Preferred equity beats convertible bonds for Bitcoin treasuries
The speaker argued that perpetual preferred equity is structurally superior to convertible bonds for Bitcoin-backed treasury companies.
The argument
The guest explained that convertible bonds introduce cliff maturity risk, restrictive covenants, and negative hedging pressure on common stock, whereas preferred equity aligns investor incentives with credit quality and expands the investor base to retail.
The thesis, stress-tested
✓ What validates it
- ✓More Bitcoin treasury companies shifting from convertible debt issuances to preferred equity offerings
- ✓Reduction in short-selling pressure on common stock following preferred equity issuance
▸ Risks discussed
- ▸Preferred equity may have a higher cost of capital than zero-coupon convertible bonds
Hear it yourself
"It's a little bit of both. And so that changes the construction, that changes the psychology, that changes the construction of how you would design a portfolio, that changes how you would think about liabilities into the future. And a lot of this stuff is novel because there's never really been an instrument that's been this attractive before with that high of a yield and that high of a liquidity profile. So I would say it's hard to conceptualize because nothing like it has ever really existed before. And it's you have to you have to think of it slightly differently than a traditional dead instrument because it is a hybrid vehicle."
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