it's been announced technically and when they've announced it usually

1535
02:01:52,028 --> 02:01:56,428
sailors posted it and fongs reposted it and it's come out um they'll say when they're going to do

1536
02:01:56,428 --> 02:02:03,148
it yeah i think it's going to be hard to miss yeah um yeah ryan's thinking august 5th it's

1537
02:02:03,148 --> 02:02:06,348
it's going to be somewhere in there it might be you know it's going to be in that week they make

1538
02:02:06,348 --> 02:02:10,348
it on a wednesday that'd be cool the following wednesday that'd be fun do it at true north

1539
02:02:10,348 --> 02:02:15,308
on top of it. We've done that a couple of times. What else? I'm going to go back to screen share.

1540
02:02:15,308 --> 02:02:18,828
We'll talk moon math because this is always fun. And people have asked me to update this

1541
02:02:18,828 --> 02:02:28,588
spreadsheet and here we go. So I've got 601,550 Bitcoin owned Bitcoin price, 118,000 assets,

1542
02:02:28,588 --> 02:02:34,668
$71 billion liabilities, 11.57. I think that might be a little light. That's probably,

1543
02:02:34,668 --> 02:02:45,908
yeah, that might be a little bit light. $59 billion of net assets, 281 E6 is the float.

1544
02:02:46,468 --> 02:02:50,328
MSTR share price 455.90 at close. So the market cap about $128 billion.

1545
02:02:51,548 --> 02:02:59,448
So looking at the MNAV that strategy traded back in November was an MNAV of four. We heard from

1546
02:02:59,448 --> 02:03:06,748
Fong earlier in the show, we could conceptualize a 10X MNAV, a 20X MNAV, if you start thinking about

1547
02:03:06,748 --> 02:03:13,568
a stock being publicly traded, forward looking, and the amount of capital that the Bitcoin gain

1548
02:03:13,568 --> 02:03:16,968
and the Bitcoin dollar gain, Bitcoin yield and Bitcoin dollar gain, if you start applying a

1549
02:03:16,968 --> 02:03:22,648
multiple of that towards a PE ratio, you could see an MNAV of much higher than that, maybe 10,

1550
02:03:22,728 --> 02:03:26,928
maybe 20. Is it going there? I don't know. Who knows where it goes, right? The market will

1551
02:03:26,928 --> 02:03:32,188
determine what happens here. But you think about how crazy this can get and a price of $150,000

1552
02:03:32,188 --> 02:03:39,228
Bitcoin and a 10X nav multiple, you're looking at a $2,799 share price, which is probably

1553
02:03:39,228 --> 02:03:45,888
a $750 billion company at that point, about $3,000 share price. I think it's about a $750

1554
02:03:45,888 --> 02:03:52,648
billion company, which forward looking, if you're looking at a company that's making $25 billion

1555
02:03:52,648 --> 02:03:58,168
dollars this year or 25 billion dollars a year from the instruments that they're offering and the

1556
02:03:58,168 --> 02:04:03,168
value of bitcoin going up into perpetuity that could be reasonable I think you can make a valuation

1557
02:04:03,168 --> 02:04:08,008
argument around it right you start to compare it to palantir valued at 300 billion dollars trading

1558
02:04:08,008 --> 02:04:13,808
at a 670 PE multiple and people still buying it the stock's still going up like there's still a story

1559
02:04:13,808 --> 02:04:15,508
there so

1560
02:04:15,552 --> 02:04:20,692
May this go beyond rationality or technical rationality of what, you know, all the 1x MNav

1561
02:04:20,692 --> 02:04:27,772
Ponzi bears think? Yeah. Can it go higher? Can the MNav go higher? Yes. How or why? Because it can,

1562
02:04:27,972 --> 02:04:34,952
like it just, it literally can. It's all forward future expectations. So yeah, some of these numbers

1563
02:04:34,952 --> 02:04:39,292
get pretty nutty, right? Like you think about holding the stock for 10 years and Bitcoin going

1564
02:04:39,292 --> 02:04:44,912
to a price of, you know, a million dollars per Bitcoin and thinking at 10x multiple on that,

1565
02:04:44,912 --> 02:04:49,172
which might be egregious. I have no idea. These numbers start to get pretty ridiculous pretty

1566
02:04:49,172 --> 02:04:56,072
quickly. So always fun to look at what the dynamics are. I know Ryan and I, when we talked

1567
02:04:56,072 --> 02:05:03,072
about can MSDR hit $10,000, that's split adjusted $1,000. That's potentially right around the corner.

1568
02:05:04,852 --> 02:05:11,132
Right? MNAV is six at today's price. It'd be $1,200. So MNAV of four at $150,000. That's

1569
02:05:11,132 --> 02:05:15,232
$10,000 split adjusted. And that, you know, happened in a year and a half. Here we are.

1570
02:05:15,892 --> 02:05:22,292
So exciting times. Yeah. And earnings is the 31st. It's on Strategies website. So.

1571
02:05:22,792 --> 02:05:30,032
Oh, it's official. The 31st. 31st. Thursday the 31st. Bingo. All right. Well, we're at two hours

1572
02:05:30,032 --> 02:05:35,572
and five minutes. Should we go do final thoughts? Pass it around. We'll go to you, Dan, from the

1573
02:05:35,572 --> 02:05:36,792
from the room of mahogany.

1574
02:05:37,872 --> 02:05:38,292
Yeah, yeah.

1575
02:05:38,372 --> 02:05:39,532
Great combo tonight, guys.

1576
02:05:39,672 --> 02:05:40,792
Thanks for watching, everyone.

1577
02:05:41,152 --> 02:05:53,044
And prefs seem to be ramping up Life good Figure out the prefs If you don get them figure them out Watch Dan Hillary consistently

1578
02:05:53,724 --> 02:05:54,224
Follow Dan.

1579
02:05:54,984 --> 02:05:55,844
Okay, over to you, Soleil.

1580
02:05:56,584 --> 02:05:58,084
How many people we got on the stream tonight?

1581
02:05:58,324 --> 02:06:00,084
38,638.

1582
02:06:00,304 --> 02:06:00,904
That's a big day.

1583
02:06:01,644 --> 02:06:02,164
Good number.

1584
02:06:02,784 --> 02:06:07,784
The reason I ask is Balaji Srivanasthan did an interview recently,

1585
02:06:07,784 --> 02:06:11,104
And he's got this theory about the network state.

1586
02:06:11,504 --> 02:06:17,364
There's going to be people who have virtual ties to certain things.

1587
02:06:17,904 --> 02:06:23,264
Some of them might be something like, oh, I don't know, Bitcoin, strategy, even True

1588
02:06:23,264 --> 02:06:23,664
North.

1589
02:06:24,264 --> 02:06:30,664
And those people may start to coalesce into actual physical locations and create like

1590
02:06:30,664 --> 02:06:32,144
pockets of communities.

1591
02:06:32,144 --> 02:06:42,544
Yeah. So start searching the real estate findings for an abandoned mining town for our true north community. I'll see you there in 10 years.

1592
02:06:43,744 --> 02:06:53,204
We'll take over some like really cool old mining town in Montana with like it's currently inhabited by grizzly bears and we take it over turn into a Bitcoin town. That would be cool.

1593
02:06:53,544 --> 02:06:55,444
Exactly. Every home with a dark basement.

1594
02:06:56,164 --> 02:06:56,764
Dark basement.

1595
02:06:58,504 --> 02:07:00,064
That's right. That would be fun.

1596
02:07:00,064 --> 02:07:06,464
Yeah. And on that topic, go to your local Bitcoin meetup, go to your local Bitcoin conference.

1597
02:07:07,104 --> 02:07:11,104
There is Bitcoin for Everyone is happening on August 1st, which is two weeks from now.

1598
02:07:11,724 --> 02:07:22,536
And a lot of the True North folks are going to be there Myself I will be there Dan Hillary will be there Soleil will be there Mason will be there Jesse Kobernick will be there And it in Portland Oregon

1599
02:07:23,216 --> 02:07:24,156
It's going to be a good time.

1600
02:07:24,196 --> 02:07:27,416
It's a relatively cheap one, about 200 people, high signal event.

1601
02:07:27,416 --> 02:07:32,476
And there even is a field trip to a mining facility on the Columbia River Gorge on Saturday.

1602
02:07:32,696 --> 02:07:35,016
So there's some cool stuff popping out there.

1603
02:07:35,296 --> 02:07:36,776
And go to your local meetups.

1604
02:07:37,176 --> 02:07:37,976
Anyway, over to you, Ben.

1605
02:07:39,036 --> 02:07:40,636
Yeah, I'll just say it's good to be back.

1606
02:07:40,636 --> 02:07:42,936
I know it's been a little while here.

1607
02:07:43,056 --> 02:07:46,676
I've been in a bit of a sprint here for the last two months.

1608
02:07:46,816 --> 02:07:49,896
We've had an incredibly busy time over at Swan.

1609
02:07:50,116 --> 02:07:52,136
So just incredible things happening.

1610
02:07:52,616 --> 02:07:54,736
And I've missed doing this.

1611
02:07:55,056 --> 02:07:57,256
I had to re-channel the dark basement.

1612
02:07:57,436 --> 02:08:01,896
I didn't quite go back to my old grainy camera, but that's probably coming next.

1613
02:08:01,996 --> 02:08:04,436
We're going to just throw this thing all the way back here pretty soon.

1614
02:08:04,616 --> 02:08:06,256
But it's nuts.

1615
02:08:06,376 --> 02:08:07,756
It's always good to talk to you guys.

1616
02:08:08,096 --> 02:08:08,716
Glad to be back.

1617
02:08:08,716 --> 02:08:10,376
I'll be back on more regularly now.

1618
02:08:10,376 --> 02:08:12,776
So let's get it rolling.

1619
02:08:12,776 --> 02:08:14,696
Heck yeah. Thanks, Ben. Also, congratulations.

1620
02:08:14,696 --> 02:08:18,936
I mean, the role that Swan's got now with Sequon, that's super exciting.

1621
02:08:18,936 --> 02:08:21,976
Seeing behind the scenes is just a whole nother level.

1622
02:08:21,976 --> 02:08:25,016
And you've gone and raised the capital.

1623
02:08:25,016 --> 02:08:25,896
You've done the whole thing.

1624
02:08:25,896 --> 02:08:28,616
So, I mean, that's exciting to see all that work come to fruition.

1625
02:08:28,616 --> 02:08:30,136
I mean, I know you've been working really hard.

1626
02:08:30,856 --> 02:08:33,336
So that's super exciting.

1627
02:08:33,336 --> 02:08:36,616
And I encourage everybody listening, if you're interested in this space,

1628
02:08:36,616 --> 02:08:37,656
just start talking about it.

1629
02:08:37,656 --> 02:08:40,636
but like your Twitter is your public profile.

1630
02:08:40,636 --> 02:08:52,288
If you start talking about these things and getting in the conversation and going to your local meetups your ability to go do these types of things is wide open There a real lack of dearth of talent in this space And everybody

1631
02:08:52,288 --> 02:08:58,048
looking to hire people that can communicate and talk about what's going on in these capital markets.

1632
02:08:58,468 --> 02:09:03,628
So yeah, there's no formal education for this. This is the education, right? So this is one of

1633
02:09:03,628 --> 02:09:09,128
those rare points in time where if this is really a space you're interested in, you know, this is

1634
02:09:09,128 --> 02:09:15,128
the time to double down because there is a big talent void out there. People are scrambling to

1635
02:09:15,128 --> 02:09:18,888
catch up and there's a lot of opportunities. So if this is a space you want to work in,

1636
02:09:18,988 --> 02:09:26,208
now's the time to focus on that. Absolutely. Absolutely. A lot to be happy about right now.

1637
02:09:26,348 --> 02:09:31,128
MSDR hitting market cap all-time highs, Bitcoin hitting all-time highs. We got a lot of potential

1638
02:09:31,128 --> 02:09:38,688
macro tailwinds, which is nice to say, and potential S&P 500 earnings coming up on the

1639
02:09:38,688 --> 02:09:43,888
horizon, the prefs are getting massive adoption. Things are cooking. Everybody's in the market.

1640
02:09:44,028 --> 02:09:47,988
You got more corporations buying Bitcoin. I think everything is going higher. We've got a lot more

1641
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energy coming into the scene here. And we're going to see more all-time highs. And people don't even

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know this is happening yet. People don't even know the strategy products exist. People that have

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managed capital for their entire careers don't even know strategy exists. So I think we're going

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higher. All right. Thanks everyone. 39,369 people. Wow. That's a good number. And we will catch you

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next week. Have a good one.