During a recent earnings call, Strategy (MSTR), the largest publicly traded entity holding bitcoin, suggested it might sell some of its bitcoin holdings to meet dividend obligations. This announcement sparked concern among investors and the broader crypto community.
In response, executive chairman Michael Saylor engaged in a discussion with CoinDesk senior analyst James Van Straten at Consensus in Miami. He expressed his belief that the announcement was largely “inconsequential.”
As Strategy transitions from being primarily a bitcoin treasury company to a comprehensive capital markets operation, Saylor elaborated on various topics including potential bitcoin sales for dividends, details about their preferred stock known as Stretch or STRC, and common misconceptions regarding their trading strategies.
This interview has been edited for brevity and clarity. This is part one of an ongoing series featuring CoinDesk’s conversation with Michael Saylor.
CoinDesk: Your earnings call indicated that Strategy might sell bitcoin to support dividends. How significant is this?
Michael Saylor: From an economic standpoint, it’s insignificant. If we were to fund all our dividends solely through selling bitcoin over the next year, we would end up buying 20 bitcoins for every one sold. Essentially, it’s akin to buying 20 bitcoins without selling any at all. Moreover, considering that there’s between $20 billion and $50 billion in liquidity available today within the market for bitcoin; funding our dividends through this means would only amount to approximately $3 million—negligible really.
CoinDesk: What criteria do you use when deciding whether to buy more bitcoin or pay down debt?
Saylor: We evaluate two main metrics—the first being $BTC yield which assesses benefits for common equity shareholders; if there’s no yield it’s neutral equity-wise; negative yields are dilutive while positive yields are accretive. The second metric involves credit impact on our balance sheet—does it increase risk?
If we were entirely focused on stock buybacks using all available cash flow—it would be beneficial for equity but detrimental from a credit perspective due to changing market prices daily across our financial instruments.
The trades we prioritize are those which maximize Bitcoin per share creation; if one trade can generate ten times more Bitcoin than another—we choose that option first.
CoinDesk: With Bitcoin currently around 36%-37% below its peak value—is now an opportune moment to sell high-cost-basis Bitcoin and realize tax credits?
Saylor: We have access up to $2.2 billion in tax credits whose value fluctuates constantly; alongside opportunities arising from mispriced convertible bonds offering substantial yields as well as capturing gains via trades involving Bitcoin itself—we assess these options continuously on both weekly and daily bases.
The decisions made exclude alternatives so we always weigh whether actions taken benefit equity but negatively affect credit—potentially yielding large profits while slightly compromising credit strength may be acceptable depending upon current conditions of either aspect at play during decision-making processes.
No specific timeline will be communicated regarding these actions—but flexibility remains key amidst evolving circumstances presenting intriguing trading opportunities currently available.
CoinDesk: Critics claim you consistently purchase Bitcoin at weekly highs—what’s your take?
Saylor: That critique lacks understanding of underlying mechanics involved here! When acquiring Bitcoins via equity swaps following price rallies—it becomes economically advantageous given heightened premiums present during such surges where swapping MSTR shares translates into greater profitability overall compared against lower premium scenarios encountered otherwise!
A typical week comprises168 hours yet only three may witness significant market rallies enabling us substantial capital raise efforts totaling around$250 million achieved within those brief windows! Thus although appearances suggest top purchases occurring—they’re actually strategic maneuvers optimizing returns risk-free through effective swaps executed timely based upon prevailing conditions!
If executed under low pricing environments premiums diminish leading inevitably towards lesser profits or even losses incurred by shareholders alike thus explaining why perceptions arise suggesting frequent high-end acquisitions taking place without context provided therein.
CoinDesk : STRC has emerged prominently recently – could you clarify how it differs fundamentally from conventional bonds?
Saylor : Our design aims towards robustness ; specifically , creating perpetual preferreds devoiding traditional maturity timelines . In instances where someone opts out wishing liquidate say$2 billion worth , redemption isn’t applicable since no liquidation rights exist nor put provisions stipulated .
Selling stablecoins incurs immediate obligations whereas Stretch entails perpetual agreements ensuring payment indefinitely aligned alongside SOFR plus agreed-upon spreads mutually established over time allowing both parties long-term engagement rather than short-lived transactions prevalent elsewhere !
Market liquidity derives externally facilitated rather than internally driven hence allowing rapid trading activities undertaken efficiently amongst major players seeking swift executions without hindrance imposed by rigid structures otherwise constraining operations significantly affecting overall performance metrics observed too frequently throughout industry landscape presently !
Coin Desk : Recently STRC experienced slight discounts post-dividend dates – what factors contribute toward slower recovery rates witnessed lately ?
SAYLOR : Observations must encompass entire monthly cycles wherein substantial amounts raised rapidly ($3 .2B ) contrasted against basis approximating roughly ($5B ) resulting vast supply expansions impacting digestion periods accordingly . Some fluctuations attributed directly back towards opportunistic purchases targeting quick returns leading ultimately back into circulation post-dividend payouts received previously mentioned above !
Our growth trajectory nears400 % annually reflecting hypergrowth nature expected given dynamics unfolding before us causing fluctuations seen throughout respective marketplaces today especially evident when evaluating recent activity patterns observed surrounding current ranges exhibited consistently hovering near five-cent variances surrounding$100 thresholds established earlier noted trends indicating comfort levels maintained adequately across board despite pressures applied externally influencing valuations considerably over time ahead moving forward together collaboratively achieving desired outcomes successfully achieved collectively along way toward success stories told often thereafter reflected positively too throughout journeys embarked upon concurrently sharing experiences gained immensely learned along pathways traversed further still …
Disclosure :The author holds shares in Strategy (MSTR).
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FAQ
- What does MSTR stand for?
MSTR stands for MicroStrategy Incorporated. - Why did Michael Saylor mention selling bitcoins during the earnings call?
Selling bitcoins was suggested as a potential method of funding dividend obligations. - Aren’t there risks associated with selling cryptocurrencies like Bitcoin?
Certainly! Selling cryptocurrencies can lead not just financial implications but also affect investor sentiment. - <strongHow does MSTR decide between buying back stocks versus purchasing more Bitcoins?
MSTR evaluates metrics related both yield benefits accruing shareholder interests alongside assessing impacts posed onto balance sheets respectively determining best course forward accordingly based off evaluations performed regularly.
<li<strong Is there any particular advantage linked towards utilizing Stretch (STCR) compared traditional bond offerings?
The primary advantage lies within its perpetual structure eliminating fixed maturity timelines whilst ensuring consistent income streams generated indefinitely enhancing flexibility offered therein relative existing alternatives presented generally speaking across industry landscapes commonly encountered today!