Leverage and preferred drag pressure MicroStrategy
The speakers argued that MicroStrategy's aggressive issuance of yield-bearing instruments has created a structural drag on common equity holders.
The argument
The guest argued that structures like 'Stretch' prime common equity holders by taking claims away from common stock and giving them to preferred holders. With no underlying operating revenue to support these yields, the company faces a growing cash flow drag as it may need to increase dividend yields to 12-13%.
The thesis, stress-tested
✓ What validates it
- ✓MSTR forced to increase dividend yields to 12-13%
- ✓Underperformance of MSTR common equity relative to spot Bitcoin
▸ Risks discussed
- ▸A massive upward move in Bitcoin price could overwhelm the structural drag
- ▸Management successfully restructuring its debt or dividend obligations
Hear it yourself
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