Strategy (formerly MicroStrategy), the world’s largest Digital Asset Treasury (DAT) company, plans to never sell any of its bitcoin (BTC). However, to accomplish that feat, there are substantial annual costs to service its holdings: currently $689 million and rapidly increasing.Broadly speaking, the company, which holds $66 billion worth of BTC, has cash obligations to service its treasury in the form of coupons to debtholders, dividends to preferred shareholders, and other expenses related to running its business such as operating expenses.It also has cash obligations such as product support and subscriptions, as well as possible future obligations such as taxes.Strategy mostly intends to avoid incurring tax obligations in order to preserve return of capital (ROC) dividend tax status for its preferred shareholders.
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0 sats \ 10 replies \ @Cje95 6h
Is the cost just the debt they took out for BTC or is there actually some sort of very high cost to hold that level/amount of BTC? I am sure security and wallet stuff is high but not anywhere near that level!
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20 sats \ 7 replies \ @bitcoingraffiti 6h
He needs to pay the dividends on the preferreds. It's going to be paid by selling common shares.
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0 sats \ 6 replies \ @Cje95 6h
So its just going to be diluting existing shareholders.... that sounds like a terrible idea....
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21 sats \ 5 replies \ @bitcoingraffiti 6h
No, it's all about bitcoin/share. The dividends are about 10%/y whilst BTC continues to accrete at an average of 50% per year. That's a 40% margin/y, i.e. a very good business.
Also understand that on the initial purchase the bitcoin/share increased significantly without any cost or dilution.
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33 sats \ 2 replies \ @freetx 6h
Exactly. Its a balancing act. As long as bitcoin-per-share keeps increasing above the dilution rate then in theory shareholders are still happy.
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0 sats \ 1 reply \ @euthymic 4h
No. Ironically, MSTR is the ponzi scheme that no-coiners claim BTC represents.
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100 sats \ 0 replies \ @bitcoingraffiti 4h
You've been listening too much to denlilapan. There's no evidence it is a ponzi. As long as Bitcoin outperforms the dividend yield it's a profitable business.
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0 sats \ 1 reply \ @euthymic 4h
Small point: Bitcoin doesn't accrete. Accrete means to 'grow by accumulation or coalescence'. Bitcoin just rises in nominal USD terms as the currency is devalued.
Big point: the market is realizing BTC per share doesn't matter. MSTR shareholders have no claims to the underlying, and Microstrategy will never realize gains (they have stated they never plan to sell their BTC), so 'btc per share' is, at best, a song and dance. Microstrategy will also continue to issue common stock to fund their dividends in perpetuity - a disaster for MSTR holders.
This is coming from someone who held a sizeable MSTR position up until recently. Look out below.
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0 sats \ 0 replies \ @bitcoingraffiti 4h
It accretes in dollar value which is the unit of account of the dividends. That's the only math that needs to check out. It's not a linguistic problem.
If you say the shareholders don't have claims to the underlying then basically you're against the stock market as a whole. To me it seems that most people who got rich owned some kind of business whether public or private. It's been working rather well for the last couple of hundred years.
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10 sats \ 1 reply \ @0xbitcoiner OP 6h
I don't get these moves from Strategy, and I don't even want to. I'm just sharing info.
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11 sats \ 0 replies \ @Cje95 6h
Haha fair enough! I was like how the hell does holding BTC cost you that much.... its gotta be the stupid levels of debt that Saylor took out to purchase all of it.
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0 sats \ 0 replies \ @ZezzebbulTheMysterious 4h
He is able to sell BTC to pay for STRC yield.
STRC, being the most popular, will attract the largest coupon payments.
Of course, this will be unpopular, but its allowed under the offering.
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