Strategy’s Proud Return to Junk (Financial Times, Craig Coben) \ stacker news ~econ

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Strategy’s Proud Return to Junk (Financial Times, Craig Coben)www.ft.com/content/f0875253-9e4c-411c-a021-f5edb1504216

1256 sats \ 17 comments \ @denlillaapan 14h econ

Oh, beautiful.

It's clearly my professional duty to report on this great, snarky article. (#1014681, #1232813)

Yes, yes, Strategy got a credit rating the other day... not, mind you, the one they wanted but whatever.

Last Monday, Michael Saylor, executive chairman of Strategy (formerly MicroStrategy), hailed what he described as a historic first for a bitcoin treasury company: Standard & Poor’s had assigned the firm a credit rating. Strategy’s online supporters immediately rejoiced.

Executive sum:

The restored junk rating is not a badge of honour. It just reaffirms what has been clear for some time: Strategy’s strategy of issuing lots of securities to accumulate bitcoin has failed to strengthen the company’s underlying financial position, leaving it dependent on capital markets access to service its existing obligations.

Oh, and this:

it’s difficult to understand why Strategy is trumpeting this development. For one thing, S&P bestowed a rating of B-, a whopping six notches into “junk” territory. The report didn’t exactly give a rousing endorsement:

OOPS!

This was funny and ironic: trying to be edgy yet still embrace the same-old, same-old of the tradfi world:

Strategy presents itself as a bulwark against the debasement of fiat currency. Yet it seeks legitimacy from two of the oldest and arguably most discredited pillars of the ancien régime: sell-side equity research analysts (FTAV has already dissected Citigroup’s initiation report) and credit rating agencies

Nah, there's an anwer to this -- starts with the uncomfortable P-word (#1019584)

"The result is a financial loop in which one liability is funded either by creating another or by further diluting common stockholders."

Yet, this is the best:

SO LOOOONG, SUCKERS.

Junk?

Always has been.

ARchive: https://archive.fo/IRpss

view all related items

163 sats \ 8 replies \ @grayruby 14h

I don't think Strategy should have a junk rating they aren't really a default risk but they do need to present the market with a "strategy" beyond perpetually issuing more shares to buy Bitcoin. I think if they ran a large lightning node, even though it would be an infinitesimally small amount of their Bitcoin holdings, the market would see it as them doing something with their Bitcoin and treat it favourably. Plus it would bring more attention to the lightning network and use case of Bitcoin as money for the internet.

61 sats \ 7 replies \ @elvismercury 14h

I've wondered why they don't actually do anything or contribute anything other than financial engineering. They tried some kind of distributed identity something something based on btc years ago, but it didn't go anywhere.

Given that Saylor is obviously very smart, I have to assume this is on purpose, and the purpose I suspect is that he doesn't want to be seen meddling in the ecosystem, since whatever he did would both create precedent and get massive scrutiny. Even contributing $1m/year to OpenSats seems potentially fraught.

130 sats \ 4 replies \ @SimpleStacker 14h

I don't know how smart Saylor actually is. On the tizz / rizz scale I think he's more rizz than tizz

51 sats \ 3 replies \ @elvismercury 11h

I'm convinced he's very smart. He has an astounding command of a broad range of material that he synthesizes fluidly and creatively.

I've spent waaaaaaay too much time around people trying, w/ varying degrees of success, to mimic the surface trappings of intelligence, and I think I have a good eye for that con. (The btc space is chock full of exemplars, surprise surprise.) Saylor has not tripped the alarm in me, whatever his other faults. One can gripe that he gets over his skis and overextends a metaphor (e.g., the "monetary energy", among others) but I have zero doubt that the guy is legit brilliant.

Of course, it's possible this reveals more about me than about the truth of Saylor.

40 sats \ 1 reply \ @kepford 7h

He's clearly smart. He's well read and can talk circles around many of his critics. For one thing most of his critics in tradfi don't even understand bitcoin and the kicker is they don't know that they don't get it.

But, smart men can make mistakes and be wrong. Allow arrogance to cloud their thinking. But he's no dummy.

40 sats \ 0 replies \ @SimpleStacker 3h

Well, I'm not saying he's dumb, and he's obviously an order of magnitude smarter than the typical talking head on CNBC

but over time listening to him, some of the stuff he says seems slightly off... like it's directionally correct but wrong on some nuanced technical levels, and I'm not even referring to his clearly exaggerated metaphors (swarm of cyberhornets, etc.)

that's why I still think he's still rizz > tizz. he's probably smart in the sense of being able to synthesize a lot of broad, high level ideas, but he probably doesn't spend much time thinking about the nuances of technical details anymore

0 sats \ 0 replies \ @Bell_curve 11h

He graduated from MIT with a degree in civil or aviation engineering

He started Microstrategy in 1989

112 sats \ 1 reply \ @grayruby 14h

I think it comes down to focus. He has talked many times about being laser focused in a couple things and anytime he tried to put his hands in too many buckets he hasn't been successful. I would like to see them use their capital might to support the ecosystem though even if they just created an investment arm of the company to fund bitcoin companies.

51 sats \ 0 replies \ @elvismercury 11h

I think that's a fair critique (I've also taken note of his focus on focus, over the years) but would giving $1m to un-sexy btc infra causes really be such a distraction?

Literally: "Here's a check, enjoy bros."

I'm not the world's highest achiever but I think I could manage to write a check once a year without it driving my other productivity into a wall.

98 sats \ 1 reply \ @Undisciplined 14h

Once BTC starts appreciating again the weighing machine will respond accordingly

0 sats \ 0 replies \ @Solomonsatoshi 13h

4 year cycle.

85 sats \ 0 replies \ @fourrules 13h

I think the strategy is not dissimilar to that of Berkshire Hathaway, difficult as that may be to believe.

Step 1: accumulate bitcoin Step 2: wait for credit crunch Step 3: offer collateral for bridge loans in return for a cut of the interest and potentially equity in the distressed companies

In the case of Berkshire they are waiting for the same blood in the water, the same credit crunch, to use their cash to buy up distressed but viable assets.

During a credit crunch, ironically, the value of bitcoin as collateral increases because what you want in collateral is upside potential. Given the quantity of bitcoin that Strategy holds even in a downturn he'll be able to offer collateral to a lot of good businesses in distress, especially technology companies because of the industry expertise he has in-house, something banks often struggle with.

In that context one would expect bitcoin treasury companies to pop up throughout the economy, randomly distributed, with local industry relationships that they'll be able to leverage in the same way, to form partnerships with banks who want to provide credit but need collateral to back it. That's what we see.

32 sats \ 1 reply \ @BlokchainB 13h

Clearly the bias is thick with this one.

Strategy is very well capitalized

They got the same rating as JetBlue and Hertz

Both have dogshit balance sheets

It goes to show trad fi is still struggling with the idea of bitcoin based finance.

113 sats \ 0 replies \ @kepford 7h

goes to show trad fi is still struggling with the idea of bitcoin based finance.

Understatement

2 sats \ 0 replies \ @falsefaucet 13h

i like bitcoin buy my shitcoin

0 sats \ 0 replies \ @nelom 11h

I was watching a Saylor interview earlier, where he described the several offerings to the market, mstr and strk and even more financial manipulations to what is essentially the antithesis of Bitcoin.

But as an institutional or retail investor, I can see the honey that surrounds the pot, guaranteed almost 10% dividend forever, forfeiting your right to custody is fairly uniform in Wall St.

Listening to Saylor's 10M predictions is all well and good until the proof doesn't seem to be in the pudding.

We will all be spectators in the arena if Bitcoin uncouples from it's four year cycle and the performance of Stategy's reaction.

Stack sats stay humble

0 sats \ 0 replies \ @035736735e 13h outlawed

stackers have outlawed this. turn on wild west mode in your /settings to see outlawed content.