Explore MicroStrategy's Q2 2025 earnings and its pivotal shift to preferred stocks. Learn how this new strategy de-risks their model for investors.
Timestamp Overview
[00:01:04 - 00:10:52] Understanding MicroStrategy’s Financial Strength
- The hosts review MicroStrategy’s (MSTR) current financial health, emphasizing that the company is very strong.
- They explain that MSTR holds over $72 billion in Bitcoin assets but has only about $14.5 billion in total debt and preferred stock.
- This means the company has five times more assets than it owes, making it very financially stable.
- The speaker uses an analogy: if a person with $7 million in assets asked for a $60,000 loan, any bank would approve it because they are clearly good for the money. MSTR is in a similar strong position.
- This strength protects them from a potential Bitcoin price drop; the price would need to fall by 80% to $23,162 before their asset value equals their debt.
[00:10:52 - 00:21:25] The Big Shift: From Bonds to Preferred Stocks
- The discussion highlights MSTR’s strategic move away from convertible bonds to a new type of financing called preferred stocks.
- Unlike bonds that have a due date for repayment, these preferred stocks are “perpetual,” meaning MSTR never has to pay back the initial amount.
- This removes a major source of risk, as the company only needs to focus on making yearly dividend payments, not saving up for a huge balloon payment.
- This new model makes the company incredibly resilient and able to withstand large, extended drops in Bitcoin’s price.
- The speakers refer to the old bonds as “training wheels” that helped MSTR get started, while the new preferred stocks are the more advanced, long-term solution.
[00:21:25 - 00:29:51] Building a Capital-Raising Machine
- The hosts explain that MSTR’s new strategy makes raising money incredibly efficient.
- Jeff Walton uses the analogy of a “robot for capital raising,” comparing it to automating a Hershey’s chocolate factory.
- Instead of the hard work of making individual deals, MSTR can now continuously raise money through an automated process called an “at-the-market” (ATM) offering.
- This gives them complete control to buy more Bitcoin whenever market conditions are right, without delays or lengthy negotiations.
- It was noted that MSTR likely planned this for months, which is why they kept their leverage low recently—to make room for these new, powerful financial tools.
[00:29:51 - 00:44:24] A Closer Look at MSTR’s Game-Changing Products
- The hosts dive into the details from MSTR’s Q2 2025 earnings call, focusing on their new preferred stock products (like STRC).
- These products are described as “category killers” because they offer higher income (yield) and are safer than most traditional investments like corporate bonds.
- A key advantage is their liquidity, meaning they can be bought and sold easily, unlike a certificate of deposit (CD) which locks up your money.
- This combination of safety, high yield, and easy access is expected to attract a massive amount of money from the traditional financial world.
[00:44:24 - 01:00:18] Why MSTR’s New Investments are Superior
- It’s pointed out that MSTR’s new products are better than their competitors in every important way: higher income, better safety (collateral), and easier to trade (liquidity).
- The speakers predict that many people who buy these products for the steady income will be pleasantly surprised when the products also increase in price.
- As the market recognizes how superior these products are, their value will rise, which in turn lowers MSTR’s cost to borrow money.
- This creates a powerful cycle, allowing MSTR to acquire even more Bitcoin at a faster rate.
- MSTR also officially began reporting “Sats per share,” a key metric that shows investors exactly how much Bitcoin their shares represent.
[01:00:18 - 01:14:16] MSTR’s Leadership, Transparency, and Vision
- The team praises MSTR for its highly educational and transparent earnings calls, which they use to explain their long-term vision to investors.
- They note the growing visibility of the entire MSTR leadership team, like CEO Andrew Fong, which reduces the company’s reliance on just Michael Saylor.
- A key quote from Fong is highlighted: MSTR’s goal is not just to be the biggest Bitcoin treasury company, but the biggest treasury company in the world.
- Nithu Sezni states that after 3x’ing Bitcoin’s performance over five years, this is the “least efficient MSTR will ever be,” suggesting their performance will only improve.
[01:14:16 - 01:26:00] Guidance, Valuation, and Future Earnings
- For the first time, MSTR provided official guidance to investors, a major milestone.
- Key guidance includes a promise to stop issuing new common stock (MSTR shares) unless the company’s valuation reaches a very high level, which is great news for current shareholders.
- When comparing MSTR’s earnings to other giants in the S&P 500, the company looks incredibly undervalued.
- The hosts discuss the massive potential for future reported income if Bitcoin’s price continues to climb, with numbers that could dwarf even the largest tech companies.
[01:26:00 - 01:39:25] Favorable Politics and a New Way of Thinking
- The discussion shifts to the increasingly positive political climate for Bitcoin in the United States, with support growing on both sides of the aisle.
- This political “tailwind” gives investors more confidence and removes major roadblocks that existed in the past.
- Jeff Walton introduces the concept of using Bitcoin as a “unit of account”—a new ruler to measure the success of other companies.
- He shows that when measured in Bitcoin, the profits of major companies like Nike and CrowdStrike are actually shrinking, proving Bitcoin’s strength as the ultimate store of value.
[01:39:25 - 01:57:18] Surviving AI Disruption and Final Thoughts
- The team discusses how artificial intelligence (AI) is disrupting almost every industry, from coding to law.
- They conclude that a Bitcoin balance sheet is the ultimate defense against this disruption because, unlike any technology or business model, its supply is fixed and cannot be changed.
- This makes companies holding Bitcoin fundamentally more resilient and prepared for an uncertain future.
- The episode wraps up with a reminder to enjoy the summer and an announcement for an upcoming Bitcoin event in New York City.
Notable Quotes
Preferred Stock Strategy
So really what they're starting to focus on is just managing that annual dividend obligation. And that's actually a much bigger shift than people think it is.
Ben Werkman @benwerkman
MSTR's Resilience
I think this is just being completely missed at the moment how much more resilient this model makes them than when they were using convertible bond debt.
Ben Werkman @benwerkman
Convertible Bonds
Yeah, it's not that the bonds are bad, you know, they're like training wheels. If you can't go straight to the preferreds, you know, it's okay to walk before you run.
Soleil Nitu @nithusezni
Capital Efficiency
They built a robot for capital raising.
Jeff Walton @punterjeff
Bitcoin-Backed Credit
There's going to be a scenario within the next four years if you're not looking at these instruments and you're a money manager, you have career risk.
Jeff Walton @punterjeff
Preferred Stock Value
I think there's going to be a lot of people that are accidentally going to stumble into capital appreciation on their fixed income products.
Ben Werkman @benwerkman
MSTR's Products
Yeah, every single one of these is a category killer and they're going to keep coming out with new ones until they have one category killer per category.
Soleil Nitu @nithusezni
Bitcoin Finance
This is the biggest idea in all finance.
Jeff Walton @punterjeff
MSTR's Ambition
...they don't want to just be the biggest bitcoin treasury company. They want to be the biggest treasury company.
Soleil Nitu @nithusezni
MSTR's Performance
...they've 3x Bitcoin in five years. And this is the least efficient MSTR will ever be. The future is going to be better than that.
Soleil Nitu @nithusezni
Bitcoin's Strength
You're backing the entire balance sheet of a company by truly decentralized capital.
Ben Werkman @benwerkman
Bitcoin vs. AI
But the only thing that can't be disrupted is a bitcoin balance sheet because it has a fixed supply.
Soleil Nitu @nithusezni
STRC
Make dry powder great again.
Soleil Nitu @nithusezni
Questions & Answers
Question 1: Why is MicroStrategy shifting from convertible bonds to preferred stocks?
Answer: The speakers explain that MicroStrategy is shifting to preferred stocks primarily because they are less risky for the company. Unlike convertible bonds, which have a maturity date requiring a large principal repayment, perpetual preferred stocks do not. This removes the risk of having to pay back a large sum of money at a specific time. As a result, the company’s financial management can focus on simply covering its annual dividend payments, making the entire business model more resilient and sustainable, especially during market downturns.
Question 2: How does MicroStrategy’s new strategy make them more efficient at acquiring Bitcoin?
Answer: The discussion describes MicroStrategy’s new structure as a “robot for capital raising.” By establishing preferred stocks with “at-the-market” (ATM) programs, they have created an automated and continuous system to raise money. This is far more efficient than their old method of conducting individual, time-consuming bond deals. This new approach gives them full control to raise capital and buy Bitcoin whenever market conditions are favorable, without needing to go through lengthy roadshows or negotiations with bankers.
Question 3: How do MicroStrategy’s new preferred stock products (like STRC) compare to traditional fixed-income investments?
Answer: The speakers assert that MicroStrategy’s preferred stock products are superior to traditional fixed-income investments on multiple fronts. They offer a significantly higher yield (income), are backed by a highly liquid and over-collateralized asset (Bitcoin), and can be traded with immense liquidity. Jeff Walton notes that this combination of high yield and low risk is so compelling that money managers who ignore these products will face “career risk” for underperforming their peers who do invest in them.
Question 4: Will MicroStrategy continue to issue its common stock (MSTR) to raise capital?
Answer: Based on the guidance from the recent earnings call, the speakers confirm that MicroStrategy has changed its approach. The company announced it will not use its common stock ATM to raise capital as long as the stock’s M-NAV (a valuation multiple) is below 2.5. If the valuation rises above that level, they will only “opportunistically” issue new stock. This was seen as very positive news for existing shareholders, as it limits future dilution and signals a strategic pivot to using the new preferred stocks as the primary vehicle for raising capital.
People and Organizations Mentioned
- MicroStrategy (MSTR): Aka Strategy, is a business intelligence company that is the pioneer and leader in the Bitcoin treasury strategy. The central focus of the entire discussion, praised for its innovative financial engineering and capital-raising strategies.
- Michael Saylor: Executive Chairman of MicroStrategy. Mentioned frequently as the visionary leader behind the company’s Bitcoin strategy and for his educational and passionate communication with investors.
- Phong Le: President and CEO of MicroStrategy. Praised for taking on a more prominent role in the earnings call, reducing the “keyman risk” associated with Saylor. Quoted for his ambitious goal for MSTR to be the “biggest treasury company.”
- Jeff Walton (@punterjeff): A host of the True North podcast. Leads the discussion and asked a key question on the MSTR earnings call about the changing characteristics of leverage.
- Ben Werkman (@benwerkman): A co-host of the True North podcast. Provides in-depth financial analysis of MicroStrategy’s strategy, particularly the shift to preferred stocks.
- Nithu Sezni (@nithusezni): A co-host of the True North podcast. Offers memorable commentary, such as calling MicroStrategy’s products “category killers.”
- Matt Cole: Mentioned as a co-host on the “Hurdle Rate podcast” with Jeff and Ben.
- Lynn Alden: A respected macro analyst. Mentioned for asking an insightful question on the MicroStrategy earnings call.
- Fred Krueger: A Bitcoin investor and influencer. Mentioned as someone who supports MicroStrategy’s STRC product.
- Josh Mandel: Sage trader mentioned in the context of being excited about MSTR’s M-NAV equity guidance.
- Jim Chanos: A famous short-seller. His argument against MicroStrategy is noted as no longer being valid due to the company’s new capital strategy.
- Berkshire Hathaway: Warren Buffett’s conglomerate. Used as a benchmark for a successful “balance sheet company” that MicroStrategy is compared to and aims to surpass.
- MetaPlanet: A Japanese company that has adopted a Bitcoin treasury strategy, cited as an example of the strategy’s global expansion.
- S&P 500: The major U.S. stock market index. Discussed as a benchmark for valuation and in the context of MicroStrategy’s potential inclusion, which would trigger significant passive investment flows.
- FASB (Financial Accounting Standards Board): The U.S. accounting standards organization. Their rule change allowing fair value accounting for crypto enabled MicroStrategy to report its Bitcoin holdings more accurately.
- Cynthia Lummis: A U.S. Senator from Wyoming and a vocal supporter of Bitcoin.
- Bo Hines: A pro-Bitcoin political candidate mentioned as part of the growing political support for the asset.
- Exxon, Walmart, Broadcom, Nike, CrowdStrike, Apple, Microsoft, Google, Nvidia, Palantir: Major S&P 500 companies used as comparables to illustrate MicroStrategy’s relative valuation and financial performance.
- Dan Held: A prominent Bitcoin educator. Mentioned for creating a video that was analyzed by the hosts using AI.