MicroStrategy preferred shares face structural risks
MicroStrategy's perpetual preferred shares carry significant downside risk if Bitcoin prices remain depressed, threatening its capital-raising model.
The argument
The guest argued that while MicroStrategy's strategy of selling preferred shares to buy Bitcoin worked well during a bull market, a prolonged downturn exposes the company to dividend payment pressures once its 10-month cash runway is exhausted.
The thesis, stress-tested
✓ What validates it
- ✓Preferred share price falls further below par value
- ✓Inability to cover preferred dividends after 10 months
▸ Risks discussed
- ▸A rapid recovery in Bitcoin prices would alleviate funding pressure
- ▸Ability to raise alternative capital
Hear it yourself
"So it's not just about the these companies are printing massive earnings growth. Micron just reported a 1200% increase in revenue, those type of things. And, you know, it's 1,800,000,000 in revenue last year. It's 24,000,000,000 this year. Well, to do that again next year, it's gotta be at 48,000,000,000. And and that's just you know, but you're under the law of large numbers, and they're just not gonna be able to print that type of revenue growth. So the so what's happening now is you got people selling the Mag seven to go chase semiconductor."
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