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.