MicroStrategy's Stretch preferreds remain structurally sound
The guest argued that MicroStrategy's "Stretch" preferred stock (STRC) is not facing an existential crisis despite trading below par, as its high yield simply reflects market risk pricing while its underlying credit quality remains strong.
The argument
The guest pointed out that the company has decades of Bitcoin dividend coverage and continues to successfully raise capital, with year-to-date capital raising exceeding its monthly dividend obligations by 18 times. He noted that STRC has mitigated downside risk, outperforming Bitcoin on 86% of all possible holding periods since its IPO when accounting for dividends.
The thesis, stress-tested
✓ What validates it
- ✓STRC trading back to its $100 par value
- ✓Successful maintenance of the monthly dividend payments without selling Bitcoin
- ✓Rebuilding of the USD cash reserve via ATM share issuance
▸ Risks discussed
- ▸Retail capital flight to competing high-yield products like SADA
- ▸Early retirement of convertible debt depleted cash reserves
- ▸High volatility tied to Bitcoin price drops
Hear it yourself
"And, I thought you were the right guy to get on the call and and figure out if Sailor is trapped in this trade. But welcome to the show, man. Thank you, Danny. I've been a long time fan of the show, so thank you so much for having me. You texted last night at, like, close to midnight my time. I have a new kid at home. She's about seven weeks old, and I thought, will I get some sleep? Will I be sleep deprived? Can I even articulate my thoughts? But, we're gonna give it a go. So thanks for the invite, man. I'm a huge fan."
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