Why would MSTR have to sell any bitcoin?
Bitcoin on the path to irrelevance?
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Last: 3 days ago by Yukon Cornelius
Where Saylor and I diverge is the value proposition. He is trying to associate BTC's value relative to Manhattan's land ownership, where I see the prices of both BTC and RE in Texas as a function of a greater fool theory within a supply-constrained asset class.FobTies said:
Saylor also comparing to RE purchases. This will come to a head one way or another. Everyone accepts how bullish US buying would be, but for some reason many can't fathom how bearish it could be if it doesn't materialize.
As for shorting Bitcoin, I think MSTR is where that is consolidating. Bitcoin holders who aren't overleveraged have survived major drawdowns. I'm not sure MSTR could survive a 50% correction. Hard to borrow MSTR, but could be gamma crushed by puts on a neg catalyst. Like a reverse GME.
Last week Microsoft shareholders voted overwhelmingly against adding BTC to balance sheet. So if private sector continues to reject, that doesn't bode well for congress. We are still months away from this becoming a major anticipated event at fed level. Not sure about timing on all the props on ballot at State level.
eta; I think one reason MSTR can be hard to borrow is that so many hedge funds have shorted the stock as a hedge against their long MSTR convertible notes purchased earlier this year
Yukon Cornelius said:
Why would MSTR have to sell any bitcoin?
MSTR is essentially a bitcoin reserve averaging up with borrowed funds, "buying the top" as Saylor puts it. Hypothetically if there was a major correction, like we have seen historically, the balance sheet could go negative. With the avg purchase price below the bitcoin price, MSTR would have to raise funds like any other security to stay solvent. Selling bitcoin might be one of those options, diluting could be another, more bonds/warrants etc. If MSTR stock crashes, then selling bitcoin may be most prudent of those options.
BUT, since the underlying asset won't ever go below MSTRs average price, no one has to worry, right
Same rationale in 2008 real estate, ask Lehman Bros.
Not at all comparing SBF to Saylor, but had the 2022 bitcoin correction not happend, SBF might have dug his way out without getting busted. IF Saylor were to get crushed, it likely wouldn't be criminal, but typical of any other bankruptcy filing on Wall St. But again, if everything Saylor says happens, there is no risk of failure.
FobTies said:Yukon Cornelius said:
Why would MSTR have to sell any bitcoin?
MSTR is essentially a bitcoin reserve averaging up with borrowed funds, "buying the top" as Saylor puts it. Hypothetically if there was a major correction, like we have seen historically, the balance sheet could go negative. With the avg purchase price below the bitcoin price, MSTR would have to raise funds like any other security to stay solvent. Selling bitcoin might be one of those options, diluting could be another, more bonds/warrants etc. If MSTR stock crashes, then selling bitcoin may be most prudent of those options.
BUT, since the underlying asset won't ever go below MSTRs average price, no one has to worry, right
Same rationale in 2008 real estate, ask Lehman Bros.
Not at all comparing SBF to Saylor, but had the 2022 bitcoin correction not happend, SBF might have dug his way out without getting busted. IF Saylor were to get crushed, it likely wouldn't be criminal, but typical of any other bankruptcy filing on Wall St. But again, if everything Saylor says happens, there is no risk of failure.
It's funny that MSTR is leveraging its shareholders' assets in fiat currency to buy more BTC. Any RE investor knows that leveraging your portfolio is needed to increase gains and help diversify risks. Saylor doesn't use BTC, his main asset, as leverage because he can't. BTC lacks built-in credit, leverage, or margin capabilities. So instead, he leans on other people's leverage and fiat money to bolster his investment.
Why would he need to sell btc if the price fell below his average?
Are you trolling now?
Read my post. Financial solvency. I suppose he could get delisted, and trade OTC and if a BTC rebound happened, get re-listed. But pretty much every exchange listed equity takes action to maintain listing rqmts.
Read my post. Financial solvency. I suppose he could get delisted, and trade OTC and if a BTC rebound happened, get re-listed. But pretty much every exchange listed equity takes action to maintain listing rqmts.
No I'm trying to learn.
Wouldn't btc just show on his books as unrealized loss?
What would force him to sell the btc and just not hold until it was above his avg?
Wouldn't btc just show on his books as unrealized loss?
What would force him to sell the btc and just not hold until it was above his avg?
In the real world, there is no guarantee any unrealized loss on an asset will quickly appreciate back to an unrealized gain as you assume.
In the world of Saylor and bitcoin maximalists, all corrections rebound to new highs, bc that's what's happened in the past, and therefore will always happen in the future.
Under a MSTR crash scenario, the recovery would have to be quicker than the exchange listing compliance timetable. Otherwise, MSTR would need to take action, and since their only asset is BTC, they might have to sell.
"The markets can stay irrational longer than you can stay solvent".
In the world of Saylor and bitcoin maximalists, all corrections rebound to new highs, bc that's what's happened in the past, and therefore will always happen in the future.
Under a MSTR crash scenario, the recovery would have to be quicker than the exchange listing compliance timetable. Otherwise, MSTR would need to take action, and since their only asset is BTC, they might have to sell.
"The markets can stay irrational longer than you can stay solvent".
FobTies said:
In the real world, there is no guarantee any unrealized loss on an asset will quickly appreciate back to an unrealized gain as you assume.
In the world of Saylor and bitcoin maximalists, all corrections rebound to new highs, bc that's what's happened in the past, and therefore will always happen in the future.
Under a MSTR crash scenario, the recovery would have to be quicker than the exchange listing compliance timetable. Otherwise, MSTR would need to take action, and since their only asset is BTC, they might have to sell.
"The markets can stay irrational longer than you can stay solvent".
Ignore the first part. It's irrelevant for what I'm asking. I don't care about prognostications one way or another in this line of inquiry.
I want to genuinely understand what the mechanism is and how it works to force MSTR to sell btc.
What is the exchange listing requirement you're referring to?
You know that that MSTR is a shell company for BTC correct? BTC is the only asset that underlies the MSTRYukon Cornelius said:FobTies said:
In the real world, there is no guarantee any unrealized loss on an asset will quickly appreciate back to an unrealized gain as you assume.
In the world of Saylor and bitcoin maximalists, all corrections rebound to new highs, bc that's what's happened in the past, and therefore will always happen in the future.
Under a MSTR crash scenario, the recovery would have to be quicker than the exchange listing compliance timetable. Otherwise, MSTR would need to take action, and since their only asset is BTC, they might have to sell.
"The markets can stay irrational longer than you can stay solvent".
Ignore the first part. It's irrelevant for what I'm asking. I don't care about prognostications one way or another in this line of inquiry.
I want to genuinely understand what the mechanism is and how it works to force MSTR to sell btc.
What is the exchange listing requirement you're referring to?
From their SEC filings:
Supposedly they also have a an AI technology product for BTC-related applications but I've never heard anyone mention it having any value.Quote:
MicroStrategy is the world's first and largest Bitcoin Treasury Company. We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin by offering a range of securities, including equity and fixed income instruments.
eta: MSTR continues to use equity dilution to fund its operations and BTC purchases. If that equity valuation along with BTC price drops below certain levels, MSTR may not be able to fund in ongoing operations
MSTR makes 100 million in profit a year if I'm not mistaken based on their software techn stuff.
What exactly would cause them to sell btc to pay for operations?
What exactly would cause them to sell btc to pay for operations?
I've told you everything already. A margin call type scenario on any borrowed funds or obligations IF underlying collateral collapses. And nasdaq financial requirements IF solvency/stock crash.
If you want to know more detail on requirements or what thresholds apply, search it, it's all widely available.
If you don't accept the hypothetical scenario I laid out, and continue to assume MSTR maintains it's financial health in a BTC crash, you wont understand. So it's a waste of time.
Lehman Bros had lots of assets and revenue streams, but it got totally destroyed bc it was the most leveraged in housing. MSTR is the most leveraged in Bitcoin.
If you want to know more detail on requirements or what thresholds apply, search it, it's all widely available.
If you don't accept the hypothetical scenario I laid out, and continue to assume MSTR maintains it's financial health in a BTC crash, you wont understand. So it's a waste of time.
Lehman Bros had lots of assets and revenue streams, but it got totally destroyed bc it was the most leveraged in housing. MSTR is the most leveraged in Bitcoin.
The guy who just survived BTC going from $69,000 to $15,000 over three years isn't going to be prepared when it now goes from $106,000 to $50,000.
You think MSTR is leveraged the same now and then?
You haven't answered my question at all. It can't be margin called because the btc isn't leveraged. It's not used as collateral.
The debt is convertible bonds. So he can just convert the debt into shares and devalue the shares Yes but still not be forced to sell any btc.
Unless I'm missing something. Which is why I'm asking. What actual mechanism forces the sell?
The debt is convertible bonds. So he can just convert the debt into shares and devalue the shares Yes but still not be forced to sell any btc.
Unless I'm missing something. Which is why I'm asking. What actual mechanism forces the sell?
And yet they have Net Income losses
FobTies said:
You think MSTR is leveraged the same now and then?
I know it's not. I also think Saylor isn't a complete idiot. He is probably just as fully aware as I am that Bitcoin will have a 50% draw back starting sometime next year (assuming the government doesn't start throwing dollars at it). The question is how high it gets before it starts that drawback. What number do you predict?
If I'm not mistaken the older converts, which are maturing in the next few years, are at low rates (like 75 bps). The younger converts are basically at 0% and convertible into equity at lower price levels. It's actually a really nice financing strategy when your stock price continues to rise.Quote:
The debt is convertible bonds. So he can just convert the debt into shares and devalue the shares Yes but still not be forced to sell any btc.
Why do you think this? Who is selling?Quote:
He is probably just as fully aware as I am that Bitcoin will have a 50% draw back starting sometime next year.
BTC has basically tracked the QQQs (TQQQ?) for a while. Would this follow a QQQ pullback at the same time?
Still cracks me up that there are folks on here that are staunchly against BTC. I'll never forget telling my financial advisor to buy all of it he could with my cash back around 2019... He failed me. This was before the SEC said ok to the ETFs and Trump said he was going to buy a bunch as a strategic reserve, mind you.
I'm sure in 5 more years there will still be doubters on here.
I'm sure in 5 more years there will still be doubters on here.
I doubt there was a way for your financial advisor to purchase BTC on your behalf back in 2019Signel said:
Still cracks me up that there are folks on here that are staunchly against BTC. I'll never forget telling my financial advisor to buy all of it he could with my cash back around 2019... He failed me. This was before the SEC said ok to the ETFs and Trump said he was going to buy a bunch as a strategic reserve, mind you.
I'm sure in 5 more years there will still be doubters on here.
tysker said:If I'm not mistaken the older converts, which are maturing in the next few years, are at low rates (like 75 bps). The younger converts are basically at 0% and convertible into equity at lower price levels. It's actually a really nice financing strategy when your stock price continues to rise.Quote:
The debt is convertible bonds. So he can just convert the debt into shares and devalue the shares Yes but still not be forced to sell any btc.
For sure. But that being the case I still don't see what forces any btc sell by MSTR.
Being cash flow negative and also unable to line up financing could result in the need to trim some of its BTC. No different than any other asset-rich, cash-poor company.Yukon Cornelius said:tysker said:If I'm not mistaken the older converts, which are maturing in the next few years, are at low rates (like 75 bps). The younger converts are basically at 0% and convertible into equity at lower price levels. It's actually a really nice financing strategy when your stock price continues to rise.Quote:
The debt is convertible bonds. So he can just convert the debt into shares and devalue the shares Yes but still not be forced to sell any btc.
For sure. But that being the case I still don't see what forces any btc sell by MSTR.
I'm curious how the market will treat a scenario where they offer their BTC as collateral
Ok, you are right. MSTR won't have any solvency or listing issues IF there major BTC crash, and run on MSTR shares. They will never have to liquidate any BTC, bc their borrowing/bond selling strategy and software biz backstop are fool proof.
I'm not saying that at all. This is now TWICE you've said one saying something I'm not even close to. I'm asking to help understand the exact opposite situation you're trying to saying I'm espousing.
Why would they be insolvent if btc market price falls below their avg buy. It's just Unrealized loss. The debt they owe is payable by converting the debt into shares.
So again what or who forces them to sell?
Why would they be insolvent if btc market price falls below their avg buy. It's just Unrealized loss. The debt they owe is payable by converting the debt into shares.
So again what or who forces them to sell?
For the same reason MSTR goes up more than BTC, it will go down more than BTC. In a +50% BTC crash scenario there could be a run on MSTR shares and flood of puts creating a downward spiral, class actions suits, and all the other BS that happens when targeted. In that scenario, billions have to be paid back to bond holders bc stock price thresholds weren't met. They would owe more than their software biz makes. MSTR has already doubled their share count, so doubtful they would issue more shares, doubtful bond holders would want more convertible debt, so selling BTC becomes the option to avoid de-listing and BK.
I've repeatedly said this multiple times. Im beating a dead horse at this point. If you are long MSTR, good luck, nothing to worry about unless there is a major BTC sell off.
I've repeatedly said this multiple times. Im beating a dead horse at this point. If you are long MSTR, good luck, nothing to worry about unless there is a major BTC sell off.
I agree that longing mstr isn't a good play. That's not what I'm talking about though. Whether or not they can be forced to liquidate btc is what I'm wondering about.
In the example you posted is there a threshold of price for which if the shares fall below he can't convert the debt into shares and had to come up with cash?
In the example you posted is there a threshold of price for which if the shares fall below he can't convert the debt into shares and had to come up with cash?
I'm not sure all the new convertible bond details are disclosed, other than general structure with differing price thresholds and maturities.
Saylor is essentially selling high vol call options to buy BTC, expecting an outcome where he gives up shares at higher BTC/MSTR price. Otherwise, it's just an interest free loan he can pay back easily in his mind. He describes it in a way that makes you think he can't lose. But I just outlined how MSTR could lose big time, what might be a small crash becomes a bigger MSTR crash, bc leveraging works both directions.
If US state and federal govs decide not to sponsor BTC in a meaningful way, that could be the beginning of the end. To me that's the single biggest risk to watch. Won't happen tmrw, but could within next few years.
Saylor is essentially selling high vol call options to buy BTC, expecting an outcome where he gives up shares at higher BTC/MSTR price. Otherwise, it's just an interest free loan he can pay back easily in his mind. He describes it in a way that makes you think he can't lose. But I just outlined how MSTR could lose big time, what might be a small crash becomes a bigger MSTR crash, bc leveraging works both directions.
If US state and federal govs decide not to sponsor BTC in a meaningful way, that could be the beginning of the end. To me that's the single biggest risk to watch. Won't happen tmrw, but could within next few years.
But you haven't described how he can lose big?
If you don't know that's fine. But if you do what would force him to sell btc? Or is there not one?
If you don't know that's fine. But if you do what would force him to sell btc? Or is there not one?
I have several times, in great detail.
MSTR could crash big, requiring them to sell BTC to pay creditors and avoid delisting/BK. If the stock doesn't crash, they can weather BTC pullbacks thru other fundraising instruments.
For whatever reason you refuse to accept that scenario. That's fine, others here understand the concept.
MSTR could crash big, requiring them to sell BTC to pay creditors and avoid delisting/BK. If the stock doesn't crash, they can weather BTC pullbacks thru other fundraising instruments.
For whatever reason you refuse to accept that scenario. That's fine, others here understand the concept.
What I'm not understanding and the direct questions I've asked.
Why does MSTR have to sell btc if price drops?
Why does MSTR have to sell btc if price drops?
The same reason any equity has to sell assets if their stock collapses beyond their abilty to fund creditor obligations. That's why. It's the fiduciary of the CEO to maintain solvency and avoid delisting/bankruptcy. If MSTR were to ch11, the feds may step in to force the sell of their BTC on behalf of the creditors. Again, this is a hypothetical scenario of MSTR price totally collapsing, forcing drastic action, including the sale of its BTC.
It's kinda disturbing you can't grasp this simple concept. I don't know if it has to do with your conviction in underlying asset, or complete ignorance on how the stock market works.
It's kinda disturbing you can't grasp this simple concept. I don't know if it has to do with your conviction in underlying asset, or complete ignorance on how the stock market works.
But their debt is convertible bonds. So can't they just convert the bonds to shares? Why would they have to come up with cash?
I'm not sure why you're trying to insult me. I'm trying to understand how/why MSTR would have to sell btc. I'm asking very direct questions that aren't getting answered.
I understand that any entity that owes money but can't pay said money has to start selling assets to generate the money to pay.
However in MSTRs case(the one I'm interested in specifically) they did not take out a loan for cash nor did they put up any btc for collateral. What they did was they sold convertible bonds.
If btc drops to 10k tomorrow I don't think they have to sell any.
If MSTr stock drops to 10 bucks I don't think they have to sell any btc.
Now if I'm wrong on either of those or both please explain to me how and why.
I'm not sure why you're trying to insult me. I'm trying to understand how/why MSTR would have to sell btc. I'm asking very direct questions that aren't getting answered.
I understand that any entity that owes money but can't pay said money has to start selling assets to generate the money to pay.
However in MSTRs case(the one I'm interested in specifically) they did not take out a loan for cash nor did they put up any btc for collateral. What they did was they sold convertible bonds.
If btc drops to 10k tomorrow I don't think they have to sell any.
If MSTr stock drops to 10 bucks I don't think they have to sell any btc.
Now if I'm wrong on either of those or both please explain to me how and why.
I explained it already. This is the last time.
The bondholders only convert to stock if MSTR price appreciates to a certain price threshold. IF MSTR price were to collapse, bondholders are owed that money back interest free. It could be several billions owed depending on when said collapse happens. If Saylor isn't already being investigated by then, he certainly will be if he refuses to liquidate BTC. Ultimately under that MSTR collapse scenario, the sale of their BTC would happen by force bc they have no other assets or biz revenue to meet the debt obligation. Yes, the federal gov would seize their bitcoin to pay off creditors, then the various classes of shareholders if there is enough.
*I'm not referring to a 10% drop in BTC or small dip in MSTR. It's why I specifically said +50% BTC drop and total collapse of MSTR (ie 90%). It's like you aren't even reading my posts. With small drops, MSTR could issue ATM shares or more bonds, instead of selling BTC.....so your scenario is totally irrelevant to my explanation on what could cause MSTR to have to sell BTC.
The bondholders only convert to stock if MSTR price appreciates to a certain price threshold. IF MSTR price were to collapse, bondholders are owed that money back interest free. It could be several billions owed depending on when said collapse happens. If Saylor isn't already being investigated by then, he certainly will be if he refuses to liquidate BTC. Ultimately under that MSTR collapse scenario, the sale of their BTC would happen by force bc they have no other assets or biz revenue to meet the debt obligation. Yes, the federal gov would seize their bitcoin to pay off creditors, then the various classes of shareholders if there is enough.
*I'm not referring to a 10% drop in BTC or small dip in MSTR. It's why I specifically said +50% BTC drop and total collapse of MSTR (ie 90%). It's like you aren't even reading my posts. With small drops, MSTR could issue ATM shares or more bonds, instead of selling BTC.....so your scenario is totally irrelevant to my explanation on what could cause MSTR to have to sell BTC.
Ok but they could be forced converted bonds correct? As I understand it Saylor can force tbe bonds to be converted to shares not having to come up with any cash or am I wrong?
I am reading yours. You reading mine? I said 10k not 10%
I'm not trying to be difficult but these questions I've been trying to find the answer to. Btcers on one end say there is zero risk to Saylors strategy. On the other end you have jaded bitter no coiners saying Saylor is going to get liquidated and wind up in prison.
Truth is likely in the middle somewhere. I'm trying to figure out exactly what the doomsday scenerio for MSTR is.
I am reading yours. You reading mine? I said 10k not 10%
I'm not trying to be difficult but these questions I've been trying to find the answer to. Btcers on one end say there is zero risk to Saylors strategy. On the other end you have jaded bitter no coiners saying Saylor is going to get liquidated and wind up in prison.
Truth is likely in the middle somewhere. I'm trying to figure out exactly what the doomsday scenerio for MSTR is.