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You're questioning, you know, what's happening in the world.

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You're questioning the role of government.

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It was a dark time and searching for something that brought a little bit of light was, it

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was easy.

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People are trying to do mental gymnastics as if the policy scheme is extremely dilutive.

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I raise a billion dollars of strife.

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Day one, there is zero dilution to the shareholder.

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I turn around and I buy a billion dollars worth of Bitcoin that is 100% accretive. Just like we were turning people on to Bitcoin-backed debt, now we're turning people on to Bitcoin-backed credit and we're just getting started.

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I think for the foreseeable future, we're still talking 50-40% annualized returns over a four or five year period.

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Non-sovereign has limited supply.

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People in Australia, people in the US, people in Ukraine, people in Turkey, people in Argentina, people in Vietnam and South Korea.

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Everyone likes Bitcoin.

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Welcome to Australia, Fon.

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Thank you for having me.

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Well, I've been talking to your team about doing this show for a little while.

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The plan was for me to go out to DC and do it.

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And then this fell into our lap.

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I know.

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Why not do it while you're here?

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And you're here on a very important day.

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Do you know that?

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No, I didn't.

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Today is the start of the ashes.

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Okay, which is?

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One of the biggest sporting events in the world.

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It's where England play Australia in the cricket.

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They do five tests.

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So five games.

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Yeah.

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Each game is five days long.

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Oh, wow.

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Over the next two months.

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It's a big deal.

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I need to get into cricket.

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I like sports in general.

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yeah what's your sport uh so i growing up in the u.s american football basketball you can tell from

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my stature i played a lot of basketball i actually did play a lot of basketball i still play basketball

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every sunday morning i get together with a bunch of guys nice and uh and that's my game yeah cricket

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is a funny one it's one of the hardest sports i think to explain especially to an american where

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it takes five days to play and it can still end in a draw like it's the most english game of all

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time, I think. Well, you know, the funny thing is, so, you know, my parents were immigrants to

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the U.S. My mom likes sports. She never could figure out how baseball works. She's like,

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football, I get it. You know, you go to one end zone, you go to the other end zone, basketball,

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you throw the ball in the hoop, soccer, you kick. Baseball, you explain to somebody, four balls,

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three strikes, you run around a diamond, only one direction, not the other direction.

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Somebody throws, it doesn't make any sense. So cricket probably feels the same way.

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Yeah, I think cricket is very similar.

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But this is not a cricket podcast.

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We're here to talk about Bitcoin and strategy.

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I'm really interested in your background

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because I know you've been at strategy for quite some time.

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Took the CEO role a few years ago now.

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But what got you here?

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What were you doing before this?

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I was, so most folks know at this point in time,

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originally MicroStrategy was a data and analytics software company.

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We still are a data analytics software company.

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Part of the reason I'm here in Sydney is I'm joining some of our software colleagues because we have quite a few big customers in this region.

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And so my background is software engineering.

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My undergrad was in engineering, and I'm a data software analytics person, just like Mike was.

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That's how I joined MicroStrategy in 2015 as CFO, intersection of technology and finance, undergrad in engineering, business school.

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And so you think about engineering and finance, and you go to data and analytics, but you can also pretty quickly go to Bitcoin.

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And when, so that was going to be one of my questions is, were you into Bitcoin before Michael came presumably to the board and announced the initial plan in 2020?

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I was aware of Bitcoin and not deep in it at all.

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And I still remember it was March of 2020.

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Michael brought me into his office.

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And this is right after COVID.

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Nobody could go to the office and they let people start going again.

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And he's like, Fong, I have something really important to talk to you about.

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And he's like, I don't want you to jump to any conclusions.

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I don't want you to just let me tell you, what do you know about Bitcoin?

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I said, not much.

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And he said, I think we should consider it.

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And he said, now, here are a bunch of things for you to go watch and read.

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and once you've done that, why don't we get back together

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in a few days and tell me what you think.

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And that was the beginning.

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And so when you went off, he's almost like giving you your homework,

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you went off and read these books and listened to whatever.

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What was your kind of gut instinct

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of this being a good idea for the company or not?

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Well, so before we even went into what to do with it,

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I just thought it was fascinating, right?

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Like this whole idea of, you know, again, being a software guy,

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decentralized computing. Fascinating. Blockchain, fascinating. Store value, I didn't even sort of

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quite go there yet. It's just really the technology, the white paper. And it was, you know, I wasn't

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staying up until four in the morning watching, you know, videos, but I was consuming five,

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six hours a day. And the more I, you know, and there wasn't a lot of great content in 2020.

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Like people forget. Hey, we were around. You guys are around, right? But there,

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Like now you can literally find tens of thousands of hours of content.

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Back then, there was no mainstream, right?

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It's not like the Wall Street Journal was writing about it.

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It's not like Morgan Stanley had a report you could pick up.

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It was just a bunch of random people.

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And so it was absolutely, and this was right in the midst of COVID too.

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So you're questioning what's happening in the world. You're questioning the role of government. You're questioning, you know, back then, I would say in March, not many people had made a conclusion that this is a reason to shut down the NBA or to close down offices and buildings or not.

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And so it was a dark time and searching for something that brought a little bit of light.

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It was easy.

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It was easy to find something that was interesting to read about and learn about it.

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Yeah.

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And so I'm interested what happened from that sort of initial conversation to then making the move to doing everything that strategy has done since then.

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Because I know in the early days, Michael would talk about the cash you had on the balance sheet and it just being a melting ice cube.

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So was the initial thing to just turn that cash that you sat on into Bitcoin before doing everything you've done since?

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Yeah, the initial thing was absolutely think about it as just a buy and hold Bitcoin strategy using excess cash from the software business. So we had about $600 million at that point in time on our balance sheet. And in addition, we were generating anywhere between $75 and $100 million of excess cash from our software business a year.

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and you could imagine going from,

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call it $600, $700 million

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and then another $100 million a year,

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that would have taken us a lot of time

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to accumulate the Bitcoin that we have.

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We put about, I think, $45 billion

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into Bitcoin at this point in time.

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But at that point in time,

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in August of 2020,

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the idea that we were going to lever the company,

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go to convertible notes,

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secured notes,

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Bitcoin-backed debt and then prefers was not something that was on the table.

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I do remember, though, that we talked about it for a month or so, and Michael showed me this

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model he built in Excel that projected if we bought Bitcoin and Bitcoin went up a certain amount

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and we traded at a certain premium to NAV, what the stock price of strategy could have been,

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looking three, four, five years out.

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So we built the model.

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I played around with it.

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We made some adjustments to the assumptions.

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And, you know, if we were to look at that model now,

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we would have broken the model.

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To the upside.

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To the upside.

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That's amazing.

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And I remember we had a couple of laughs.

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I was like, oh, well, that would be nice.

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It's funny because I remember that time

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because it was maybe just before Block announced

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that they were buying Bitcoin.

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Obviously, Tesla bought Bitcoin.

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space exports um there was a couple other sort of edge cases i think rougher and uh mass mutual i

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think was the other one around that time that but i expected this to be like a corporate gold rush

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to a bitcoin and it took quite a few years for that to actually play out did you expect once you

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made the initial announcement this would move much quicker than it has done yeah so we made our

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announcement August 10th of 2020. Square, now Block, made their announcement a couple months

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later. Tesla, I think, in March or April of 2021. At the same time, Elon said that SpaceX had done

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the same. Overstock did this in 2012, so kudos to them. And we ran our first Bitcoin for corporations.

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I think that might have been May of 2021.

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And we had thousands of people show up online.

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This was virtual, of course.

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And when that occurred, I remember thinking to myself, the floodgates have opened.

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And interestingly, off the back of that, I probably talked to, in the course of six months after Bitcoin and for Corporations,

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two to three dozen public company treasurers, CFOs, CEOs.

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And so I figure I'm talking to them all.

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And I remember talking to our team, talking to Mike and saying,

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I talked to this person, this person, this person.

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They all said they're interested.

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And the year went along, 2021, Bitcoin goes up to, I think,

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67,000 at some point in 2021 at the end of the year.

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and I figure everybody just missed the boat.

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And why didn't everybody announce like we did?

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So yeah, I thought the floodgates were going to open

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and they didn't in 2021.

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It was a little disappointing.

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Yeah, and then I guess with the FTX stuff that happened that year,

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that will have put people off for a couple of years

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while they kind of reassess.

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And then, I mean, everything you've said so far,

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I want to get to in more detail,

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but the way that this has now evolved

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is like strategy has an underlying business that makes money.

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It's obviously become more and more about the Bitcoin side of the business.

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But a lot of the companies that are doing this kind of pure play treasury thing

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don't really have an underlying business.

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Has it surprised you the type of companies that have come along

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putting Bitcoin on the balance sheet?

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It has.

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And the underlying business by itself isn't necessarily required,

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but it brings a lot of advantages.

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We've been a public company since 1998.

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We're a well-known seasoned issuer,

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which means that we can add an ATM

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without regulatory approval from the SEC.

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We have a finance team.

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So we have, in our software business,

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in our total business today,

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we have about 1,500 employees.

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10 focused on Bitcoin, 1490 on software.

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Within that 1490,

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we have a team that creates websites,

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you know, that manages our website.

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So creatingstrategy.com,

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we just had people who could do that, right?

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We have a finance team of about 100 people.

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They know how to file SEC reports.

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They know how to talk to analysts and investors.

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They understand the capital markets.

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We have a legal team of about 35 people.

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They understand, again, sort of governance, SEC reporting.

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We've been creating products since the 1990s, right?

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Our prefers are common.

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00:14:28,100 --> 00:14:29,440
They're products, right?

232
00:14:29,500 --> 00:14:31,600
And so we know how to market them.

233
00:14:31,600 --> 00:14:32,600
We know how to distribute them.

234
00:14:32,720 --> 00:14:36,180
So the advantage of having the operating company,

235
00:14:36,740 --> 00:14:42,940
one is the already there since 1998, right?

236
00:14:43,040 --> 00:14:47,060
22 years of being a public company, established,

237
00:14:47,440 --> 00:14:49,000
knows how to file SEC reports.

238
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So all the corporate governance exist.

239
00:14:51,640 --> 00:14:53,040
Yeah, all the processes are in place.

240
00:14:53,360 --> 00:14:53,860
Everything runs.

241
00:14:53,940 --> 00:14:55,740
And we have people who can do all these things,

242
00:14:55,800 --> 00:14:56,840
finance, legal people.

243
00:14:56,980 --> 00:15:00,080
Mike's been a public company CEO since 1998.

244
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I've been a public company CFO since 2015.

245
00:15:04,400 --> 00:15:06,380
So the contrast with what we have,

246
00:15:06,900 --> 00:15:09,580
the operating company is useful, right?

247
00:15:09,580 --> 00:15:13,040
But all of the processes and the people and the expertise.

248
00:15:13,860 --> 00:15:16,620
And now you look at some of these Bitcoin treasury companies,

249
00:15:17,200 --> 00:15:20,180
they don't necessarily have all of that, right?

250
00:15:20,300 --> 00:15:23,760
And so there's clearly a contrast of maturity and capability

251
00:15:23,760 --> 00:15:25,040
and ability to execute

252
00:15:25,040 --> 00:15:29,560
that some of these Bitcoin treasury companies don't have.

253
00:15:29,560 --> 00:15:34,800
So Semler Scientific, who was the second one, they had an established business, right?

254
00:15:34,860 --> 00:15:37,260
Eric Semler is an established entrepreneur.

255
00:15:38,060 --> 00:15:39,500
And so there's maturity there.

256
00:15:40,120 --> 00:15:44,380
Yeah. And the interesting thing, sort of going back to those companies that followed you initially,

257
00:15:45,180 --> 00:15:49,800
block aside, most of those companies have not treated Bitcoin in the same way that you have.

258
00:15:49,800 --> 00:15:53,220
Like, obviously, Tesla sold some, Ruffa, I think, sold some of theirs.

259
00:15:53,600 --> 00:15:57,580
Like, for a few of them, it was a trade, whereas this is something you've built your business around.

260
00:15:57,580 --> 00:16:13,720
But I'm interested to know sort of how important the underlying company is now, because you're obviously CEO. You have to, I guess, wear two hats where you have the Bitcoin side of the business and you have the actual operating side of the business. Like, how important is it that you retain that?

261
00:16:14,700 --> 00:16:21,160
So of the 10 or so people that work on Bitcoin, I would say there's probably three that straddle.

262
00:16:21,600 --> 00:16:24,400
Myself, our CFO, and our general counsel.

263
00:16:25,040 --> 00:16:27,100
Everybody else is focused on Bitcoin.

264
00:16:27,900 --> 00:16:31,440
There's a couple of interesting attributes of our operating business.

265
00:16:31,760 --> 00:16:38,280
One is we're characterized as an operating company as opposed to a financial company.

266
00:16:38,880 --> 00:16:42,780
Now, because we have Bitcoin on our balance sheet as a commodity, that's still okay, not a security.

267
00:16:42,780 --> 00:16:45,480
But that helps structurally.

268
00:16:46,100 --> 00:16:53,000
The other thing that we stumbled upon more recently is we have negative taxable earnings and profits.

269
00:16:53,720 --> 00:17:05,400
Our software business, although generating and operating profit because of some of the other characteristics of it, equity, stock-based comp, we have negative taxable earnings and profits.

270
00:17:05,880 --> 00:17:11,800
Because of that, our preferreds and the dividends we pay on our preferreds are return of capital.

271
00:17:11,800 --> 00:17:27,760
What that means is if you own our prefers for most jurisdictions around the world, because we're not paying the dividends out of profits, we're paying the dividends out of our capital, it's tax deferred until they sell the underlying.

272
00:17:28,180 --> 00:17:29,920
It's a huge deal, right?

273
00:17:30,040 --> 00:17:40,000
So normal dividends are taxed, I call it a 15-20% tax rate, capital gains in the U.S.

274
00:17:40,000 --> 00:17:44,000
and that's at a federal level.

275
00:17:44,160 --> 00:17:46,820
You add state and local taxes on top of that,

276
00:17:46,900 --> 00:17:48,980
it get as high as 20, 25%.

277
00:17:48,980 --> 00:17:50,480
And then you take,

278
00:17:50,800 --> 00:17:53,480
if you have a money market or ordinary income, right?

279
00:17:53,520 --> 00:17:56,020
Like your compensation for your job,

280
00:17:56,340 --> 00:17:58,620
that's taxed in anywhere between 30 to 40%,

281
00:17:58,620 --> 00:18:02,460
call it 30 to 37% at a federal level.

282
00:18:02,580 --> 00:18:04,060
You add all the taxes on top of that,

283
00:18:04,120 --> 00:18:05,920
you might be paying 40, 50%.

284
00:18:05,920 --> 00:18:08,380
You live in New York City, 55% tax rates.

285
00:18:08,680 --> 00:18:09,000
Okay.

286
00:18:10,000 --> 00:18:16,360
what we have in our preferreds paying 10.5% like a stretch, all that taxes differ. Meaning you only

287
00:18:16,360 --> 00:18:22,260
have to pay the taxes if you sell the underlying. If you hold the underlying, you're getting 10.5%,

288
00:18:22,260 --> 00:18:31,100
but on a tax equivalent basis, that's 17, 20, 23%. It's quite magical. And that's partially because

289
00:18:31,100 --> 00:18:34,840
we have this underlying operating business that generates negative taxable E&P.

290
00:18:35,400 --> 00:18:39,980
That is interesting. So I do want to get into the preferreds. But just before we do that,

291
00:18:40,000 --> 00:18:43,840
Um, in 2022, is that when you became CEO?

292
00:18:44,140 --> 00:18:46,640
Uh, 2022 was when I became CEO, August.

293
00:18:46,740 --> 00:18:47,040
Okay.

294
00:18:47,040 --> 00:18:50,240
So when, when Michael came to you, he was gonna step down as CEO,

295
00:18:50,240 --> 00:18:51,740
go to executive chairman.

296
00:18:51,740 --> 00:18:51,940
Yeah.

297
00:18:52,080 --> 00:18:53,580
Um, what did you think?

298
00:18:53,580 --> 00:18:58,220
Because for me, obviously from the outside looking in, it seems like

299
00:18:58,220 --> 00:19:11,428
there probably very few CEO roles that would come under more scrutiny than this Because what you doing is so novel people don understand it yet Like everyone watching you and either waiting

300
00:19:11,428 --> 00:19:12,987
for you to succeed or fail, I guess.

301
00:19:12,987 --> 00:19:21,267
Yeah. Look, I'm a pretty ambitious guy, right? And so being the CEO of one of the

302
00:19:21,267 --> 00:19:25,547
most interesting, if not the most interesting company in the world is an ambitious position

303
00:19:25,547 --> 00:19:26,607
in a vicious role.

304
00:19:27,307 --> 00:19:27,967
This is, you know,

305
00:19:28,408 --> 00:19:30,328
most public companies

306
00:19:30,328 --> 00:19:32,007
have a succession planning process.

307
00:19:32,348 --> 00:19:34,287
So it's not like August 2022,

308
00:19:34,627 --> 00:19:35,688
he comes to me and says,

309
00:19:35,787 --> 00:19:36,607
hey, Fong, guess what?

310
00:19:37,148 --> 00:19:38,068
I'm going to step down.

311
00:19:38,547 --> 00:19:40,027
Tomorrow you're going to be the CEO

312
00:19:40,027 --> 00:19:41,408
and I'm going to be executive chairman.

313
00:19:41,848 --> 00:19:42,088
Right?

314
00:19:42,987 --> 00:19:44,588
And this is something

315
00:19:44,588 --> 00:19:45,867
we've been talking about

316
00:19:45,867 --> 00:19:48,747
for multiple years prior to this

317
00:19:48,747 --> 00:19:50,168
and the board too.

318
00:19:50,267 --> 00:19:51,867
And it's part of a thoughtful

319
00:19:51,867 --> 00:19:53,408
succession planning process.

320
00:19:53,408 --> 00:20:00,807
and you know it made sense michael wanted to spend 100 of his time focus on bitcoin strategy

321
00:20:00,807 --> 00:20:08,207
bitcoin advocacy and our bitcoin treasury business and i had been working and running

322
00:20:08,207 --> 00:20:12,388
the software business i was already president running the day-to-day of the software business

323
00:20:12,388 --> 00:20:20,328
so it made logical sense to have that delineation of responsibilities now the reality is not not

324
00:20:20,328 --> 00:20:27,148
really that much changed day to day. Day to day, I was already running the software business. I was

325
00:20:27,148 --> 00:20:33,328
already executing on the Bitcoin strategy. And Mike was the evangelist and the one who established

326
00:20:33,328 --> 00:20:41,527
our Bitcoin strategy. So from July 2022 to September 2022, not that much changed. The irony

327
00:20:41,527 --> 00:20:48,447
of it all, of course, was this was during the middle of Bitcoin winter 2022. And people were

328
00:20:48,447 --> 00:20:50,987
like, oh, you know, Michael stepped down as CEO.

329
00:20:51,388 --> 00:20:53,527
It must be because Bitcoin's not doing well

330
00:20:53,527 --> 00:20:55,847
and our stock was, no, it had nothing to do with that.

331
00:20:55,908 --> 00:20:58,107
This was just part of the succession planning process.

332
00:20:58,688 --> 00:21:01,068
But I mean, it's a hell of a role to step into,

333
00:21:01,168 --> 00:21:02,247
especially at that time.

334
00:21:02,408 --> 00:21:04,328
Obviously, the company in the following year

335
00:21:04,328 --> 00:21:05,267
has done really well.

336
00:21:05,527 --> 00:21:07,027
And maybe it'd be worth going through

337
00:21:07,027 --> 00:21:10,027
what's happened from that very initial purchase

338
00:21:10,027 --> 00:21:11,987
to like the convertible notes that you did

339
00:21:11,987 --> 00:21:12,947
and now into the preferreds.

340
00:21:13,027 --> 00:21:15,607
Like, how have you thought about that whole process?

341
00:21:15,607 --> 00:21:41,127
Yeah, so once we launched our strategy in August 2020, our equity started trade up, initially up to, I think at that point in time, and this was pre-split, I'll use the post-split numbers. We started off at about $12, and we saw our equity value go up to north of $600, $700. Actually, I think it was $200, $300 in December. So it was already doing well, 2-3x.

342
00:21:41,127 --> 00:22:01,487
And so once we knew the strategy was working, we wanted to access capital. And that's where the convertible bond market is fairly easy to access. You can decide one day that you want to raise money and do it in two, three days.

343
00:22:01,487 --> 00:22:04,787
because the people who are part of that process,

344
00:22:05,027 --> 00:22:06,307
you know, primarily hedge funds,

345
00:22:06,928 --> 00:22:08,047
and some are along only,

346
00:22:08,487 --> 00:22:10,568
they literally can get a call a day

347
00:22:10,568 --> 00:22:12,928
and deploy hundreds of millions of dollars of capital.

348
00:22:14,007 --> 00:22:16,987
And convertible bonds were primarily used

349
00:22:16,987 --> 00:22:18,747
for high growth companies, tech companies,

350
00:22:19,188 --> 00:22:22,668
at that point in time, biotech companies would access it

351
00:22:22,668 --> 00:22:26,088
because as long as the stock, you know, had appreciation,

352
00:22:26,408 --> 00:22:28,807
the potential for appreciation, you can get pretty good terms.

353
00:22:29,707 --> 00:22:30,967
And so we went into that market

354
00:22:30,967 --> 00:22:32,867
and it was pretty quick, easy money.

355
00:22:33,627 --> 00:22:38,107
And we did our first in December of 2020.

356
00:22:38,627 --> 00:22:39,847
It was around $600 million.

357
00:22:40,487 --> 00:22:43,307
And then we did our second in Q1 of 2021

358
00:22:43,307 --> 00:22:45,148
and it was $1.05 billion.

359
00:22:45,148 --> 00:22:50,627
And that one, we got 0% interest rates and up 50.

360
00:22:51,287 --> 00:22:54,908
And we started to really aggressively go after that market,

361
00:22:54,987 --> 00:22:56,087
the convertible bond market.

362
00:22:56,227 --> 00:22:58,507
That was what we were aware of at that point in time.

363
00:22:58,507 --> 00:23:25,507
And then we did a securitized note, securitized by the software company. And then we did a Bitcoin-backed loan with Silvergate. And throughout this process, as we started to learn how the capital markets work, we realized that the convertible bond market, although flush with capital, is really a small illiquid.

364
00:23:25,507 --> 00:23:31,967
illiquid. The bonds don't really trade after the market every single day. Retail doesn't have

365
00:23:31,967 --> 00:23:36,888
access to it. You have to be a qualified institutional buyer. And of course, what do

366
00:23:36,888 --> 00:23:41,428
these hedge funds do? They buy your bond and they go short your equity. Yeah, just hedge out the

367
00:23:41,428 --> 00:23:47,007
risk. Yeah, which creates some volatility, but it's not great for the long-term equity holders.

368
00:23:48,087 --> 00:23:52,947
Now, if you turn around and you buy an asset that's appreciating at 50%, it's good for everybody.

369
00:23:52,947 --> 00:23:55,568
but the pricing and the spreads were quite wide.

370
00:23:56,527 --> 00:24:00,388
And so, and, you know, the duration risk still exists, right?

371
00:24:00,388 --> 00:24:02,928
Even if you pace it out four, five, six, seven, eight years,

372
00:24:03,088 --> 00:24:05,007
there's duration risk in terms of

373
00:24:05,007 --> 00:24:06,328
when these things are going to mature.

374
00:24:07,328 --> 00:24:10,168
And so we did that for two, three years.

375
00:24:10,307 --> 00:24:13,547
We ended up being a monster in the convertible bond market, right?

376
00:24:13,568 --> 00:24:15,287
I believe last year, 2024,

377
00:24:15,668 --> 00:24:17,668
we were something in the range of 35%

378
00:24:17,668 --> 00:24:21,747
of the entire convertible bond market in the U.S., right?

379
00:24:21,747 --> 00:24:24,227
We were the biggest player.

380
00:24:25,188 --> 00:24:29,587
And in an illiquid market with very few buyers,

381
00:24:30,408 --> 00:24:34,467
with no access to retail,

382
00:24:34,967 --> 00:24:36,707
if you're 36% of the market,

383
00:24:36,807 --> 00:24:38,027
you've essentially tapped out the market.

384
00:24:39,307 --> 00:24:42,688
And we needed more access to capital

385
00:24:42,688 --> 00:24:46,007
in a liquid market where retail can get in.

386
00:24:46,227 --> 00:24:48,947
And that's where we found these preferreds.

387
00:24:49,188 --> 00:24:50,967
And preferreds are called hybrids.

388
00:24:51,547 --> 00:24:55,327
They're technically equities, but they pay out a coupon that looks like debt.

389
00:24:55,888 --> 00:24:57,487
And we started that this year.

390
00:24:57,607 --> 00:25:02,207
I mean, it really wasn't that long ago, January of this year, and we raised around $7 billion

391
00:25:02,207 --> 00:25:03,007
from that.

392
00:25:03,007 --> 00:25:08,287
And we're just like we were turning people on to Bitcoin-backed debt.

393
00:25:08,707 --> 00:25:11,747
Now we're turning people on to Bitcoin-backed credit, and we're just getting started.

394
00:25:12,227 --> 00:25:14,267
So was Strike the first preferred you did?

395
00:25:14,568 --> 00:25:15,467
Strike was the first.

396
00:25:15,607 --> 00:25:18,648
And the reason we did Strike first is it was a convertible preferred.

397
00:25:18,648 --> 00:25:23,648
So we seeded that with the convertible bondholders.

398
00:25:24,447 --> 00:25:28,327
They're like, hey, I love buying anything that has microstrategy behind it.

399
00:25:28,888 --> 00:25:35,388
And so if you give us a convertible preferred in January this year, we consider entering it.

400
00:25:35,727 --> 00:25:41,127
And when we started this in January this year, all the banks said, you can't do this.

401
00:25:41,168 --> 00:25:41,947
It's not going to work.

402
00:25:42,188 --> 00:25:44,607
The preferreds are a very different type of market.

403
00:25:45,547 --> 00:25:47,908
And we just sort of went along.

404
00:25:47,908 --> 00:25:50,168
but we had to seed it with a lot of these hedge funds

405
00:25:50,168 --> 00:25:52,607
who were typically purchasing our convertibles.

406
00:25:52,767 --> 00:25:54,928
So that's why we did it as convertible preferred,

407
00:25:55,307 --> 00:26:00,527
is it looked more like some of our convertible bonds that we had before.

408
00:26:01,007 --> 00:26:02,707
Okay, can you explain the preferreds to me

409
00:26:02,707 --> 00:26:05,487
and the reason you've done each of the four of them?

410
00:26:05,547 --> 00:26:07,487
Because I'm no expert in this at all.

411
00:26:08,307 --> 00:26:10,867
Obviously, it started with Strike, Stretch is the most recent one.

412
00:26:11,047 --> 00:26:14,428
And people talk about you building out sort of a yield curve on Bitcoin with this.

413
00:26:14,747 --> 00:26:15,828
Will you explain that to me?

414
00:26:15,828 --> 00:26:17,727
Yeah, so we started with Strike.

415
00:26:17,908 --> 00:26:26,828
And it was an 8% coupon with upside where you can convert strike one for 10 into equity.

416
00:26:27,447 --> 00:26:28,828
And so that's the first.

417
00:26:29,428 --> 00:26:33,087
And it has governance rights and it's cumulative.

418
00:26:33,747 --> 00:26:43,787
And what that means is, with a preferred note, the way dividends are paid is the board or yields are paid is the board has to approve it.

419
00:26:43,787 --> 00:26:48,307
right? And so in this particular case, if the board says, hey, you know, we're not going to pay

420
00:26:48,307 --> 00:26:53,668
the dividend, it's cumulative just means that you keep adding on. Next quarter, you owe two,

421
00:26:53,707 --> 00:26:58,247
you know, you owe two quarters of dividend and on and on. And then there's penalties on top of that,

422
00:26:58,328 --> 00:27:02,227
right? If we don't pay, then we have to pay a certain percentage on top of that. And there's

423
00:27:02,227 --> 00:27:07,168
governance rights. If we don't pay for a full year, then we have to add board seats. That's how a

424
00:27:07,168 --> 00:27:12,928
traditional preferred works, right? And in this case, it was convertible, right? So then after that,

425
00:27:12,928 --> 00:27:16,648
we said, well, why don't we launch something that is more senior, right?

426
00:27:16,767 --> 00:27:17,047
Strife.

427
00:27:17,107 --> 00:27:21,287
And I don't actually remember off the top of my head if we did Strife or Strife next.

428
00:27:21,547 --> 00:27:23,908
But we said, let's do something that's more senior than that.

429
00:27:24,168 --> 00:27:29,027
Doesn't have the convertible aspect with it, but we're going to pay 10%.

430
00:27:29,027 --> 00:27:32,007
And it sits on top of Strife.

431
00:27:32,287 --> 00:27:34,487
And what if we launch something that's more junior?

432
00:27:34,847 --> 00:27:41,627
And so something that's more senior to Strife, Strife looks like an investment-grade bond.

433
00:27:41,627 --> 00:27:48,027
right uh and so like a triple a investment grade has all this bitcoin behind it that's the idea

434
00:27:48,027 --> 00:27:51,947
and there are people who can buy convertible prefers there are people who buy investment

435
00:27:51,947 --> 00:27:57,928
grade and then below investment grade is what people call high yield or jump bonds right and

436
00:27:57,928 --> 00:28:05,047
so that's what stride was at the bottom so we have strife strike stride strife is investment grade

437
00:28:05,047 --> 00:28:07,447
strike is convertible

438
00:28:07,447 --> 00:28:09,307
and stride

439
00:28:09,307 --> 00:28:10,607
is a jump on

440
00:28:10,607 --> 00:28:13,467
and that one pays 10%

441
00:28:13,467 --> 00:28:15,248
also but it's not cumulative

442
00:28:15,248 --> 00:28:17,627
no governance rights we can suspend

443
00:28:17,627 --> 00:28:18,668
payments at any time

444
00:28:18,668 --> 00:28:20,807
which we wouldn't do by the way

445
00:28:20,807 --> 00:28:23,428
we wouldn't suspend payments but that one then

446
00:28:23,428 --> 00:28:25,328
trades what happens is these are all

447
00:28:25,328 --> 00:28:26,607
$100 par instruments

448
00:28:26,607 --> 00:28:29,087
and as it trades at 100

449
00:28:29,087 --> 00:28:31,267
it's 10% yield if it

450
00:28:31,267 --> 00:28:33,487
trades down to 80 the yield goes up

451
00:28:33,487 --> 00:28:35,068
If it trades up, the yield goes down.

452
00:28:35,148 --> 00:28:36,828
So it's a self-correcting instrument.

453
00:28:37,487 --> 00:28:40,908
So with these three, before Stretch came along,

454
00:28:41,248 --> 00:28:44,107
who are the people that they're almost targeted at?

455
00:28:44,168 --> 00:28:46,467
Who are the likely buyers of those three preferreds?

456
00:28:46,607 --> 00:28:48,688
Yeah, so what's interesting is

457
00:28:48,688 --> 00:28:50,987
when you launch instruments in the market,

458
00:28:51,148 --> 00:28:53,068
you want enough institutional capital.

459
00:28:53,668 --> 00:28:55,447
The banks are like, okay, I can sort of guarantee

460
00:28:55,447 --> 00:28:56,627
this thing is going to work

461
00:28:56,627 --> 00:28:58,328
if the institutions are interested.

462
00:28:59,428 --> 00:29:01,248
What you can do with preferreds,

463
00:29:01,408 --> 00:29:03,087
it's basically an IPO, right?

464
00:29:03,087 --> 00:29:09,947
It's unlike a convertible where it's 144A listed, qualified institutional buyers only.

465
00:29:10,347 --> 00:29:12,148
When you launch a preferred, it's like an IPO.

466
00:29:12,327 --> 00:29:13,107
It is an IPO.

467
00:29:13,668 --> 00:29:22,967
And what you do in an IPO is you launch it to the institutional customers or market, but you're also launching it to retail at the same time.

468
00:29:23,627 --> 00:29:27,987
Retail distributed is through a Fidelity or Morgan Stanley Wealth Management.

469
00:29:27,987 --> 00:29:32,527
it, right? You always see, like when you see an IPO and if you sit on the retail side,

470
00:29:32,908 --> 00:29:38,688
you always wonder who are these people who get to buy the IPO and get the pop, right? Like somebody,

471
00:29:38,828 --> 00:29:44,068
somebody, you'll see a new company launches an IPO and they say they're pricing it at 80

472
00:29:44,068 --> 00:29:51,188
and it pops to 140. Well, who's, who's getting in at 80 because normal person can only buy at 140.

473
00:29:51,527 --> 00:29:56,508
So the people who get at 80 are the institutions distributed through the underwriters, the banks,

474
00:29:56,508 --> 00:29:59,347
and then these banks get to go to their wealth management teams

475
00:29:59,347 --> 00:30:02,227
and they get to go to the high net worth individuals

476
00:30:02,227 --> 00:30:03,668
that they're managing wealth for

477
00:30:03,668 --> 00:30:05,867
and they're saying, hey, you want to participate in this IPO.

478
00:30:06,148 --> 00:30:08,507
You can get it at 80 and I think it's going to pop to 140.

479
00:30:09,227 --> 00:30:12,347
And so that's basically what's happening with our preferred IPOs

480
00:30:12,347 --> 00:30:14,668
is we might price one at 80.

481
00:30:14,747 --> 00:30:16,487
We just did our most recent one, Stream.

482
00:30:16,908 --> 00:30:19,607
Price it at 80, in theory it pops to 100

483
00:30:19,607 --> 00:30:22,188
because most of these instruments, the par value is 100.

484
00:30:22,928 --> 00:30:25,467
Now Stream actually should be pricing even higher in that

485
00:30:25,467 --> 00:30:31,408
because the returns, the yields, right?

486
00:30:31,527 --> 00:30:33,967
Like corporate treasury, the treasury yields

487
00:30:33,967 --> 00:30:36,727
in Europe are lower than they are in the US, right?

488
00:30:36,787 --> 00:30:39,127
So if you're paying 10%, it should price higher.

489
00:30:39,527 --> 00:30:40,787
But that's basically what's happening

490
00:30:40,787 --> 00:30:42,867
is we're putting these instruments out in the market

491
00:30:42,867 --> 00:30:43,567
as an IPO.

492
00:30:44,127 --> 00:30:47,668
And then once you IPO two, three days later,

493
00:30:47,787 --> 00:30:49,787
then it's just trades in the NASDAQ.

494
00:30:50,168 --> 00:30:51,688
And part of the innovation here

495
00:30:51,688 --> 00:30:54,148
is we're marketing these products.

496
00:30:54,148 --> 00:30:58,527
in that we're giving them a cool four-letter ticker, right?

497
00:30:58,727 --> 00:31:01,668
Strikes, Strikes, giving them some cool names to it,

498
00:31:02,007 --> 00:31:05,227
making it very easy to find on the NASDAQ.

499
00:31:05,307 --> 00:31:06,727
Now Robinhood listed them too.

500
00:31:07,347 --> 00:31:10,188
And we've opened up the Preferreds,

501
00:31:10,188 --> 00:31:12,567
which were originally a pretty sleepy,

502
00:31:12,947 --> 00:31:14,447
also somewhat illiquid market.

503
00:31:14,827 --> 00:31:18,447
And we're creating them into a retail market.

504
00:31:18,928 --> 00:31:22,168
The first one that we did, Strike, in January,

505
00:31:22,527 --> 00:31:23,688
if I remember correctly,

506
00:31:23,688 --> 00:31:27,547
had about 10-12% participation of retail.

507
00:31:28,227 --> 00:31:29,807
And then the most recent one we did,

508
00:31:29,867 --> 00:31:32,567
not counting the European one, Stretch,

509
00:31:33,067 --> 00:31:36,847
had over 25% participation of retail.

510
00:31:37,188 --> 00:31:39,247
So retail now is learning about these instruments

511
00:31:39,247 --> 00:31:41,127
they're getting in, which is, you know,

512
00:31:41,148 --> 00:31:42,027
that's what we've done, right?

513
00:31:42,168 --> 00:31:43,987
We've securitized Bitcoin.

514
00:31:44,507 --> 00:31:48,527
We taught people about a Bitcoin treasury company,

515
00:31:49,007 --> 00:31:50,007
MSTR, the common.

516
00:31:50,507 --> 00:31:52,007
And we opened that up,

517
00:31:52,007 --> 00:31:55,928
opened up the eyes to retail, and we're doing the same thing with the preferred market.

518
00:31:56,507 --> 00:32:01,227
And you said that you had almost tapped out the conversable market. How big is this one?

519
00:32:01,987 --> 00:32:06,707
How big is the preferred market? It's really just as big as the total equity market,

520
00:32:07,267 --> 00:32:13,747
right? Again, because these are retail listed trades, sorry, these are listed on the NASDAQ,

521
00:32:13,747 --> 00:32:19,967
anybody can access it. And so it's really, you know, if you want to compare it,

522
00:32:19,967 --> 00:32:25,388
depends on what you compare it to, right? Like if you strike, because it's convertible to equity,

523
00:32:25,388 --> 00:32:34,007
looks more like an equity, right? Strife stride looks more like a bond. And then stretch, which

524
00:32:34,007 --> 00:32:39,727
is the most recent one, looks more like a money market, right? Because your principle is meant to

525
00:32:39,727 --> 00:32:48,227
be, we design it so that the price stays relatively flat around $100. And that last one is a bigger

526
00:32:48,227 --> 00:32:53,568
market, like money markets are about a $30 trillion market size, right? And it's not a

527
00:32:53,568 --> 00:32:58,267
money market, let's be clear, but it behaves like that. If you have short-term money that you want

528
00:32:58,267 --> 00:33:03,707
to return at this point in time, 10.5%, right? You can park it in a stretch for a period of time.

529
00:33:03,707 --> 00:33:08,267
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530
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575
00:36:04,148 --> 00:36:08,148
really interesting because a lot of the treasury companies now, especially these sort of pure play

576
00:36:08,148 --> 00:36:11,788
treasury companies that are coming out, are doing the things that you were doing a few years ago.

577
00:36:11,788 --> 00:36:17,188
And you've kind of innovated in this preferred market, but it's also brought with it some

578
00:36:17,188 --> 00:36:23,168
skeptics about it. So I think one of the issues is, I think this number's correct, tell me if I'm

579
00:36:23,168 --> 00:36:29,148
wrong, that your interest that you have to pay out annually is about $650 million, is that right?

580
00:36:29,148 --> 00:36:38,887
It's up to, with the seasoning of Stretch and the growth of Stretch and with the launch of Stream, it's closer to $750 to $800 million a year.

581
00:36:38,887 --> 00:37:06,907
Okay. And so I did a show recently with Lynn Alden and Andy Constant, who were sort of debating on this. And I think one of the issues that especially some of these sort of TradFi people have is, where does that money come from? And like, in my understanding, and tell me where I'm wrong here, it's either you issue more preferreds, or you have more preferreds, you dilute the common shareholder, or you could potentially sell Bitcoin, although I know you've said you don't plan to do that. Is that correct?

582
00:37:06,907 --> 00:37:26,987
That's correct. And selling equity at a premium to MNAV would be the primary way we pay for the dividend on our preferreds. And there's a little bit of people are trying to do mental gymnastics as to what that means is that the policy scheme is extremely dilutive.

583
00:37:27,727 --> 00:37:33,168
You start with the basis that when we as a company are trading at a premium to MNAV,

584
00:37:33,307 --> 00:37:34,527
let's do simple math.

585
00:37:34,607 --> 00:37:36,927
Let's say we're trading at 2x MNAV, right?

586
00:37:37,107 --> 00:37:42,427
And we raise a billion dollars from our common, right, through the ATM.

587
00:37:42,507 --> 00:37:45,168
And I think people are pretty comfortable with that at this point, right?

588
00:37:45,168 --> 00:37:50,587
When we're trading at 2x premium MNAV, right, and we raise a billion dollars,

589
00:37:50,907 --> 00:37:56,027
that means essentially half of that billion, 500 million, is dilutive to our shareholders.

590
00:37:56,027 --> 00:37:59,867
and $500 million is accretive in terms of Bitcoin yield.

591
00:37:59,867 --> 00:38:13,255
You getting million not more Bitcoin that you didn have before when we sell equity and pay for it So that good right That pretty good 2XMNAB 50 of that is accretive Now let turn that around and do that

592
00:38:13,675 --> 00:38:15,175
Let's talk about doing that as a preferred.

593
00:38:15,375 --> 00:38:17,835
Let's just choose strife as a simple one, right?

594
00:38:18,515 --> 00:38:20,195
Pays at a 10% dividend.

595
00:38:20,955 --> 00:38:23,015
I raise a billion dollars of strife.

596
00:38:23,375 --> 00:38:27,095
Day one, there is zero dilution to the shareholder, right?

597
00:38:27,135 --> 00:38:29,175
Because these are preferred hybrids.

598
00:38:29,295 --> 00:38:31,195
They're not common equity, zero dilution.

599
00:38:31,195 --> 00:38:48,495
I turn around and I buy a billion dollars worth of Bitcoin that is 100% accretive versus 50% accretive. And at the end of the year, if I have to issue $100 million of equity to pay for that dividend, then that's my dilution right there.

600
00:38:48,495 --> 00:38:56,755
In year one, my dilution is $100 million versus when I issue just common equity to buy Bitcoin is $500 million.

601
00:38:57,475 --> 00:39:07,015
It'll take over the course of five years for that to be as dilutive as just issuing a billion dollars of equity.

602
00:39:07,975 --> 00:39:10,215
And during that five years, what do you get?

603
00:39:10,635 --> 00:39:13,255
You get the gain in Bitcoin or whatever you think it is.

604
00:39:13,255 --> 00:39:21,355
So it is anytime you can issue a preferred, it is significantly more creative than just issuing common equity.

605
00:39:22,415 --> 00:39:24,095
That's what we figured out.

606
00:39:24,175 --> 00:39:25,135
That's what the math says.

607
00:39:25,135 --> 00:39:28,975
If you believe that the reason you buy a Bitcoin treasury company is for Bitcoin yield.

608
00:39:29,655 --> 00:39:35,315
Bitcoin yield is non-dilutive appreciation of Bitcoin.

609
00:39:36,255 --> 00:39:42,435
Because I know that over the last few years, strategy has kind of delevered the balance sheet in a lot of ways.

610
00:39:43,255 --> 00:39:47,815
But one of the things you can't control is the MNAV because that's just up to the market.

611
00:39:48,335 --> 00:39:51,875
And so I think right now you're about roughly 1.2x MNAV.

612
00:39:52,995 --> 00:39:57,275
Actually, first of all, do you think that there's a natural gravity to go back towards one?

613
00:39:57,775 --> 00:39:58,495
I don't think so.

614
00:39:58,595 --> 00:40:02,275
I think as long as we can generate Bitcoin yield, right?

615
00:40:02,635 --> 00:40:05,195
1x MNAV means you're basically an ETF.

616
00:40:05,495 --> 00:40:05,635
Yeah.

617
00:40:05,635 --> 00:40:16,615
It means that somebody puts money in, you buy Bitcoin, and if somebody puts a billion dollars in, you buy a billion dollars of Bitcoin, now you're worth a billion dollars more.

618
00:40:17,275 --> 00:40:28,375
But if you can lever and provide Bitcoin yield, more Bitcoin per share, then you should trade above MNF for as long as somebody thinks that you can do that for.

619
00:40:28,375 --> 00:40:33,895
right that that's that to me is the primary difference is one you value at the underlying

620
00:40:33,895 --> 00:40:38,835
bitcoin because when you put a billion dollars in you get a billion dollars of bitcoin the other

621
00:40:38,835 --> 00:40:44,295
is you're trading at a premium at mnav because you're providing bitcoin yield right like if i

622
00:40:44,295 --> 00:40:51,535
you know if i told you i was going to give you ten dollars and all you could do is just hold that

623
00:40:51,535 --> 00:40:56,795
ten dollars that ten dollars is worth ten dollars and i tell you i'm going to give you ten dollars

624
00:40:56,795 --> 00:40:58,735
and you can go invest it, right?

625
00:40:58,795 --> 00:41:00,255
And you can get 10% a year.

626
00:41:00,335 --> 00:41:01,555
Next year is $11.

627
00:41:02,155 --> 00:41:03,375
Don't you think it's worth $11?

628
00:41:04,155 --> 00:41:11,475
Or if your cost of capital is 5%

629
00:41:11,475 --> 00:41:13,415
and I told you you could get 10%,

630
00:41:13,415 --> 00:41:18,075
then that $10 is worth $10.5, right?

631
00:41:18,355 --> 00:41:20,635
But if I told you all you can do with that $10 is,

632
00:41:20,815 --> 00:41:21,715
Danny, you got to put it in your pocket

633
00:41:21,715 --> 00:41:23,415
and you can't do a thing with it, that's $10.

634
00:41:24,415 --> 00:41:26,595
That's the difference is you can invest this

635
00:41:26,595 --> 00:41:27,715
into something, right?

636
00:41:27,735 --> 00:41:31,275
Isn't that how most public equities are treated, right?

637
00:41:31,355 --> 00:41:32,855
Meaning it's a future,

638
00:41:33,035 --> 00:41:36,095
it's basically discounting all the future cash flows.

639
00:41:36,575 --> 00:41:39,695
And if you think a company can appreciate over time

640
00:41:39,695 --> 00:41:41,755
or increase the cash flows, right?

641
00:41:41,755 --> 00:41:43,695
If you create a great product, right?

642
00:41:43,715 --> 00:41:44,815
And you invest in that product

643
00:41:44,815 --> 00:41:46,455
and you invest in capital behind that product.

644
00:41:46,495 --> 00:41:49,775
And all of a sudden that product is returning 20, 30% growth.

645
00:41:50,015 --> 00:41:52,155
It's worth more than if you buy a product

646
00:41:52,155 --> 00:41:54,175
that's generating 10% growth.

647
00:41:55,255 --> 00:41:56,575
That makes total sense, yes.

648
00:41:57,135 --> 00:42:00,915
But like, obviously, strategy is far and away the biggest of any of these.

649
00:42:01,015 --> 00:42:02,855
I think you have nearly 650,000 Bitcoin.

650
00:42:03,135 --> 00:42:03,415
That's right.

651
00:42:03,895 --> 00:42:04,775
You're huge.

652
00:42:05,255 --> 00:42:12,295
Is there a scale that plays into this where, are the days of sort of 4XM now behind you,

653
00:42:12,335 --> 00:42:12,695
do you think?

654
00:42:12,695 --> 00:42:21,475
Well, I would say I go back to using traditional company analogies, right?

655
00:42:21,475 --> 00:42:28,235
Is a company that is 10 times the size of another company, right?

656
00:42:28,355 --> 00:42:37,415
Like, is a Microsoft, right, versus a Salesforce, versus a Snowflake, right?

657
00:42:37,535 --> 00:42:41,035
Is that scale, right, worth something, right?

658
00:42:41,115 --> 00:42:42,675
And I would say yes, right?

659
00:42:42,815 --> 00:42:48,255
Like, it's what, you know, you can go all the way to an extreme, and you can take a monopoly, right?

660
00:42:48,255 --> 00:42:54,095
A legal monopoly is worth more than a duopoly, than a triopoly.

661
00:42:54,095 --> 00:42:54,415
Yeah.

662
00:42:54,415 --> 00:43:00,095
Right. And so, yeah, scale matters, right? That's why some of the biggest companies in the world,

663
00:43:00,095 --> 00:43:06,495
that's why you have, I mean, that's why you have the Mag7. These are super scale technology

664
00:43:06,495 --> 00:43:12,495
companies. And in many cases, they're worth more, more of a multiple revenue, more multiple of

665
00:43:12,495 --> 00:43:14,175
earnings than a subscale company.

666
00:43:14,175 --> 00:43:17,695
And so we could actually flip the other way to how I was suggesting. Because it's funny,

667
00:43:17,695 --> 00:43:22,315
I've been quite skeptical of some of these treasury companies. And whenever I have the

668
00:43:22,315 --> 00:43:27,895
conversation, I quite purposely have strategy to one side, because I feel like just with being the

669
00:43:27,895 --> 00:43:33,135
first mover, how quickly you've got to 650,000 Bitcoin, I don't think you can compare that to

670
00:43:33,135 --> 00:43:39,275
XYZ treasury company who has 1,000 Bitcoin on their balance sheets or whatever. But I'm interested

671
00:43:39,275 --> 00:43:44,635
to know, is there any world where you would ever sell Bitcoin? Because let's say we're entering a

672
00:43:44,635 --> 00:43:48,475
market now. Who knows if we are? Who knows what that bear market might look like if we are?

673
00:43:48,475 --> 00:43:54,715
But if your MNAV does go below one again, and you obviously still have these interest payments,

674
00:43:55,435 --> 00:43:57,195
would selling Bitcoin ever be an option?

675
00:43:57,195 --> 00:44:01,595
Yeah. So back to your point on the other Bitcoin treasury companies for a minute.

676
00:44:02,635 --> 00:44:08,475
You could make an argument that in the US, there is no second best, right? What's unique about a

677
00:44:08,475 --> 00:44:14,215
of MetaPlanet or SmarterWeb, as a couple of examples, or Orange, is they have regulatory

678
00:44:14,215 --> 00:44:16,035
access to markets.

679
00:44:16,035 --> 00:44:22,015
If we wanted to tomorrow, you know, Stream, if you looked, we launched Stream, we launched

680
00:44:22,015 --> 00:44:24,815
it to institutional and currently don't have retail access.

681
00:44:25,275 --> 00:44:29,535
Once we list it, we do, but we couldn't launch it in retail because of regulatory access

682
00:44:29,535 --> 00:44:30,515
in Europe, right?

683
00:44:31,935 --> 00:44:36,475
If I wanted to launch a preferred in Japan, it might take me one or two years to do so.

684
00:44:36,475 --> 00:44:53,455
So in the US, you might argue that some of the other options, unless they do something unique, are just smaller scale versions of us. But if you go around the world, there could be a strategy in every region because it's hard for us as a US public company to access those.

685
00:44:53,455 --> 00:45:08,035
That's interesting that you say that, though, because this is another thing that I have pushed back against when I've spoken to other people. Just from the perspective of, like, I live here in Australia. If I want to buy exposure to a Bitcoin treasury company, I can still do that with microstrategies.

686
00:45:08,055 --> 00:45:08,375
That's right.

687
00:45:08,375 --> 00:45:14,235
And so where does that sort of jurisdictional arbitrage actually benefit these companies and other jurisdictions?

688
00:45:14,635 --> 00:45:15,675
Yeah, it depends on the country.

689
00:45:15,795 --> 00:45:21,715
So part of the reason MetaPlanet has been so successful is you're a Japanese investor, institutional or retail.

690
00:45:22,175 --> 00:45:23,655
Yes, you can buy offshore.

691
00:45:23,835 --> 00:45:25,275
There's different taxation rules.

692
00:45:25,435 --> 00:45:28,995
There's different money transfer rules.

693
00:45:29,095 --> 00:45:34,135
So it's much easier as a Japanese resident to buy a Japanese equity or a Japanese bond.

694
00:45:34,335 --> 00:45:36,355
That's not true in many other places.

695
00:45:36,355 --> 00:45:42,355
but there's places where those jurisdictions are quite unique.

696
00:45:42,915 --> 00:45:44,995
So your other question.

697
00:45:45,235 --> 00:45:47,075
Will you ever sell Bitcoin under any circumstance?

698
00:45:47,795 --> 00:45:52,435
We can sell Bitcoin, and we would sell Bitcoin

699
00:45:52,435 --> 00:45:56,395
if we needed to fund our dividend payments below 1XMF.

700
00:45:57,315 --> 00:45:59,515
And that would be, by definition,

701
00:45:59,795 --> 00:46:02,735
if BTC yield is our north star,

702
00:46:02,735 --> 00:46:09,315
right and that's sort of what what what our key our primary kpi is just like earnings per share

703
00:46:09,315 --> 00:46:15,235
might be an important kpi for a traditional company then under 1x mnav it's more creative

704
00:46:15,235 --> 00:46:22,135
to btc yield to sell our bitcoin uh to to pay the dividends and so we would do it in that case

705
00:46:22,135 --> 00:46:28,795
now that said right as we speak we have to look at liability management are there ways that we can

706
00:46:28,795 --> 00:46:34,295
raise capital above MNAV to pay for things below MNAV. So the things that we think pretty long and

707
00:46:34,295 --> 00:46:39,855
hard about, just like in 2022, during Bitcoin winter, we thought long and hard about what to

708
00:46:39,855 --> 00:46:45,175
do with our secured loan, our Bitcoin back loan. We decided to buy back our Bitcoin back loan at

709
00:46:45,175 --> 00:46:49,455
80 cents on the dollar. We're pretty nimble. That was silver again. That was silver again. Yeah.

710
00:46:50,375 --> 00:46:57,375
And so now, as we're looking at Bitcoin winter, as we see our MNAV compressing, my hope is our

711
00:46:57,375 --> 00:46:58,715
that doesn't go below one.

712
00:46:58,815 --> 00:47:03,175
But if we did and we didn't have other access to capital,

713
00:47:03,275 --> 00:47:03,975
we would sell Bitcoin.

714
00:47:04,435 --> 00:47:05,855
But that would almost be a last resort.

715
00:47:06,195 --> 00:47:07,215
That would be a last resort.

716
00:47:07,215 --> 00:47:12,155
And I think there's the mathematical side of me

717
00:47:12,155 --> 00:47:15,255
that says that would be absolutely the right thing to do.

718
00:47:15,855 --> 00:47:17,555
And there's the emotional side of me,

719
00:47:17,615 --> 00:47:19,115
the market side of me that says,

720
00:47:19,175 --> 00:47:22,155
we don't want to really be the company that's selling Bitcoin.

721
00:47:23,155 --> 00:47:26,015
Generally speaking for me, the mathematical side wins.

722
00:47:26,015 --> 00:47:35,295
Because I guess from a narrative perspective, if you did sell Bitcoin, I wonder if that then makes it harder to grow MNAV in the future.

723
00:47:35,855 --> 00:47:42,415
Because the idea of you being this sort of treasure chest that sucks up all the Bitcoin and never lets it go is gone.

724
00:47:42,835 --> 00:47:49,935
Yeah, so to the extent that MNAV is all around accretion of BTC yield, then it shouldn't.

725
00:47:49,935 --> 00:47:59,075
To the extent that MNAV is a market sentiment of, you know, we're the original Bitcoin treasury company.

726
00:47:59,215 --> 00:48:00,315
We have the most Bitcoin.

727
00:48:00,455 --> 00:48:04,195
Us selling Bitcoin wouldn't be good for the ecosystem, wouldn't be good for the narrative.

728
00:48:04,515 --> 00:48:05,095
That'd be negative.

729
00:48:05,515 --> 00:48:07,735
But here's another good reason to sell Bitcoin, right?

730
00:48:07,835 --> 00:48:15,275
Like, I can, if I was to sell high basis Bitcoin and we bought Bitcoin at every price, right, for a loss,

731
00:48:15,275 --> 00:48:20,455
I could take that capital loss and I could offset it against other capital gains.

732
00:48:20,875 --> 00:48:27,575
So there are tax reasons to why we might want to sell high basis point or high basis Bitcoin.

733
00:48:28,275 --> 00:48:30,355
And that would be a very obvious one.

734
00:48:30,675 --> 00:48:35,135
Yeah, I guess the challenge with that is convincing, even if it makes total sense,

735
00:48:35,395 --> 00:48:38,775
convincing the market that it makes total sense is maybe a different thing.

736
00:48:38,795 --> 00:48:43,975
Because it seems like the market has decided that the way these companies are valued is based off their MNAV.

737
00:48:43,975 --> 00:48:45,815
Do you think that is too simplistic?

738
00:48:47,875 --> 00:48:57,935
If you impute into MNAV a combination of the Bitcoin yield potential and sentiment,

739
00:48:58,595 --> 00:49:02,635
and this is, I guess, the valuation of all public companies,

740
00:49:03,115 --> 00:49:06,895
are a combination of, call it a discounted cash flow,

741
00:49:07,335 --> 00:49:11,635
or some multiple to earnings, or some multiple to revenue,

742
00:49:12,235 --> 00:49:13,475
and sentiment.

743
00:49:13,975 --> 00:49:15,115
Do I like the management team?

744
00:49:15,235 --> 00:49:16,275
Do I trust the team?

745
00:49:16,435 --> 00:49:19,675
Do I think that they have a business that is durable?

746
00:49:20,055 --> 00:49:23,195
Do I think they have good liability management, right?

747
00:49:23,315 --> 00:49:25,095
Do they have access to strong markets?

748
00:49:25,655 --> 00:49:27,815
To the extent that all of that is subjective,

749
00:49:28,355 --> 00:49:31,175
then yeah, I think there's a subjectivity to MNAV,

750
00:49:31,175 --> 00:49:33,455
which is why not selling Bitcoin,

751
00:49:33,655 --> 00:49:36,615
I think helps with that subjective feeling

752
00:49:36,615 --> 00:49:37,335
about the company.

753
00:49:37,735 --> 00:49:38,715
Yeah, I totally agree with that.

754
00:49:38,735 --> 00:49:40,015
But there's also, you know,

755
00:49:40,075 --> 00:49:41,735
you got to balance these things, right?

756
00:49:41,735 --> 00:49:46,575
because we also have large, sophisticated institutional investors that say,

757
00:49:46,575 --> 00:49:49,615
Phong, Mike, and the board, don't be subjective.

758
00:49:49,615 --> 00:49:50,915
Don't be emotional.

759
00:49:50,915 --> 00:49:53,075
Run this thing purely mathematically.

760
00:49:53,075 --> 00:49:53,375
Yeah.

761
00:49:53,375 --> 00:49:56,655
And I guess then it's trading off who are the most valuable to your company

762
00:49:56,655 --> 00:49:59,715
in terms of whether it's the retail that might be emotional about you doing

763
00:49:59,715 --> 00:50:01,795
something like that and the institutional investors

764
00:50:01,795 --> 00:50:04,755
who are obviously giving you more money who want you to be analytical about it.

765
00:50:04,835 --> 00:50:05,195
Yeah.

766
00:50:05,195 --> 00:50:06,795
And it's there's not a right or wrong answer.

767
00:50:06,795 --> 00:50:09,295
It's not like we like we like all classes of shareholders.

768
00:50:09,295 --> 00:50:09,555
Yeah.

769
00:50:09,555 --> 00:50:10,595
Right.

770
00:50:10,595 --> 00:50:14,715
And, you know, that's, I guess, that's the fun part of running a public company.

771
00:50:15,335 --> 00:50:19,415
So one of the interesting things that's happened over the last few months is a lot of these

772
00:50:19,415 --> 00:50:21,515
treasury companies are now trading at a discount.

773
00:50:21,695 --> 00:50:21,875
Yeah.

774
00:50:22,195 --> 00:50:26,555
As a company that buys as much Bitcoin as you possibly can, would there ever be a world

775
00:50:26,555 --> 00:50:31,355
where you would look to acquire these companies when they're trading below a 1x MNAV because

776
00:50:31,355 --> 00:50:33,575
you're essentially buying Bitcoin at a discount if you did that?

777
00:50:33,575 --> 00:50:58,095
Yeah. So the mathematical side of me, just like I would sell Bitcoin below 1xMNav, says that companies are fairly valued by the market. And so if somebody is trading below 1xMNav, there's some sentiment, but there's also market knowledge about that that's valuing that company at that price for a reason.

778
00:50:58,095 --> 00:51:01,095
It could be belief in the executive team.

779
00:51:01,215 --> 00:51:02,775
It could be belief in the business model.

780
00:51:02,935 --> 00:51:04,775
It could be belief in the market that they're in.

781
00:51:05,255 --> 00:51:09,295
And so, you know, the market is large and liquid.

782
00:51:09,795 --> 00:51:13,715
They must know something if something's trading at 0.75 XM NAV.

783
00:51:14,035 --> 00:51:15,655
And we could go do our due diligence.

784
00:51:15,875 --> 00:51:16,595
We could go figure it out.

785
00:51:16,695 --> 00:51:18,495
Maybe we're missing something and the market isn't.

786
00:51:18,935 --> 00:51:25,935
So that would be a pure market view of most companies are trading at a fair value.

787
00:51:26,555 --> 00:51:29,275
The other piece is an acquisition, right?

788
00:51:29,375 --> 00:51:32,435
And again, I've been in the software industry a long time.

789
00:51:32,615 --> 00:51:34,495
Acquisitions are hard, right?

790
00:51:34,575 --> 00:51:37,055
Like there are companies that are machines at it,

791
00:51:37,055 --> 00:51:38,115
like an Oracle, right?

792
00:51:38,135 --> 00:51:39,815
It's a machine at tech acquisition,

793
00:51:39,815 --> 00:51:41,315
and they have hundreds of people

794
00:51:41,315 --> 00:51:43,075
that are part of a corp dev team.

795
00:51:43,195 --> 00:51:43,815
They bring them in.

796
00:51:44,235 --> 00:51:46,195
They ask them a thousand due diligence questions,

797
00:51:46,315 --> 00:51:47,595
and they ask their banks to do it,

798
00:51:47,615 --> 00:51:49,075
and they ask their lawyers to do it.

799
00:51:49,295 --> 00:51:50,715
Then they write up a term sheet

800
00:51:50,715 --> 00:51:53,155
that gives them all the outs and gives them all the...

801
00:51:53,155 --> 00:51:54,575
And that's a machine.

802
00:51:55,455 --> 00:51:56,515
We've got 10 people.

803
00:51:56,875 --> 00:52:00,235
We don't have a machine to do a Bitcoin treasury company acquisition.

804
00:52:00,395 --> 00:52:00,955
Could we do it?

805
00:52:01,055 --> 00:52:01,435
Probably.

806
00:52:01,975 --> 00:52:04,475
Would it distract us from just buying Bitcoin?

807
00:52:04,735 --> 00:52:05,175
Probably.

808
00:52:05,815 --> 00:52:09,815
Like buying and holding Bitcoin is extraordinarily simple.

809
00:52:10,275 --> 00:52:11,395
That's why we have 10 people doing it.

810
00:52:11,395 --> 00:52:12,075
It's not easy, but it's simple.

811
00:52:12,295 --> 00:52:15,755
It was hard the first time and hard the second time.

812
00:52:15,795 --> 00:52:16,215
It gets easier.

813
00:52:16,215 --> 00:52:18,215
And now we get to the hundredth time.

814
00:52:18,295 --> 00:52:19,695
It gets a lot easier, right?

815
00:52:20,035 --> 00:52:20,955
We have a machine.

816
00:52:21,355 --> 00:52:22,295
We can buy and hold Bitcoin.

817
00:52:22,675 --> 00:52:24,075
I would have to create a new machine.

818
00:52:24,575 --> 00:52:46,395
Right. To identify a Bitcoin treasury company that's trading at a discount to its MNAV, figure out why, figure out what the risk is, understand if we should buy it, figure out where they've custody the Bitcoin, decide if they have good agreements. It's quite complex. Could we do it? Yeah. Should we do it? Maybe. But right now, that's not our strategy.

819
00:52:46,895 --> 00:52:47,135
Fair enough.

820
00:52:47,195 --> 00:52:50,955
Because I do, I understand what you're saying about if it's, you know, the market society

821
00:52:50,955 --> 00:52:54,195
and they don't have enough faith in the executive team, like things like that, if that Bitcoin

822
00:52:54,195 --> 00:52:56,235
was coming under your control, I think you could.

823
00:52:56,415 --> 00:52:58,215
It would just immediately pop, maybe.

824
00:52:58,455 --> 00:53:03,995
But then I do understand it may be an expensive distraction to do that rather than just do

825
00:53:03,995 --> 00:53:04,415
what you're doing.

826
00:53:04,635 --> 00:53:04,875
Yeah.

827
00:53:04,955 --> 00:53:06,315
And you could be just wrong.

828
00:53:06,315 --> 00:53:10,375
Think about all the tech acquisitions in the last 20 years that everyone thought was a

829
00:53:10,375 --> 00:53:11,855
good idea until it wasn't.

830
00:53:11,855 --> 00:53:18,675
Yeah. Like AOL Time Warner. At that point in time, everyone thought that was a great merger and then ended up not being one.

831
00:53:18,675 --> 00:53:23,615
Right. A huge distraction. It led to the downfall of AOL and Time for that matter.

832
00:53:23,715 --> 00:53:29,995
And then Warner split off. So there are a lot of acquisitions that look good on paper and are misexecuted.

833
00:53:30,375 --> 00:53:33,295
There are a lot of acquisitions that look good on paper and just weren't.

834
00:53:34,015 --> 00:53:36,355
Right. So you see it as maybe just too much risk.

835
00:53:36,455 --> 00:53:38,695
There's no point when you can just go out to the market and buy Bitcoin.

836
00:53:39,455 --> 00:53:42,075
I think that's a much easier thing to do for us.

837
00:53:42,195 --> 00:53:42,675
Fair enough.

838
00:53:42,815 --> 00:53:43,035
Okay.

839
00:53:43,715 --> 00:53:45,535
Can I ask you about one of the other criticisms

840
00:53:45,535 --> 00:53:46,695
that came up in this interview?

841
00:53:46,755 --> 00:53:47,455
I did this debate.

842
00:53:47,455 --> 00:53:47,755
Yeah.

843
00:53:48,175 --> 00:53:56,175
It was around having Bitcoin upside down as earnings

844
00:53:56,175 --> 00:53:57,875
in your reports.

845
00:53:58,075 --> 00:53:58,175
Yeah.

846
00:53:58,615 --> 00:54:01,335
I understand that that's just the way the accounting works,

847
00:54:01,455 --> 00:54:03,115
but do you see that as an issue,

848
00:54:03,235 --> 00:54:06,175
that Bitcoin appreciating a value goes in as earnings

849
00:54:06,175 --> 00:54:08,235
when it's maybe not traditionally

850
00:54:08,235 --> 00:54:09,315
what you think of as earnings?

851
00:54:09,595 --> 00:54:10,115
Not really.

852
00:54:10,235 --> 00:54:11,995
I mean, we advocated for that, right?

853
00:54:12,055 --> 00:54:14,575
Like the original accounting treatment of Bitcoin,

854
00:54:14,715 --> 00:54:16,595
because there was no accounting treatment,

855
00:54:16,715 --> 00:54:18,555
was to treat it in the worst way possible,

856
00:54:18,715 --> 00:54:20,215
which is intangible asset accounting.

857
00:54:20,935 --> 00:54:22,495
Intangible asset accounting is there

858
00:54:22,495 --> 00:54:24,515
for things that you can't really value easily.

859
00:54:24,655 --> 00:54:25,615
It's not a liquid market.

860
00:54:25,795 --> 00:54:28,055
Art could be an intangible asset,

861
00:54:28,175 --> 00:54:29,615
which means that every year you go

862
00:54:29,615 --> 00:54:31,135
and you test it for impairment,

863
00:54:31,275 --> 00:54:32,415
is that art worth less?

864
00:54:32,515 --> 00:54:33,955
Who knows, right?

865
00:54:34,155 --> 00:54:35,415
And you appraise it

866
00:54:35,415 --> 00:54:36,295
and then you write it down,

867
00:54:36,355 --> 00:54:38,015
but you can never write it up until you sell it.

868
00:54:38,455 --> 00:54:42,375
And that's what Bitcoin was treated like before 2023,

869
00:54:42,815 --> 00:54:44,935
where we worked with FASB,

870
00:54:45,075 --> 00:54:46,735
we worked with the big four to get it changed.

871
00:54:47,195 --> 00:54:48,955
So we changed the fair value.

872
00:54:49,395 --> 00:54:50,995
We changed the fair value from your,

873
00:54:51,915 --> 00:54:53,315
what do you want to know?

874
00:54:53,375 --> 00:54:54,395
What's the company worth?

875
00:54:54,395 --> 00:54:58,475
It's worth the Bitcoin it has on its balance sheet

876
00:54:58,475 --> 00:55:00,355
times the price at that point in time.

877
00:55:00,855 --> 00:55:03,355
And so if it goes up, we show positive earnings.

878
00:55:03,495 --> 00:55:05,275
If it goes down, we show negative earnings.

879
00:55:05,415 --> 00:55:07,495
And I think that's a very reasonable treatment.

880
00:55:08,135 --> 00:55:12,775
I don't think people should get excited every quarter where it goes up because Bitcoin went up 20%,

881
00:55:12,775 --> 00:55:16,375
because the next quarter might go down because Bitcoin went down 30%.

882
00:55:16,375 --> 00:55:20,835
There's a whole debate of whether I think quarterly earnings make sense at all.

883
00:55:21,315 --> 00:55:25,755
You want to know what our net asset value, you can go look on our website and it updates every 15 seconds.

884
00:55:25,835 --> 00:55:28,635
Who needs quarterly earnings when you look at it every 15 seconds?

885
00:55:30,035 --> 00:55:34,015
So what you do is you just look at the Bitcoin on our balance sheet,

886
00:55:34,015 --> 00:55:37,035
you see what it's worth and you know what the company is worth at any point in time. I think

887
00:55:37,035 --> 00:55:41,855
that's reasonable. You say, does it get treated as income? Yeah, to the extent that you report

888
00:55:41,855 --> 00:55:47,635
quarterly earnings, every quarter is either treated as positive or negative income. So the

889
00:55:47,635 --> 00:55:52,115
fault I would put to that is not the fact that it's fair value. It's the fact that we have a

890
00:55:52,115 --> 00:55:55,755
quarterly earnings system and you're evaluating every quarter, whether it went up or down,

891
00:55:56,015 --> 00:55:58,875
and what happens to our income. That's fair. And I guess it's just another

892
00:55:58,875 --> 00:56:03,095
case of this being like a novel business model that people have to understand how it works and

893
00:56:03,095 --> 00:56:05,975
It's different to a normal tech company.

894
00:56:06,115 --> 00:56:09,475
Yeah, and again, I wouldn't get excited by the quarterly fluctuations.

895
00:56:11,075 --> 00:56:12,375
It's your Bitcoin, right?

896
00:56:12,515 --> 00:56:13,715
It goes up and down.

897
00:56:13,795 --> 00:56:16,875
But I would get excited if you look at it annually in a couple years out

898
00:56:16,875 --> 00:56:18,335
and you see it accreting over time.

899
00:56:18,475 --> 00:56:19,955
That's what Bitcoin does.

900
00:56:20,515 --> 00:56:23,235
And so now Bitcoin price is down quite a lot.

901
00:56:23,835 --> 00:56:26,495
How are you approaching the next 12 months?

902
00:56:26,655 --> 00:56:30,255
Does anything change if we are potentially in a bear market or a sideway?

903
00:56:30,255 --> 00:56:32,215
Whatever you can describe this as.

904
00:56:32,215 --> 00:56:52,115
Yeah, there's a couple of things that are interesting, right? Like access to the capital markets in a bear market are not the same, right? Like we raised in 2024, which was an amazing bull market, about $22 billion of capital. This year, we're almost a $20 billion company where the first three quarters of the year was a bull market.

905
00:56:52,115 --> 00:57:00,075
If we have a bear market next year and it goes through all of 2026, we're likely not going to raise $20 billion of capital.

906
00:57:00,575 --> 00:57:03,095
If stretch seasons, that could be interesting.

907
00:57:03,715 --> 00:57:20,183
That was the reason we created these preferred products is that in theory their performance is not as tied to Bitcoin price going up or down so that we can raise capital in a bear market And even that said right you know

908
00:57:20,183 --> 00:57:27,183
it'd be harder to raise equity in a bear market or when MNAV is at one, two versus when it's sitting

909
00:57:27,183 --> 00:57:33,502
at two or sitting at three. So I go back to, it's probably not much different if you're an oil

910
00:57:33,502 --> 00:57:42,223
company and you're making decisions on how much oil to mine, how much equipment to put in the

911
00:57:42,223 --> 00:57:50,502
ground, how much prospecting you want to do, your decision is very different when oil is $50 a

912
00:57:50,502 --> 00:57:56,163
barrel versus $200 a barrel, right? And when it's 50 bucks a barrel or even less than that, you just

913
00:57:56,163 --> 00:58:00,802
sort of sit and wait and you see the market play out and you make sure that you have good liability

914
00:58:00,802 --> 00:58:06,443
management, you have a strong balance sheet, you know, pops two, $300 a barrel, you put your foot

915
00:58:06,443 --> 00:58:12,363
in the accelerator and you go, go, go. Right. And you have to be prepared for both. And I think what

916
00:58:12,363 --> 00:58:19,602
we've done in five years, if we created a Bitcoin treasury company that issues Bitcoin backed

917
00:58:19,602 --> 00:58:25,323
securities, that's prepared, well prepared for a bull market and a bear market, because they're

918
00:58:25,323 --> 00:58:29,563
going to happen. Yeah, a hundred percent they're going to happen. And I do think the structure of

919
00:58:29,563 --> 00:58:34,363
might be slightly different, but there's going to be periods of this. When it comes to the preferreds,

920
00:58:34,363 --> 00:58:38,683
in the US you've got the four at the moment. Is there a gap in that where you think something

921
00:58:38,683 --> 00:58:44,203
else needs to be created or are you happy with the four at the moment? I think there could be

922
00:58:46,282 --> 00:58:51,963
mid-duration instruments. Right now we have something that's a very short duration in terms

923
00:58:51,963 --> 00:58:57,963
of stretch and we have longer 10, 15 year Macaulay duration instruments that are strife, stride and

924
00:58:57,963 --> 00:59:02,643
strike? Could you have something in between? You could. All that said, I don't think we need that

925
00:59:02,643 --> 00:59:08,343
right now. What we need, again, we're only 11 months into launching the preferreds, right?

926
00:59:08,463 --> 00:59:13,023
Like this is not, these instruments haven't been out there for five years. So it's time to season

927
00:59:13,023 --> 00:59:17,123
the market in these instruments. Even the question you asked earlier, how do we pay for the dividends?

928
00:59:18,043 --> 00:59:21,762
Right? There are a lot of folks out there who don't believe that even though we have,

929
00:59:21,762 --> 00:59:26,123
$60 billion, $65 billion worth of Bitcoin

930
00:59:26,123 --> 00:59:29,502
that we can pay $800 million a year worth of dividends.

931
00:59:30,023 --> 00:59:30,143
Yeah.

932
00:59:30,383 --> 00:59:30,563
Right?

933
00:59:30,843 --> 00:59:33,223
And so the more we pay the dividends

934
00:59:33,223 --> 00:59:35,343
out of all of our instruments every quarter,

935
00:59:35,863 --> 00:59:37,903
that's seasoning the market to realize

936
00:59:37,903 --> 00:59:39,143
that even in a bear market,

937
00:59:39,223 --> 00:59:40,203
we're going to pay these dividends.

938
00:59:40,482 --> 00:59:42,703
When we do that, they start to price up.

939
00:59:43,023 --> 00:59:46,102
We can then use the ATM to raise more money.

940
00:59:46,762 --> 00:59:51,143
But it took us to go through a bear market

941
00:59:51,143 --> 00:59:52,302
where they're common.

942
00:59:53,203 --> 00:59:56,243
And when we came out the end of that bear market in 2023,

943
00:59:57,082 --> 00:59:59,143
people were like, oh, here's a company

944
00:59:59,143 --> 01:00:02,123
that can withstand a bear market

945
01:00:02,123 --> 01:00:05,582
with just a levered Bitcoin strategy.

946
01:00:06,023 --> 01:00:08,683
Now we can prove that we can withstand a bear market.

947
01:00:08,943 --> 01:00:11,063
In this case, and it hardens the company.

948
01:00:11,443 --> 01:00:13,163
Yeah, I think that makes total sense to me.

949
01:00:13,203 --> 01:00:14,102
Because like you say,

950
01:00:14,203 --> 01:00:16,063
last time Bitcoin went through a bear market,

951
01:00:16,063 --> 01:00:17,683
the question was like,

952
01:00:17,982 --> 01:00:20,582
is there a point where strategy gets liquidated

953
01:00:20,582 --> 01:00:21,923
and you have to start selling Bitcoin.

954
01:00:22,183 --> 01:00:23,183
And once that didn't happen,

955
01:00:23,282 --> 01:00:24,323
everyone gained confidence in it.

956
01:00:24,383 --> 01:00:25,643
And maybe it does take something similar

957
01:00:25,643 --> 01:00:26,403
in these preferreds

958
01:00:26,403 --> 01:00:28,443
before people have full confidence in them

959
01:00:28,443 --> 01:00:30,482
and willing to get more and more money into that.

960
01:00:30,703 --> 01:00:33,163
Yeah, you remember a lot of our investors today

961
01:00:33,163 --> 01:00:36,703
didn't even know what strategy was.

962
01:00:36,703 --> 01:00:39,383
So a microstrategy at that point in time in 2022.

963
01:00:40,102 --> 01:00:42,143
And you remember the narrative back then.

964
01:00:42,943 --> 01:00:44,602
What was going to happen in the company?

965
01:00:44,683 --> 01:00:45,802
Is there going to be a marginal?

966
01:00:46,663 --> 01:00:49,163
Yeah, our stock went all the way back down

967
01:00:49,163 --> 01:00:49,943
to where it started.

968
01:00:49,943 --> 01:00:51,223
It was at about $16.

969
01:00:51,903 --> 01:00:55,923
And we were trading, I think it was 0.8 MNav.

970
01:00:56,403 --> 01:01:00,262
And everyone was just ready for the company to implode.

971
01:01:00,582 --> 01:01:02,223
And we didn't do that at all.

972
01:01:02,323 --> 01:01:02,683
We hardened.

973
01:01:02,843 --> 01:01:03,523
We got stronger.

974
01:01:04,363 --> 01:01:10,403
The test of you, the test of our management skills,

975
01:01:10,482 --> 01:01:13,123
but the test of an individual, the test of a good team,

976
01:01:13,383 --> 01:01:16,743
I don't know cricket, but I'm guessing the teams are tested

977
01:01:16,743 --> 01:01:18,243
when they're not doing well.

978
01:01:18,243 --> 01:01:24,963
right like no team wins all the time right and and so we were tested at that point in time and

979
01:01:24,963 --> 01:01:30,802
i think we did pretty well in 2022 if this is the beginning of a bear market in 2025 we have another

980
01:01:30,802 --> 01:01:35,582
test are we going to pay our dividends or not uh and i sit here and say we're going to pay the

981
01:01:35,582 --> 01:01:40,262
dividends and when people see that they're going to we're going to pass the test and we're going to

982
01:01:40,262 --> 01:01:45,423
come out of this and the next bull market will shoot back up again right because people understand

983
01:01:45,423 --> 01:01:49,163
that we know how to run a Bitcoin treasury company

984
01:01:49,163 --> 01:01:50,463
and a Bitcoin credit company.

985
01:01:50,963 --> 01:01:52,943
Yeah, it's going to be an interesting few years.

986
01:01:53,043 --> 01:01:54,762
It's funny, like, when we started this conversation,

987
01:01:54,943 --> 01:01:57,802
you talked about the model that Michael had given you

988
01:01:57,802 --> 01:01:59,843
in the early days, and you said that broke the upside.

989
01:02:00,002 --> 01:02:02,123
And like Michael says, all your models will be broken.

990
01:02:02,302 --> 01:02:02,463
Yeah.

991
01:02:02,683 --> 01:02:06,843
But you will obviously have to model Bitcoin price appreciation

992
01:02:06,843 --> 01:02:09,563
in some way to have confidence in what you're doing at the company.

993
01:02:09,563 --> 01:02:12,323
Like, where do you see Bitcoin going over the next few years?

994
01:02:12,323 --> 01:02:32,423
Yeah, so I think Michael said it's going to go up 21% for the next 21 years, and I think that's a reasonable model. I think as long as Bitcoin is performing better than the S&P 500, as an example, which has been going up 14%, 15% a year, and if it's double that and it's going up 30% a year, then we're going to win.

995
01:02:32,703 --> 01:02:34,802
If it's going up 20% a year, we're going to win.

996
01:02:35,063 --> 01:02:37,102
If it's going up 18% a year, we're going to win.

997
01:02:38,282 --> 01:02:40,383
I think for the foreseeable future,

998
01:02:40,383 --> 01:02:43,563
we're still talking 50%, 40% annualized returns

999
01:02:43,563 --> 01:02:46,443
over a four or five year period, right?

1000
01:02:46,443 --> 01:02:50,703
And that gets back to the fundamentals of Bitcoin, right?

1001
01:02:50,863 --> 01:02:52,423
All the reasons why we enjoyed,

1002
01:02:52,703 --> 01:02:55,383
all the reasons why in 2020, when I discovered this thing,

1003
01:02:55,423 --> 01:02:56,463
I was like, this is extraordinary.

1004
01:02:57,102 --> 01:02:58,343
It's amazing technology.

1005
01:02:58,843 --> 01:03:02,082
It's an amazing store of value asset.

1006
01:03:02,423 --> 01:03:11,063
right it's non-sovereign and has limited supply uh and you know people in australia people in the

1007
01:03:11,063 --> 01:03:16,743
u.s people in ukraine people in turkey people in argentina people in vietnam and south korea

1008
01:03:17,323 --> 01:03:24,762
like everyone likes bitcoin right and so you have to go back to like i don't really know what the

1009
01:03:24,762 --> 01:03:30,982
returns are going to be but you go back to is it a good product right and and if you believe it's a

1010
01:03:30,982 --> 01:03:35,463
good product and you believe there are people that want the product, right? And you believe

1011
01:03:35,463 --> 01:03:40,982
there's a limited supply, right? Then it's going to work, right? Like when Apple came out with the

1012
01:03:40,982 --> 01:03:46,943
iPhone or when Netflix came out, you know, with streaming, heck, when Netflix came out with DVDs

1013
01:03:46,943 --> 01:03:50,723
that you get in the mail two days later, you can hold them onto them for as long as you want.

1014
01:03:51,002 --> 01:03:55,723
It's a good product. What was the size of Netflix? Did I know that Netflix was going to become a

1015
01:03:55,723 --> 01:04:00,782
streaming video company? No, but you knew it was a great product. When the internet came out,

1016
01:04:00,982 --> 01:04:10,183
Like I was in the 1980s, I was on BBSs and like doing dial up before AOL existed and downloading like whatever it is, little video games.

1017
01:04:10,183 --> 01:04:11,823
And I was like, this is the greatest thing ever.

1018
01:04:12,102 --> 01:04:13,143
I knew it was a good product.

1019
01:04:13,223 --> 01:04:18,223
Did I sit there at the age of 14 and say, hey, you know, what's the value of this thing?

1020
01:04:18,282 --> 01:04:22,963
How much are BBSs going to go up and the ability to communicate with people over a phone line?

1021
01:04:23,482 --> 01:04:25,183
No, I just knew it was a great product.

1022
01:04:25,543 --> 01:04:26,982
And that's what I would say about Bitcoin.

1023
01:04:27,302 --> 01:04:28,623
This is just a great product.

1024
01:04:29,063 --> 01:04:29,123
Yeah.

1025
01:04:29,123 --> 01:04:34,323
Yeah. You brought up the S&P there. I've had Jeff Walton on the show a couple of times. I think he's

1026
01:04:34,323 --> 01:04:39,423
great. And he's been constantly tweeting about when is strategy going to be added to the S&P.

1027
01:04:40,482 --> 01:04:43,323
You obviously, I believe you already qualify for it.

1028
01:04:43,363 --> 01:04:43,703
That's right.

1029
01:04:43,963 --> 01:04:46,723
What is it that's holding that back? And do you think that'll happen?

1030
01:04:49,163 --> 01:04:56,843
There's a little bit of a, if you think about these indexes, right? S&P 500, NASDAQ, MSCI,

1031
01:04:56,843 --> 01:05:03,823
et cetera, et cetera. S&P 500, they're basically public companies, right? MSCI is a public company.

1032
01:05:04,262 --> 01:05:09,762
They have customers. Who are their customers? Their customers are primarily the large asset

1033
01:05:09,762 --> 01:05:18,443
managers. So who are buying these products? BlackRock, Vanguard, and similar light companies,

1034
01:05:18,443 --> 01:05:26,383
If you're Vanguard, you are the largest customer of S&P index.

1035
01:05:26,643 --> 01:05:28,663
You're the largest customer of the MSCI.

1036
01:05:29,243 --> 01:05:33,762
So guess who gets to decide indirectly what gets into these indexes?

1037
01:05:34,463 --> 01:05:34,703
Vanguard.

1038
01:05:35,703 --> 01:05:39,823
And so does Vanguard want us in these indexes?

1039
01:05:40,063 --> 01:05:42,143
Because then you become a competitor to their ETF products.

1040
01:05:42,823 --> 01:05:44,743
They're also happening to one of our largest shareholders.

1041
01:05:44,743 --> 01:05:48,863
It's an interesting, extremely circular system.

1042
01:05:49,123 --> 01:05:51,203
But Vanguard's on the record that says,

1043
01:05:51,302 --> 01:05:53,082
hey, you know, I'm not a big fan of Bitcoin,

1044
01:05:53,563 --> 01:05:54,923
even though they're our largest shareholder

1045
01:05:54,923 --> 01:05:56,923
through these passive funds, right?

1046
01:05:57,023 --> 01:06:01,863
And so that has to be broken and unlocked somehow.

1047
01:06:03,263 --> 01:06:06,383
And, you know, it's not too much different than today, right?

1048
01:06:06,462 --> 01:06:08,883
NVIDIA goes and invests in OpenAI

1049
01:06:08,883 --> 01:06:11,323
and OpenAI goes and buys NVIDIA chips.

1050
01:06:11,543 --> 01:06:12,343
Is that good or bad?

1051
01:06:12,802 --> 01:06:14,643
There's questions about that, right?

1052
01:06:14,643 --> 01:06:19,343
Here you have Vanguard buying S&P products,

1053
01:06:19,743 --> 01:06:21,763
and S&P decides what goes in that product

1054
01:06:21,763 --> 01:06:23,443
and turns around and sells it to Vanguard.

1055
01:06:23,782 --> 01:06:25,323
It's a circular system.

1056
01:06:26,082 --> 01:06:29,423
And the way you break these circular systems is retail.

1057
01:06:30,102 --> 01:06:33,863
Because who's actually the customer of the S&P in Vanguard?

1058
01:06:34,383 --> 01:06:36,823
It's the people who are putting money into it.

1059
01:06:36,843 --> 01:06:38,403
It's not Vanguard's money, it's our money.

1060
01:06:38,523 --> 01:06:40,363
You're my money, it's retirement money.

1061
01:06:41,143 --> 01:06:43,823
And so this is why retail is amazing.

1062
01:06:44,643 --> 01:06:48,643
Because institutions are there, but their customers are retail.

1063
01:06:49,082 --> 01:06:59,183
If retail goes out and tells Vanguard, hey, you should have Bitcoin-backed products, then Vanguard will go tell S&P, hey, you should let strategy into the S&P 500.

1064
01:06:59,683 --> 01:07:01,403
I'm not sure that's exactly how it works.

1065
01:07:01,703 --> 01:07:03,123
That's why I love the NASDAQ 100.

1066
01:07:03,623 --> 01:07:04,743
It's not subjective.

1067
01:07:05,502 --> 01:07:07,843
Market cap, top 100 in the NASDAQ.

1068
01:07:09,002 --> 01:07:09,523
Transparent.

1069
01:07:09,823 --> 01:07:10,582
Everybody can see it.

1070
01:07:10,843 --> 01:07:11,602
That's why I love Bitcoin.

1071
01:07:11,602 --> 01:07:30,962
Then you have these subjective products like the S&P 500 index. Now, do I think they should add us? I think they should. Will they? I think there will need to be some lobbying from retail from us and others to get there. Or they might just add us.

1072
01:07:30,962 --> 01:07:34,082
Right. Again, I don't really know. It's a black box process.

1073
01:07:34,082 --> 01:07:43,082
But what I know is in these black box processes where you have parties taking retail money and making decisions without transparency, I don't love that.

1074
01:07:43,082 --> 01:07:44,363
Yeah, no, I agree with that.

1075
01:07:44,363 --> 01:07:49,923
And I mean, it seems like a matter of when, not if, like at some point, I'm sure it will happen.

1076
01:07:50,403 --> 01:07:53,123
What difference does that make to your business?

1077
01:07:53,123 --> 01:07:57,443
Like the passive flows that come in through the S&P, like how much difference do you think that would make?

1078
01:07:57,443 --> 01:08:07,282
I think it's pretty significant because these passive flows, again, what I find humorous is these passive flows are ultimately retail money.

1079
01:08:08,143 --> 01:08:13,683
It's retail money controlled by institutions, so therefore it's considered institutional money, but it really isn't.

1080
01:08:13,863 --> 01:08:14,843
It's retail money.

1081
01:08:16,002 --> 01:08:22,123
And just like in the U.S., if you don't like the government, you show up to vote.

1082
01:08:22,123 --> 01:08:24,883
if you don't like what the indexes are doing,

1083
01:08:25,422 --> 01:08:27,602
you write a letter, you comment, you let them know.

1084
01:08:29,063 --> 01:08:31,942
That's how we got the FASB accounting change

1085
01:08:31,942 --> 01:08:35,583
is there is an open process where the SEC,

1086
01:08:36,263 --> 01:08:38,343
or in this case FASB, solicits comments,

1087
01:08:38,862 --> 01:08:41,223
and we flooded them with 500 or so letters,

1088
01:08:41,402 --> 01:08:43,523
and they're used to getting like 20, right?

1089
01:08:43,523 --> 01:08:47,083
There are open comment windows periods

1090
01:08:47,083 --> 01:08:48,723
for companies like the MSCI.

1091
01:08:49,083 --> 01:08:50,143
I think there is one for the SEC.

1092
01:08:50,143 --> 01:08:59,783
If retail wants us, wants Bitcoin-backed companies to be part of these indexes, the best thing for you to do is we'll give you the email addresses of the folks.

1093
01:09:00,143 --> 01:09:01,203
Send them emails. Let them know.

1094
01:09:01,783 --> 01:09:03,283
That's the great thing about America.

1095
01:09:03,442 --> 01:09:04,883
That's the great thing about retail.

1096
01:09:05,042 --> 01:09:06,862
We're a democracy when it comes to voting.

1097
01:09:07,362 --> 01:09:12,163
And ultimately, retail are the ones who create and make the money.

1098
01:09:14,303 --> 01:09:17,462
They just have to show up and say, hey, you should add strategy.

1099
01:09:17,462 --> 01:09:19,203
Apply enough pressure and things might change.

1100
01:09:19,502 --> 01:09:19,602
Yeah.

1101
01:09:19,602 --> 01:09:21,902
Fong, this has been amazing.

1102
01:09:22,583 --> 01:09:24,803
I want to ask you one more question before we close out,

1103
01:09:24,883 --> 01:09:26,602
which we did touch on a little bit earlier.

1104
01:09:27,442 --> 01:09:28,962
As I said, like strategy,

1105
01:09:29,223 --> 01:09:31,223
far and away the biggest of these treasury companies.

1106
01:09:31,723 --> 01:09:33,163
In the US specifically,

1107
01:09:33,383 --> 01:09:35,823
for getting the kind of jurisdictional arbitrage play,

1108
01:09:36,083 --> 01:09:39,283
how many do you think the market can support

1109
01:09:39,283 --> 01:09:40,783
and how many do you think will survive?

1110
01:09:44,123 --> 01:09:47,623
There's different kinds of treasury companies

1111
01:09:47,623 --> 01:09:48,763
or Bitcoin companies.

1112
01:09:48,763 --> 01:09:56,962
There are the Teslas who decide, and now Figma is another one who decides 5%, 10% of your treasury should be in Bitcoin.

1113
01:09:57,383 --> 01:10:11,462
And I think for the health of Bitcoin, the health for corporate treasuries, and the health of the monetary system, companies should be putting Bitcoin on their balance sheet.

1114
01:10:11,563 --> 01:10:11,883
Absolutely.

1115
01:10:12,083 --> 01:10:13,843
5%, 10%, 15%, right?

1116
01:10:13,843 --> 01:10:34,723
And I think that is much more important than how many Bitcoin treasury companies there are. And so the question really isn't, should we have one, should we have five, should we have 10 Bitcoin treasury companies? The question is, how do you take 4,000 public companies in the U.S. and have them all holding Bitcoin in some way, shape, or form?

1117
01:10:34,723 --> 01:10:38,323
and I think that will start to happen.

1118
01:10:38,482 --> 01:10:39,623
You're starting to see it happen.

1119
01:10:39,783 --> 01:10:42,163
I think over the next five, 10 years,

1120
01:10:42,243 --> 01:10:44,223
you'll see all the companies at some point in time

1121
01:10:44,223 --> 01:10:47,002
either holding Bitcoin or holding one of our preferreds.

1122
01:10:47,563 --> 01:10:50,123
Why wouldn't you hold a stretch instead of a treasury

1123
01:10:50,123 --> 01:10:52,362
if you believe that those dividends

1124
01:10:52,362 --> 01:10:54,542
are going to get paid over the course of time?

1125
01:10:54,542 --> 01:10:58,383
So I think that's going to be the interesting wave

1126
01:10:58,383 --> 01:11:00,563
as Bitcoin legitimizes.

1127
01:11:01,183 --> 01:11:03,362
It's like you don't really want the U.S. government

1128
01:11:03,362 --> 01:11:05,263
to hold all of their treasury in Bitcoin,

1129
01:11:05,663 --> 01:11:07,602
but you want some of it in Bitcoin, right?

1130
01:11:07,643 --> 01:11:09,303
And if all the governments around the world

1131
01:11:09,303 --> 01:11:10,942
hold some of their treasury in Bitcoin,

1132
01:11:10,942 --> 01:11:13,482
that's more important than one country

1133
01:11:13,482 --> 01:11:15,243
holding all of their treasury in Bitcoin.

1134
01:11:15,462 --> 01:11:15,982
I think it's also,

1135
01:11:16,143 --> 01:11:17,643
that's probably a more healthy scenario

1136
01:11:17,643 --> 01:11:18,502
for Bitcoin as well,

1137
01:11:18,542 --> 01:11:20,883
rather than everyone doing sort of levered plays on it.

1138
01:11:20,962 --> 01:11:23,962
Just buying it with a portion of your cash balance.

1139
01:11:24,502 --> 01:11:27,502
Why do you think we've not seen much of that?

1140
01:11:27,843 --> 01:11:30,703
Like, just to pick a huge company with loads of cash,

1141
01:11:30,743 --> 01:11:31,183
like Apple,

1142
01:11:31,183 --> 01:11:33,643
they could very easily put a tiny percentage

1143
01:11:33,643 --> 01:11:34,643
of their cash into Bitcoin.

1144
01:11:34,962 --> 01:11:35,123
Yeah.

1145
01:11:35,323 --> 01:11:38,402
Do you think they're worried about shareholders

1146
01:11:38,402 --> 01:11:40,063
seeing that as a negative

1147
01:11:40,063 --> 01:11:41,362
and their share price dropping on it?

1148
01:11:41,383 --> 01:11:42,623
Which I don't think would happen.

1149
01:11:42,783 --> 01:11:43,402
But I'm trying to figure out

1150
01:11:43,402 --> 01:11:44,422
what happens in the boardrooms

1151
01:11:44,422 --> 01:11:46,343
and why they're not deciding to do this.

1152
01:11:46,823 --> 01:11:48,663
Well, from a corporate governance perspective,

1153
01:11:48,663 --> 01:11:50,482
back to how a public company works,

1154
01:11:50,823 --> 01:11:53,323
there are things that the executive team,

1155
01:11:53,643 --> 01:11:54,883
the CEO can do.

1156
01:11:55,203 --> 01:11:57,343
And there are things that you require the board to do.

1157
01:11:57,962 --> 01:12:00,843
Like tomorrow, I can go hire 20 people.

1158
01:12:01,183 --> 01:12:03,422
don't need the board approval, right?

1159
01:12:03,523 --> 01:12:05,823
But I can't put gold on my balance sheet tomorrow

1160
01:12:05,823 --> 01:12:07,922
without getting board approval, right?

1161
01:12:07,942 --> 01:12:09,902
Because it has to be part of your investment policy.

1162
01:12:10,002 --> 01:12:11,663
And by definition, investment policy

1163
01:12:11,663 --> 01:12:13,203
is a board-level decision.

1164
01:12:14,083 --> 01:12:15,383
Boards aren't made to move fast.

1165
01:12:17,523 --> 01:12:20,203
Corporations at the CEO and below level

1166
01:12:20,203 --> 01:12:21,102
are made to move fast.

1167
01:12:21,623 --> 01:12:22,922
So the biggest reason

1168
01:12:22,922 --> 01:12:26,243
is you need an investment policy change.

1169
01:12:26,623 --> 01:12:27,743
You have to go to the board

1170
01:12:27,743 --> 01:12:29,303
and there might be nine people,

1171
01:12:29,422 --> 01:12:30,663
there might be 12 people.

1172
01:12:31,323 --> 01:12:33,962
And in many cases, it goes down to a board vote.

1173
01:12:34,402 --> 01:12:38,843
But if you have one board member that thinks it's a bad idea, they're going to politic behind.

1174
01:12:39,462 --> 01:12:42,883
The way a board, the CEO doesn't need a vote.

1175
01:12:43,143 --> 01:12:51,002
I don't go sit with my eight members of my executive team and I say, hey, can you all vote if you want 20 people to be out of the organization?

1176
01:12:51,183 --> 01:12:51,803
I just do it.

1177
01:12:52,203 --> 01:12:54,042
The board is a voting process.

1178
01:12:54,643 --> 01:13:00,402
And voting processes, just like the U.S. Senate or the U.S. House, are slow.

1179
01:13:00,663 --> 01:13:07,723
By definition, the executive branch, the president, can make changes for the most part with executive branch decisions.

1180
01:13:07,862 --> 01:13:10,643
But when you go to a vote, it creates inertia and it's slow.

1181
01:13:11,323 --> 01:13:19,502
An investment policy change, adding Bitcoin, even 1% of it or 2% of it to Apple's balance sheet, has to go to the board for a vote.

1182
01:13:20,402 --> 01:13:23,502
And there is absolutely, when you go to the board, there's inertia.

1183
01:13:24,183 --> 01:13:25,482
There's prejudices.

1184
01:13:25,482 --> 01:13:31,203
I mean, I challenge anyone to go look at the MAG7 board composition.

1185
01:13:32,023 --> 01:13:33,402
Go look at Apple's board.

1186
01:13:33,563 --> 01:13:34,883
Go look at Meta's board.

1187
01:13:35,042 --> 01:13:36,203
Go look at Google's board.

1188
01:13:36,383 --> 01:13:37,143
Brilliant people.

1189
01:13:37,663 --> 01:13:38,862
But are they change agents?

1190
01:13:39,462 --> 01:13:42,523
Are they ones that are going to sit and say, hey, I'm 70.

1191
01:13:43,283 --> 01:13:47,823
I'm going to retire from this board in two years, and I'm going to vote for change.

1192
01:13:48,163 --> 01:13:49,703
Or are they going to say, I'm 70.

1193
01:13:49,803 --> 01:13:51,542
I'm going to retire from this board in two years.

1194
01:13:51,723 --> 01:13:54,063
I don't really want to have to do too much work.

1195
01:13:54,063 --> 01:13:54,442
Yeah.

1196
01:13:54,442 --> 01:13:55,922
Yeah, that's the challenge.

1197
01:13:56,023 --> 01:13:57,542
And that's why we were able to do it,

1198
01:13:57,563 --> 01:13:59,343
because we were a control company, founder-led.

1199
01:13:59,942 --> 01:14:02,063
That's why Tesla was able to do it.

1200
01:14:02,663 --> 01:14:05,023
If you start with founder-led companies,

1201
01:14:05,263 --> 01:14:08,063
it'll change over time, though, when it becomes...

1202
01:14:08,843 --> 01:14:11,723
I think one of the big changes that we're going to see

1203
01:14:11,723 --> 01:14:15,283
in the next year are large banks.

1204
01:14:15,923 --> 01:14:20,402
Morgan Stanley, Citibank, maybe J.P. Morgan,

1205
01:14:21,362 --> 01:14:23,542
a TD bank, some large Bank of America.

1206
01:14:23,542 --> 01:14:26,343
as they start to offer Bitcoin services,

1207
01:14:26,723 --> 01:14:28,362
Bitcoin custody, right?

1208
01:14:28,442 --> 01:14:30,102
Bitcoin exchange, you can buy Bitcoin,

1209
01:14:30,263 --> 01:14:32,102
you can get yield on your Bitcoin,

1210
01:14:32,223 --> 01:14:33,462
you can lend against your Bitcoin.

1211
01:14:33,783 --> 01:14:37,982
When the big banking establishment legitimizes Bitcoin,

1212
01:14:38,362 --> 01:14:40,063
then I think some of these boards are going to say,

1213
01:14:40,143 --> 01:14:41,843
okay, well, you know,

1214
01:14:41,843 --> 01:14:45,423
if Morgan Stanley is custodying Bitcoin,

1215
01:14:45,822 --> 01:14:47,482
then all of a sudden, if I buy Bitcoin,

1216
01:14:47,623 --> 01:14:50,063
I don't have to hold it with Coinbase or Anchorage.

1217
01:14:50,203 --> 01:14:51,243
And those are great companies,

1218
01:14:51,243 --> 01:14:54,462
but they're not Morgan Stanley or JP Morgan or Citibank.

1219
01:14:54,563 --> 01:14:55,743
The risk profile is totally different.

1220
01:14:56,462 --> 01:14:57,322
That makes sense.

1221
01:14:57,423 --> 01:14:58,703
And I wonder if it's, again,

1222
01:14:58,803 --> 01:15:00,283
like the start of the conversation we were saying,

1223
01:15:00,362 --> 01:15:02,102
we were surprised that more corporates

1224
01:15:02,102 --> 01:15:03,583
didn't follow you in this more quickly

1225
01:15:03,583 --> 01:15:05,442
if we did this in four years' time,

1226
01:15:05,542 --> 01:15:07,123
if we were to talk about Apple owning Bitcoin.

1227
01:15:07,482 --> 01:15:08,343
I think we will.

1228
01:15:08,542 --> 01:15:09,523
I think we will.

1229
01:15:09,602 --> 01:15:12,203
I think all the banks are going to offer Bitcoin-backed services

1230
01:15:12,203 --> 01:15:15,923
and they're already all wanting to participate

1231
01:15:15,923 --> 01:15:17,783
in the stablecoin market, right?

1232
01:15:17,783 --> 01:15:20,902
And as the digital economy, digital currencies

1233
01:15:20,902 --> 01:15:22,002
become mainstream,

1234
01:15:22,482 --> 01:15:23,883
then five years from now,

1235
01:15:24,023 --> 01:15:24,942
it's not a big deal

1236
01:15:24,942 --> 01:15:26,143
if I'm on the board of Apple

1237
01:15:26,143 --> 01:15:26,703
to say,

1238
01:15:26,923 --> 01:15:27,063
hey,

1239
01:15:27,482 --> 01:15:28,303
no problem.

1240
01:15:28,402 --> 01:15:29,743
Take 2% of your

1241
01:15:29,743 --> 01:15:31,002
corporate treasury

1242
01:15:31,002 --> 01:15:31,703
and put it in Bitcoin.

1243
01:15:32,143 --> 01:15:32,982
I think that'll be

1244
01:15:32,982 --> 01:15:33,542
a game changer.

1245
01:15:34,123 --> 01:15:34,243
Well,

1246
01:15:34,283 --> 01:15:35,303
I will see you in four years

1247
01:15:35,303 --> 01:15:36,283
to do that podcast then.

1248
01:15:36,542 --> 01:15:36,683
Yeah.

1249
01:15:37,523 --> 01:15:38,602
I've really enjoyed this.

1250
01:15:38,783 --> 01:15:39,283
Thank you for,

1251
01:15:40,143 --> 01:15:40,343
well,

1252
01:15:40,402 --> 01:15:41,623
I'm surprised we did it in Australia,

1253
01:15:41,763 --> 01:15:42,462
but I'm glad we did.

1254
01:15:42,462 --> 01:15:42,883
I know.

1255
01:15:43,883 --> 01:15:45,263
What a nice chance.

1256
01:15:45,643 --> 01:15:46,042
Exactly.

1257
01:15:46,442 --> 01:15:46,703
And we,

1258
01:15:47,583 --> 01:15:49,283
you can go watch The Ashes now.

1259
01:15:49,283 --> 01:15:51,883
That will really send you to sleep with your jet lag.

1260
01:15:52,283 --> 01:15:53,322
But I appreciate the time.

1261
01:15:53,423 --> 01:15:55,703
Thank you very much for doing this, and I will see you soon.

1262
01:15:55,883 --> 01:15:57,143
Yeah, it was good seeing you in person.

1263
01:15:57,423 --> 01:15:57,862
Thank you.