Everyone, please take note that M. Saylor has recently introduced a new debt financing method. Here is a summary:
- ATM: Omitted.
- Convertible Bond: Interest rate is 0% (rarely less than 1%); the conversion price is approximately 30% to 60% higher than MSTR's price; the maturity date is 3 to 5 years. Comment: It is equivalent to a combination of a 0% interest rate fixed deposit of the principal plus a deep out-of-the-money call option on MSTR expiring in 3 to 5 years.
- Preferred Stock No. 1 $MicroStrategy Preferred (STRK)$: A new method issued at the beginning of the year; the face value was $100 per share (later reduced to $80), with a dividend rate of 8%; when MSTR exceeds $1,000, each share of STRK can be converted into 1/10 share of MSTR, meaning 10 shares can be converted into one share of MSTR; there is no maturity date. Comment: It is equivalent to a combination of an 8% interest rate plus a call option with a strike price of $1,000 and a 10-to-1 conversion ratio without an expiration date.
- Preferred Stock No. 2 $STRF$: Just announced; the face value is $100, with an annual dividend of 10%; unlike $STRK$, it does not come with a call option and does not have the right to convert to MSTR; similarly, there is no maturity date. Comment: It is a high-interest-rate version of STRK without the out-of-the-money option attribute.
It is clear that there are fewer buyers for the 0% interest rate CB, otherwise, there would be no need to attract buyers with the high dividends and no maturity date of the preferred stocks. I am very skeptical about the sustainability of the dividends of these two preferred stocks, especially when the main business is shrinking and the cash flow is drying up. MSTR is pinning all its hopes on the price of the "pie" (likely referring to Bitcoin). If it continues to decline in the long term, the situation will be dire. But in order to survive and solve the urgent need for cash, there is no other way.
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