It's been a while — over two months #1429909 #1430855 by my count! I guess I got bored with it...? — since we last talked seriously about the monstrosity Strategy.

Hate him or love him, the OG Saylorboi is here, he's queer, and he intends to eat all of your pesky corn.Hate him or love him, the OG Saylorboi is here, he's queer, and he intends to eat all of your pesky corn.

It's been even longer since we checked in with Mr. Livingston (#1414564, #1425743), the clanker-like AI-spamming Saylorboi who's busy harping Strategy products til kingdom comes. Alas, Den does not discriminate or care much what your thing is (unless you're a boomer, then, you know, skedaddle — or at least repent #1468968).

So let's start there:

Strategy, but really STRC ("Stretch") had an absolute monster week... somebody is bidding that instrument to the heavens, and Saylor is issuing every last share he can at $100.01. Printing 21,795,389 shares of that (plus ~two million MSTR common stock for good measure), yielded him bazooka ammo for bitcoin purchases (#1429909, #1436086): $2,541,630,780 to be exact, or just north of $2.5 billion dollars. In a single week. 34,164 BTC, or more than most of his copy-cats' entire stack in a single week. Huge.

Predictably, the Saylorbois and Saylor bulls are celebratingPredictably, the Saylorbois and Saylor bulls are celebrating

told yous; BIG FINANCE IS COMING; We're bitcoinizing the world, just as Satoshi intended!

In full-out sarcasm mode, Livingston in the ss above goes mega-sarcastic. BUT HOWWW to pay all those dividends?

If you haven't been following along here, Strategy's strategy is to financialize the shit out of bitcoin; stack as much corn as possible via issuing tradfi securities that pay more than a bond manager's wet dream. Entice all the world's dumb money into Strategy's securities — but really just STRC, a perpetual noncallable preferred equity, meaning invisible paper they never have to repay and can stop pay whenever... but which they pay 11.5% APR on a monthly basis to entice a ton of money through the door. And buy bitcoin with it.

If BTC appreciates faster than even a portion of their weighted-average interest expense, they're in the clear.If BTC appreciates faster than even a portion of their weighted-average interest expense, they're in the clear.

Against their other outstanding preferreds and convertibles — which I'm counting to be about $20 bn — they hold a few billion of dollar assets plus their hoard of BTC with a current market value of $62bn. Total annual interest/dividend payments breached 1bn recently, and I'm getting the figure to be $1.4bn a year right now — a neat $116 million a month.

So, roughly:

• 65bn worth of assets
• 20bn worth of debt
• 1.4bn annually out the door in servicing the debt

Mr. Livingston's point is obvious: HOW ON EARTH could a balance sheet like that not manage? Duh. In a calc the Saylorbois like to quote, that's (65-20)/1.4 = 32 years(!) of interest coverage from the (net) assets alone, no future bitcoin appreciation or revenue or future business.

no, of course it's not hard to cover cash flows if those were the weekly numbers, permanently or even once in a while.

and yes, BTC/USD doesn't have to appreciate much for them to have enough assets to carry this play home... and again, most of us over here think it will, in which case they're fine. We know.

That is the (believable) bull case... just issue some shares (either STRC or common), there will be a liquid market, and some of that siphoned-off dilution will cover the interest "expenses." Easy-peasy, lemon-squeezy

The interesting stuff happens in the interim... if bull-bears wreak havoc with our joyous ride to the wealthy heavens, if custodians rug them, if large STRC holders mega-dump at once, if the ever-lasting liquidity flowing into MSTR and STRC dry up, if nobody wants to buy the common but at rock-bottom prices...

I confess, it's getting less and less (#1356919) clear how this thing falls apart, or the supercharged accumulation even ends... it probably doesn't: #1081555

Problem A: the company didn't just "raise" $2.54bn last week... it sold $2.1795 bn (and diluted the common by about 0.6%) more of the very instrument they're trying to pay the liabilities for. That is, raising 2.18bn with 11.5% APR saddles Strategy with another $250m a year ($21m a month) in interest payments... so serving the billion-plus a year interest burden just got, you know, meaningfully heavier to do.
Stretch alone now costs the company almost a billion a year. I.e., you made the challenge harder.
Problem B: Can they issue new STRC to cover the liabilities of the old stretch? Yes, for now it seems they can — hence the Ponzi accusation — but the question is if they can in a pinch?

The outstanding instruments saddle you with liabilities forever (yes yes, you can ignore them and postpone them, and sell bitcoin for them etc but that undermines A LOT of your future credibility, too), whereas the great raising-of-dilutive funds (dilution-as-a-service) is good for now.

Like all Ponzis, the going is good until it isn't anymore.

Which world do you think we're in, schtackers?Which world do you think we're in, schtackers?

H/T to @chris21million and @Scoresby for obviously beating me to this story:
#1475605
#1475344