Welcome back to Den's Strategy Watch here at Stacker_Stocks, financed by Saylor himself! (via @BlokchainB 's fiat investments).

Here we trash Strategy and Saylor (and occasionally some other degenerate shitcoin treasury companies) on their own dime. It's a beautiful thing.

YEEEHAAA, gotta love the Saylor AI SLOP:

Michael Saylor has always conveyed confidence and conviction. The leveraged bitcoin vehicle Strategy (formerly MicroStrategy) has had its detractors and doubters, but the management have never wavered in its faith in its project, even if prices gyrate wildly. “Volatility,” wrote executive chair Saylor in February, “is Satoshi’s gift to the faithful.”

Well, no more. Now, we more explicitly farm our devotees (#1504544). Dilution as a wonderfully expensive service! #1292636

If you judge Strategy by recent actions and not words, you get the distinct impression that management have focused increasingly on managing the liquidity demands of the company’s capital structure rather than showing absolute commitment to bitcoin accumulation.

Our Alphaville reporter Mr. Coben, father KURT?! finds 4 developments

1. First Strategy stacked "dollars rather than sats."

Issuing equity at depressed prices to hoard the proceeds is not what you’d expect from a visionary founder who has trashed cash and proclaimed bitcoin as the “apex commodity, technology, property, money, & ETF asset”. The cash reserve today stands at around $900mn which covers about 7-8 months of dividends, and the market is asking how it will be replenished.

2. Then the company repurchased convertible bonds coming due in 2029, i.e., giving up free liquidity.

Straight up pretty stupid -- especially since replenishing the cash reserve means diluting a depressed common stock even more!

this is a bizarre liability to retire, even at an eight per cent discount to par. Zero-cost debt is pretty darn attractive, especially for a junk-rated credit like Strategy. Sure, with a conversion price of $672, the convertible bond was wayyy out of the money. However, because the investor put option could not be exercised until June 2028, the instrument posed no refinancing risk for at least two years.

Reasons? "Preferred stock are far more expensive to service than the convertible, but their payments can be deferred and the securities never mature. Strategy is, in effect, swapping cheap financing for more flexible financing, prioritising survival over economics. It wants to minimise the risk of outright default."

3. Sold 32, re-purchased 1550. #1504544

The market didn’t like the volte-face, with the common stock tumbling nearly 20 per cent in the following five sessions. Admittedly, Saylor had flagged on the first-quarter earnings call in early May that the company might sell a small amount of bitcoin to “inoculate the market” for future disposals. But for investors the actual sale presages future bitcoin disposals.

THIS is a serious point:THIS is a serious point:

"The token (pun intended) sale of tokens suggests management doesn’t believe that capital markets will always enable it to fund its obligations.""The token (pun intended) sale of tokens suggests management doesn’t believe that capital markets will always enable it to fund its obligations."

4. Sucks that STRETCH isn't STRETCHING:

the price decline of Strategy’s “Stretch” (STRC) preferred stock suggests the costs of sustaining the current capital structure is rising fast. STRC was aggressively pitched as a stable income instrument, with CNBC reporting Saylor as having presented it as high-yielding money market fund alternative.

TL;DR -- does management still believe its own story?!TL;DR -- does management still believe its own story?!

Strategy’s premium valuation has always rested on the assumption that it could issue securities, buy more bitcoin, and so sustain the premium that made the process possible in the first place. The company’s online followers may still believe that flywheel is self-reinforcing. The more interesting question is whether management still does.

We shall see, thanks for tuning in to Den's Strategy Watch. UNTIL NEXT TIME!

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