Explore STRC (Stretch), Strategy's Bitcoin-backed preferred stock IPO, offering stable yield and low volatility. Insights from Saylor and Le.
Timestamped Overview
00:00 “Remarkable Asset Strategy Performance”
03:16 MSTR’s Bitcoin-Driven Asset Surge
10:00 Sulfur Impact on Fixed Dividends
10:51 Monthly Dividend Strategy Unveiled
14:08 Bitcoin-Backed High-Yield Credit Offering
17:12 Bitcoin Credit Strategy & Equitization
20:15 Equity and Bitcoin Capital Strategy
24:53 “STRC: Strong Bitcoin-Backed Credit”
27:03 “Bitcoin Financial Models Overview”
Notable Quotes
Performance Since Bitcoin Standard
On an annualized basis you've seen our return is here is about 104%, which is nearly twice that of Bitcoin at 59% and nearly four times that of the Mag 7 at 27%.
Phong Le @digitalphong
Balance Sheet Growth
We are well exceeded the balance sheet of tremendous companies like Nvidia and we're honing in on some of the Mag 7 companies like Meta, Apple, Microsoft, Google and Amazon.
Phong Le @digitalphong
Introducing STRC
STRC is the newest member of our preferred stonk family. It's senior, it's perpetual preferred, It's a variable monthly dividend and we've designed it to maintain a stable price.
Michael Saylor @saylor
Target Investors for STRC
We're targeting short duration, lower volatility investors and credit that are looking for a yield.
Michael Saylor @saylor
Business Strategy
Our business strategy is we want to be the leading issuer of BTC backed credit instruments in the world.
Michael Saylor @saylor
Bitcoin and MSTR Performance
Bitcoin which has been appreciating 59% a year for nearly five years. Now. MSTR is appreciating 104% a year.
Michael Saylor @saylor
STRC as Strong Credit
STRC is strong credit targeted to the credit markets to a very particular type of credit investor.
Michael Saylor @saylor
Key Takeaways
1. Introduction and Overview
- Welcome and introductions by Phong Le (President and CEO) and Michael Saylor (Founder/Executive Chairman).
- Purpose of the session: Presentation of the new perpetual preferred offering, STRC (Stretch).
- Initial disclaimer recommendation.
- High-level outline of STRC’s seniority and structural position compared to other securities.
2. STRC (STRC) Term Sheet Walkthrough
- Seniority explained: STRC’s place relative to Stride, Strike, MSTR common stonk, convertible notes, and Strife.
- Stated amount: $100 per share.
- Price stabilization focus: Mechanisms for maintaining trading level near stated amount.
- Variable dividend rate (contrast with fixed rates of prior issues).
- Upcoming ATM (at-the-market) issuance.
- Unique call option features.
3. Performance Review of Strategy’s Bitcoin-Backed Approach
- Annualized asset performance since adopting the Bitcoin standard (August 2020).
- Returns compared to Bitcoin and the Mag 7.
- Total returns and recent 12-month performance.
Second quarter achievements:
- Significant digital asset value addition.
- Unrealized fair market gain and Bitcoin acquisitions.
- Balance sheet impact.
- Comparison with other major US company balance sheets.
Key performance indicators (KPIs):
- BTC yield (annualized target and actual performance).
- BTC dollar gain (targets and current progress).
4. Performance of Existing Perpetual Preferred Securities
- Strike, Strife, and Stride YTD performance analysis.
- Launch prices and increases in value.
- Details of ATM sales for each instrument.
- Performance comparison to the Preferred Index (PFF).
Discussion of declining effective yields and implications:
- Impact on Bitcoin torque and shareholder value.
- Rationale for launching STRC now.
5. Equity Raised Through Perpetual Preferred Instruments
- Trends and records in ATM issuances over time.
- Emphasizing ATM offerings as main balance sheet leverage strategy.
6. In-depth Overview of the STRC Offering
Michael Saylor takes over to elaborate:
- Positioning of STRC in the preferred stonk family.
- Initial variable monthly dividend (9% at par, subject to adjustment).
- Short duration vs. long-term/perpetual structure.
7. Yield Curve and Pricing Rationale
- Comparison of credit spreads and effective yields (using Strife/Treasury benchmarks).
- Initial yield offers based on possible IPO pricing (95-100 par).
8. Mechanisms for Price Stability and Volatility Control
- How variable dividends can reduce market price volatility.
- Reaction to interest rate movement (SOFR) versus fixed-dividend offerings.
- Monthly vs. quarterly dividends (advantages of monthly cashflows).
- Operational cadence of dividend payments and rate setting.
9. Mechanisms Supporting the STRC Credit Strategy
Adjusting dividends and issuance according to market price movements:
- Responses when price falls below or rises above the target range.
- Use of call options, secondary offerings, and ATM management.
- Uniqueness and novelty compared to prior instruments.
10. Target Investor Profile and Market Context
- Targeting investors seeking short duration and low volatility.
- Comparisons to money markets, T-bills, USD bank accounts, and corporate commercial paper.
- Positioning STRC within a massive, largely traditional, market.
11. Yield Comparison and Market Entry Size
- Yield advantages over comparable instruments.
- Highlighting the limited size ($500M) versus broader credit markets.
12. Capital Structure, Security Collateralization, and BTC Rating Analysis
- Review of bitcoin and equity stacks backing the offerings.
- Explanation of BTC ratings and statistical risk modeling.
Appeal to both bitcoin skeptics and “maximalists.”
13. Potential Future Capital Structure Scenarios
- What happens if convertible bonds are equitized.
- Impact on debt, surplus, and BTC ratings of all instruments.
- Risk reductions for bullish bitcoin scenarios.
- Use of Strategy.com’s BTC credit model for self-analysis.
14. Long-Term Credit Strategy Vision
- Hierarchy of instruments and target BTC ratings for each.
- Collateral support by bitcoin and equity assets.
- Interaction and reflexivity among issued instruments.
15. Ongoing Capital and Credit Management Plans
- Plan to reduce senior convertible debt via equitization.
- Maintaining perpetual preferreds for default risk minimization and flexibility.
- Timing and sizing future offerings to maintain target ratings and stack discipline.
- Goal to be the premier issuer of BTC-backed credit instruments globally.
16. Summary of STRC’s Value Proposition
- Focus on low volatility, short duration, high yield.
Four pillars of support:
- Strong issuer with a robust track record.
- Bitcoin-backed digital performance.
- Proven treasury operations.
- Direct bitcoin collateralization for the STRC credit.
- Explanation of STRC’s unique market fit and its advantages.
17. Appendix and Supporting Data
- Debt coverage reviews: Asset-to-debt ratios.
- Dividend coverage reviews (including stress scenarios like 75% BTC decline).
- Further details on KPIs, BTC yield, ratings, and credit model.
- Invitation to explore statistical models and further documentation on the company website.
Transcript
Phong Le [00:00:00]: Hello. Thank you all for joining us today. I’m here with our founder and Executive Chairman Michael Saylor. I’m Phong Le, President and CEO of Strategy and I’m excited to share with you our latest perpetual preferred offering, strc, also referred to as Stretch. I want to start with our disclaimer and I suggest you all read this in detail at your leisure and let me go through the term sheet at a high level. Michael will go through a lot of these terms and the strategy of Stretch in more detail later. I’ll start with it. This is our fourth and latest security that is perpetual and preferred in nature and in terms of seniority.
Phong Le [00:00:44]: Stretch is senior to stride and strike an MSTR common stonk. And it will be junior to our other debt, including our convertible notes, and also junior to strife. The stated amount of stretch is $100 per share. And what’s unique about Stretch is our intention is to maintain a trading level for Stretch that’s near a stated amount. We have a few mechanisms to try to create this outcome. First of all is a variable dividend rate which is unique and different than the dividend rate which has been fixed on our other perpetual preferred securities. The second is an ATM which we intend to issue in short order and we’ll use that ATM also to help us maintain the price at the stated amount. And the third is a unique call option that we also will describe later and Mike will go through.
Phong Le [00:01:43]: So let me go through a performance review of strategy and accompany to date and I’ll start with a chart that some of you have seen many times and one that we’re quite proud of, which is the annualized asset performance of strategy since the Bitcoin standard era which started on August 10th of 2020. On an annualized basis you’ve seen our return is here is about 104%, which is nearly twice that of Bitcoin at 59% and nearly four times that of the Mag 7 at 27%. And if you look at the total returns during that same period of time, we have returned 3324% in nearly a five year period. If you look at the last 12 months, you’ll see similarly remarkable returns. 172% for OSTR compared to 85% for Bitcoin, 36% for gold and 23% for the MAG7. In the second quarter of 2025 we saw an addition of $21 billion digital asset value. About $14 billion of that is via an unrealized fair market gain on our existing Bitcoin and additionally in Bitcoin that we acquired during the second quarter and $6.8 billion of Bitcoin that was acquired during the second quarter. So we’ve really added tremendous value to our balance sheet during this period of time in the second quarter, increasing it by nearly 50%.
Phong Le [00:03:16]: If you look at the performance of Bitcoin and As a result MSTR’s balance sheet and digital asset value since the second quarter, in a very short period of time, really just about 20 days or so, you’ll see that we have added an additional $7 billion additional asset value, $5.7 billion or so because of the appreciation in bitcoin price going to all time highs that we’ve seen and $1.2 billion of additional Bitcoin that’s been purchased today. The result of this is a balance sheet that is now in the top 10 in the US companies, excluding financial services companies. We are well exceeded the balance sheet of tremendous companies like Nvidia and we’re honing in on some of the Mag 7 companies like Meta, Apple, Microsoft, Google and Amazon. So we really created tremendous value in the second quarter and really in the last five years through our Bitcoin acquisition strategy. Our two primary KPIs that we measure ourselves against are BTC yield where we have an annualized annual target of 25%. You’ll see here year to date we’re at 20.8%, so nearly 80% of the way through achieving that BTC yield target. And the BTC dollar gain target that we’ve set is $15 billion. And you’ll see we’re at nearly $11 billion, so 2/3 more than 2/3 of the way through achieving our BTC gain target.
Phong Le [00:04:48]: The performance of our perpetual Prefers that we’ve issued year to date. Strike, Strife and Stride have been tremendous year to date and it’s a great backdrop for us to be introducing Stretch. I’ll point out here that Stripe was launched in January this year at an $80 price and it has increased 48% since then to 1 18.2 billion. $118 and we’ve added $549 million of strike through ATM sales. On strife, we launched an $85 and seemed similarly strong performance, 40% increase and $219 million of ATM issuances. Our most recent IPO was Stride which was launched at $85 and seen a 10% gain during that period of time and $18 million in ATM sales compared to the Preferred Universe and the Preferred Index. Pff. The performance has been significantly Better strike here.
Phong Le [00:05:56]: With an ARR of 104%, 48% performance compared to negative 2 for the PFF index. Strike has an ARR of 123%, 40% increase compared to 0% for the PFF index. And in a short period of time, stride has shown 87% ARR, 10% performance for versus a 3% for the PFF index. And so those have all performed very well. And what has occurred is because of the increased performance or the high performance of these instruments and the increased price, the yields have started to go down. And with the lower effective yields, when we issue the instruments via an atm, it actually increases the bitcoin torque and it increases the accretion to shareholder value with the lower effective yields and increase in bitcoin torque. So we’ve seen very strong performance and we’ve been proud of that. And again, think this is a great time to be launching Stretch.
Phong Le [00:06:57]: The final piece that I’ll walk through here is the amount of equity we have been able to raise through these instruments and how it has started to increase significantly over time. You’ll see here we had a record week two weeks ago of $141 million of ATM issuances through our three instruments. And this is going to be our primary way over time to lever up the balance sheet, to add performance, to add BTC yield, to add BTC dollar gain and BTC torque to our business. So with that, I’ll hand this over to Michael Saylor.
Michael Saylor [00:07:35]: Thank you, Phong. I’m just really excited about Stretch. Stretch is the newest member of our preferred stonk family. It’s senior, it’s perpetual preferred, It’s a variable monthly dividend and we’ve designed it to maintain a stable price. You know, the PAR value is 100, the dividend and PAR is 9% coming out of the gate initially. Initially it’s about as BTC rating of 7. And we pay it monthly and then the dividend may adjust monthly. We’re building out the yield curve with Stretch.
Michael Saylor [00:08:19]: So we’ve got a convertible preferred, we’ve got a long duration senior fixed preferred, we’ve got long duration junior preferred in the form of stride. And Stretch is filling a different part of the credit market. We want it to be short duration. It’s not a 20 year or 30 year Bitcoin bond. It’s meant to be a one month Bitcoin instrument. And so if you think about the way you’d price that, we’ve got about a 340 basis point credit spread above the 20 year treasury bond for Strife. And so the effective yield of strife is 840 basis points. You can see the spread there.
Michael Saylor [00:09:14]: If you were to take that same spread and apply it to stretch, and you were to benchmark that against the one month treasury, then that suggests the equivalent stretch yield will be about 7.7%. Now we’re offering 9% out of the gate. Initially, we’re pretty excited about the instrument. If we price stretch the IPO at 95, it’ll be 9.5%. If we price the IPO at 90, it could be up to 10%. STRC is designed so that we can mitigate volatility. We want it to be the least volatile, shortest duration instrument. We’re targeting price stability.
Michael Saylor [00:10:00]: So if you look at sulfur, if sofr were to decrease, then a preferred like Strife that has a fixed dividend will tend to increase in price. And when sulfur increases, a fixed dividend strand will tend to decrease in price. And so that’s an example where you hold the dividend constant and the price fluctuates. You’re getting price, you’re getting volatility. You know, the instruments actually engineered, it’s designed so that that happens. And it’s for a certain type of investor that wants that type of sensitivity. Now, stretch is meant to be different. It’s if you want the price to be less volatile, if you want to target a certain type of stable price, then you have to move something else.
Michael Saylor [00:10:51]: So the dividend changes. And you can see here that by adjusting the dividend monthly and reacting as appropriate to sulfur, then we have a mechanism, right, that we can use in order to decrease the volatility of STRC and change the characteristics of it in the aftermarket. The other thing that’s different about stretch is it’s not a quarterly dividend, it’s a monthly dividend. And we’ve heard from a lot of people that investors value monthly cash payments or monthly cash dividends. So the 15th day of the month will be the record date. And then on the last day of the month, we’ll pay the dividends in cash, and then we’ll set the next month’s stretch rate. And then we’ll just do that with a simple monthly cadence. Now, we have a number of mechanisms to execute the stretch credit strategy.
Michael Saylor [00:11:52]: You know, how do we make this instrument a success? Well within the target range, we have the mechanism. We can adjust the STRC dividend rate and the STRC issuance via the atmosphere. When the price falls below our target range, then we would cease selling Any STRC per the atm and we have the option to increase the STRC dividend rate. Now what happens when the, when STRC trades above our target range? Well, we have a mechanism. We could decrease the Stretch dividend rate. We could issue Stretch via a secondary offering at or below 101. Or we can call Stretch using the call option embedded in the instrument. So you can see it’s a variety of mechanisms.
Michael Saylor [00:12:55]: They’re novel. Most of these mechanisms, I don’t think you saw them in Strike or Stryfe or Stride because those are different instruments for a different type of credit investor. Right. Stretch has got a very particular goal that we’re pursuing. And what kind of investor would we like to find? Who are we targeting? Well, we’re targeting short duration, lower volatility investors and credit that are looking for a yield. So if you’re buying a money market, you might be getting a 4.2% yield. There’s $7 trillion in money markets. You know, maybe you’re buying short term T bills, maybe you don’t want interest rate duration, risk.
Michael Saylor [00:13:39]: You don’t want to worry about the kind of movement and the principle that takes place in a 20 or 30 year swap. There’s US dollar denominated bank accounts, a lot of them. There’s corporate commercial paper. Right. And so these are big markets. Our offering is $500 million. It’s not so big. And you can see we’re looking for those kind of, those kind of credit investors.
Michael Saylor [00:14:08]: And we’re offering 9.5 to 10% effective yield for people or for investors that are comfortable with a BTC backed credit instrument. This slide shows a different view of that universe. And you can see they’re just very large markets. We’re going to enter the market and of course our differentiation is a bitcoin backed instrument with a much higher yield. And of course this slide just shows how big this entire credit market is and how small our entry is. Ultimately, our focus on stretches, we want it to be a very unique type of credit, a very strong form of credit credit for those that believe in bitcoin and are enthusiastic about the crypto economy. Now, a lot of people will want to compare it to Strife. You know, they’re both senior perpetual instruments, but Strife’s quarterly stretches monthly, they’re both cumulative.
Michael Saylor [00:15:17]: And you know, Strife, because it’s got a long duration, it’s going to actually be more volatile to interest rate fluctuations. And Stretch, because it’s a much shorter duration, should have a different volatility profile. And we’ve Got that charted here on this slide as well. You can see on one hand we’ve engineered stretch to be our least volatile instrument. And on the other hand we’ve engineered MSTR equity to be our most volatile instrument. And then we offer, you know, various flavors in between for various types of investors. Now stretches credit is backed by our capital structure. And so we’ve got a $71 billion bitcoin stack and this $132 billion equity stack.
Michael Saylor [00:16:09]: So we have a, we have $59 billion bitcoin surplus and we have about $120 billion equity surplus. If you think about the capital structure in that configuration, you can see the debt is fairly well collateralized. You can see the preferred instruments have BTC ratings between 5.8 and 7.7. If you’re a skeptic about Bitcoin, then you can see there is some risk here. And we’ve calculated the statistical risk and calculated the BTC credit spread that you need to offset that risk. But you can see even after that credit spread, you can see there’s still a spread premium here. If you’re a bitcoin maximalist and you think Bitcoin’s appreciating 30% a year, then you can see that risk almost goes away. It falls down to single digit basis points and the BTC credit goes to spread goes to 01.
Michael Saylor [00:17:12]: So if you’re a bitcoin maximalist and you believe in bitcoin and you’re looking for credit instruments, you would be very enthusiastic about the credit that we’re creating. Now we also, you know, scenario out and consider what happens if we actually equitize our convertible bonds. And you can see here, if we were to equitize them at the earliest allowable call date, they’ll all go away by 2029. And that’s something that everyone should be thinking about. We think about it now. We’ve done a pro forma capital structure and the pro forma says, well, what happens if we equitize all the convertible notes that are currently in the money? So not the entire stack, but the ones that are in the money. And you can see that it cuts our debt down to $5 billion and it increases the bitcoin surplus and increases the equity surplus. When you start to plug in that new capital structure, the BTC ratings of all the instruments move up.
Michael Saylor [00:18:17]: Strife and stretch move be up beyond a BTC rating of 10. You can see the remaining debt would have BTC ratings of 14 to 35. Now you can look at the various BTC credit that pops out and you see the spread premiums. But you know, you start to see a very different capital or credit structure. And of course if you’re a bitcoin maximalist, you can see the risk collapses to just a few basis points. And in fact the BTC credit spread falls to zero basis points for all six of these instruments. If we were to do that for bitcoin maximalists, for anybody interested in this, you can go to our website strategy.com and you can plug in the bitcoin price you want. You can plug in your forecast for volatility, you can plug in your forecast for BTC ARR are.
Michael Saylor [00:19:13]: It’ll give you the BTC ratings, the BTC risk, the BTC credit. It’s very interesting and we’re happy to share that model. Now looking long term and long term for us is three years out, we’re really thinking about a capital structure where Strife would be at the top and we would be targeting a BTC rating of 10 or more and stretch would be second. But we’re also targeting 10 or more. We want these to be our highest rating, our highest rated, most secure, most over collateralized BTC credit instruments. The mezzanine instrument will be Strike with a BTC rating of 6 or more. The high yield instrument will be Stride with a BTC rating of 3 or more. All of those credit instruments will be supported by Bitcoin, our bitcoin stack, which is the hard asset, which is liquid.
Michael Saylor [00:20:15]: And they’ll be also supported by our equity in the equity capital markets. And so you can see that’s our long term BTC capital structure. And when you start to crank that in and you think about what’s the plan, you can see that our ability to issue credit, it’ll be a function of the appreciation of Bitcoin, be a function of the increase in our equity capital base. It’ll be a function of the issuance of the junior instruments as we issue more stride that will actually make Strike, Stretch and Strife more credit worthy. So there’s a lot of opportunity here and all of these instruments are very reflexive to each other. The issuance of one generally results in an improvement in the prospects of the others. So I’ve laid out our capital plan and our credit strategy. Here you can see our long term targets for the four instruments and the credit structure.
Michael Saylor [00:21:23]: You know, our plan is that we’d like to reduce our overall senior convertible debt outstanding over time and we’ll seek to equitize that as the options arrive. And as available. And we’ll simplify our capital structure in order to elevate the BTC ratings of the remaining credit instruments as we move forward. Preferreds are our preferred credit instrument and they’ll remain perpetual. We think that keeps our flexibility, maintains flexibility, but also minimizes default risk. It’s just best for our credit strategy. And then we’re going to time our future offerings and we’ll size them to maintain our target BTC ratings and to preserve our tiered risk and yield integrity across the stack. And our business strategy is we want to be the leading issuer of BTC backed credit instruments in the world.
Michael Saylor [00:22:24]: We are now. We don’t see any reason why we shouldn’t grow that business and continue to be the leader in that market. We’ll do it with very clear credit standards, a disciplined approach to leverage and very transparent capital allocation. Our goal for Stretch is we’re targeting low volatility, short duration, high yield credit. Right. Stretch is meant to be strong credit. It’s for credit investors. They don’t want long duration, they don’t want volatility.
Michael Saylor [00:23:03]: They want the highest yield they can get. If you can, if you can diminish the volatility and shrink the duration, how are we going to do that? Well, we’re leaning on four pillars. MSTR, the issuer has a 35 year track record. We’re a well known seasoned issuer. We have $100 billion plus equity market cap, $100 billion plus options open interest. We have nearly 5, $5 billion a day of equity liquidity. So a very well capitalized seasoned issuer. We’re also focused upon our digital capital strategy.
Michael Saylor [00:23:48]: So digital performance is really important. That’s how we’re going to generate the yield on these instruments. Right. And the performance comes from Bitcoin which has been appreciating 59% a year for nearly five years. Now. MSTR is appreciating 104% a year. So we are the bridge to the crypto economy. And as the crypto economy grows and the digital economy grows, we expect Bitcoin performance to continue.
Michael Saylor [00:24:15]: And we expect that will drive MSTR performance. We expect that that will be how we will fund and back these credit instruments. You know, we’re, we’re executing a Treasury operation that’s the third prong of our Stretch support. Right. We’ve got four ATMs right now. We’re going to add a fifth ATM as soon as practicable. With Stretch, we’ve issued $35 billion of securities over the past year. And we’ve got a five year track record issuing these securities into the marketplace.
Michael Saylor [00:24:53]: And so our treasury team will support Stretch and we expect that’s one of the elements that will make this strong credit. And then finally the credit of Stretch itself is backed by 607,770 Bitcoin, right? The largest corporate bitcoin stack, unencumbered Bitcoin that we can use as hard collateral. That gives stretch BTC rating of 7, you know, on the IPO and that means 7 times over collateralized. So when you think of stretch str, c think str means strong and C means credit. Right? Stretch is strong credit targeted to the credit markets to a very particular type of credit investor. And it’s, it’s unique in our credit stack. It’s not like stride, it’s not like strife, it’s not like strike, it’s not like the equity. We think that, that we’re bringing a very elegant and exciting product to the market.
Michael Saylor [00:26:01]: We hope that you’ll agree with us. In our appendix, we’ve offered a review of our debt coverage. And as you can see, we’ve got a substantial stack of hard ass that covers our existing debt obligations as 14 times debt coverage. Right now we’ve got a review of our dividend coverage. We’ve got 180 years worth of preferred dividends covered with hard assets. Even if we had a 75% decline in BTC, we still have 26 years of dividend coverage. We’ve got a review of our dividend obligations and how are we going to pay these cash dividends with our, our atm. And you can see, you can see we’ve got substantial liquidity in our equity and we feel confident that our ATM will be more than supportive for all of these dividend obligations.
Michael Saylor [00:27:03]: We’ve also got some detail on our KPIs we use. So if you’re wondering around how we define BTC gain or BTC yield and you know, and these various other BTC instruments, you can feel free to check out the footnotes. We’ve got a discussion of BTC rating here and BTC risk and BTC credit. We’ve been leaders in offering a Bitcoin equity model and we’re also offering our Bitcoin credit market, sorry, our Bitcoin credit model. And so please feel free to look at these. We think these provide a strong statistical and mathematical underpinning for what we’re doing and they would be interesting to any Bitcoin treasury company or BTC equity investor or BTC credit investor. So with that stretches are, you know, it’s our latest offering. We’re very excited about it.
Michael Saylor [00:28:06]: It’s unique. We think it’s very special. We hope you’ll agree with us. And I want to thank you for your time and your attention today.