Unchained - Is Strategy's Model Unraveling? What is Driving the Recent Rout and Where It Can Go From Here - Ep. 971

Episode Date: December 5, 2025

Michael Saylor's Strategy has not had the year it hoped for. Amid an explosion of copycats and Bitcoin price weakness, the company has seen its valuation and so-called mNAV crash. In this special episode of Unchained, Praxos co-founder Vinny Lingham and The Benchmark Company Analyst Mark Palmer join Unchained Executive Editor Steve Ehrlich to debate Strategy's outlook. They discuss the impact of new preferred stocks on common shareholders, the company's new cash reserve and the potential impacts of MSCI exclusion.   They also delve into what the Bitcoin digital asset treasury ecosystem could look like in the future and whether Strategy could have employed a better acquisition model. Thank you to our sponsors! ⁠Uniswap⁠ ⁠Mantle Host: Steve Ehrlich, Executive Editor at Unchained Guests: Vinny Lingham, Co-founder of Praxos Capital Mark Palmer, Senior Equity Research Analyst at The Benchmark Company Links: Unchained: Bits + Bips: Vanguard’s Crypto U-Turn, Tether/MSTR FUD & Picking Future Winners Bits + Bips: Why the Markets Now Have a Bullish Setup Senate Committee Shares Bipartisan Draft on Crypto Market Structure Bill Timestamps: 🚀 00:00 Introduction  📈 2:14 Why Mark still expects Strategy to outperform  📉 5:28 Why Vinny says Strategy preferred stocks are “vampiric” 🤔 11:45 Is Strategy's cash reserve a little too late? 👀 17:11 Debating Strategy's preferreds v. common stock 💡 19:44 How preferreds and CLARITY Act could enable Strategy to start buying Bitcoin dips as well 🫠 24:26 What happens if MSCI delists Strategy 🧠 30:34 The implications of Strategy's recent talk of selling and lending Bitcoin ⚠️ 36:25 Why it might be too late when Strategy decides to sell 🔮 39:28 How the Bitcoin DAT ecosystem could evolve as companies differentiate 🤔 44:17 Could Strategy have employed a better Bitcoin acquisition strategy? 💫 45:30 Closing thoughts on Strategy's future Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to the special episode of Unchained. I'm Steve Ehrlich, executive editor here at Unchained, and I am filling in today for Laura Shin. And we've got a really terrific show for you. Strategy has been in the news a lot, especially over the past week or so, related to not only its falling share price and declining nav, but also some, I guess some questions or even thought, as the sailor accolades would suggest. just about its ability to pay off, pay its, I guess, $700 million a year dividends, et cetera, and how they're responding to that. So there's a lot of discussion related to what the outlook is for strategy,

but then even more broadly, the entire debt ecosystem. We've got a really terrific debate lined up on the pro, or I guess on the bullish side of strategy. We have Mark Palmer, senior equities analyst at Benchmark StoneX. And on the bear side, we have Vinnie Lingam, a long-time crypto entrepreneur and the co-founder of Praxis capital management. Both have been regular guests on our shows in the past on chain and bits and bibs. So we're happy to happen both here. Welcome, both guys.

Thanks, Steve. Thanks. Thanks, great be easy. Just a typical disclaimer. As always, nothing that we say here is meant to be investment or financial advice for more disclosure. please look at unchain.com backslash fits and bibs. Are you a builder who needs to add on-chain trading to your product? The Uniswap Trading API from Uniswap Labs offers plug-and-play access to some of the deepest liquidity in crypto.

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This is the ultimate ecosystem for builders. And with that, let's kick things off. A lot of our audience is probably very familiar with strategy, perhaps even too familiar with strategy, given how much it's been in the news over the last five years or so. But Mark, I know you just put, put out a report on them, maybe kind of just set the table for where you see things right now in a world where, again, the stock has declined rapidly.

MNAV, I think, even briefly fell below one for a little bit, even though I think it's above one at this point right now. And there's a lot of concerns that the party's over when it comes to that. So how do you assess strategy at this moment? Yes. Well, you know, I've got a bit of perspective on this because I started covering strategy back at the beginning of 2021. I was the first equity unitist on the street to be covering it.

And so we've seen in the intervening years, the company go through a period not dissimilar to this in late 2022 after the FTX collapse occurred. And at that point, we heard a lot of the same things that, you know, Bitcoin was dead, crypto was dead, strategy in particular was dead. And of course, you know, that was not the case. then. We don't think it's the case now. What we do see is that, you know, number one, there's a definite decline in liquidity in the market, which you can trace back to the flash crash that happened on October 10th. It was exacerbated by a 43-day government shutdown. So the macro has not

been helpful. The crypto-specific liquidity aspects have not been helpful. And, you know, more broadly speaking, we've had so many debts come into the space over the last number of months that there have been other companies that are drawing capital away that otherwise might have gone to strategy. But all of this is very much temporary, very much in the near term. And if you look at what strategy has created in terms of its capital structure and the infrastructure that it's built around its Bitcoin. acquisition strategy, it's unmatched. No other company can point to the perpetual preferred stock issues that strategy is pioneered and now has five of them out in the market. This is

close to non-dilutive capital that it can raise. There's no fixed maturity rate. So it's effectively permanent capital, which if your business is acquiring a volatile commodity like Bitcoin, then having permanent capital is an enormous advantage, really. relative to the rest of the market. So, you know, we expect a strategy to outperform as it did for the first four plus years since the company adopted its Bitcoin acquisition strategy, and not only relative to the rest of the market, but versus other dads that are out there because it has all of these advantages. Okay. A lot to unpack there. But Vinnie, I want to give you a chance to sort of provide your bearish take on the stock. Well, look, I think my bearish take is on MSTR.

of the Commons. I think that the prefers are fine. I mean, look, it's, if you had to swap out BTC for gold and you bought, you know, $50 billion worth of gold using, you know, common shareholders money, and then you issued prefs against that for the tune of quarter five or ten billion and gave super high yields on those prefs, it would work the same way. Those press would be valuable, but the Commons would be eroded over time. People just don't understand how waterfalls work. the biggest issue with the market right now. You've got a very big retail base of investors who think that by attributing some sort of MNAV multiple on commons, they're going to benefit from it. And that's not the case. The only benefit they get is the more money they give Saylor

to buy, the more he provides equity to buy Bitcoin from existing holders and pumps the price in the process, which is what he's been doing since like 2030K. He has been the biggest buyer of Bitcoin over the past three years. And so as the MNAV multiple has, compressed down to 1.1 now, whatever it is, he's out of ammunition. He cannot provide that buy support to create upward momentum in the price of Bitcoin. That said, the Pref holders are making a killing. I mean, you can sit there. With the exception of, I think, STRD, the one where there's no, it doesn't accumulate. You know, the other three are pretty good. Like, you could, you could buy STRF and you get a 9% yield and think the STRC is like 11 nearly. So these are all great yields.

all they're doing is they're all vampiric on the MSTR stock. And that's the issue. So I think it's, for me, it's just like trying to educate people so they understand what they're buying. If you want Bitcoin exposure, buy Bitcoin. If you want leverage Bitcoin exposure, you could buy some call options, which I think a lot better than buying your MSTR. I think MSTR is just sitting in a precarious situation where the prefs are, you know,

sucking the blood out of it. Yeah, good point. And Mark, I mean, maybe just to level. level set for everyone listening here because Vinny rightfully throughout a lot of acronyms for different types of preferred that Saylor has very creatively used to kind of build the cap table. Can you just walk us through like how his cap table is structured? Like what are the different types of preferred because that's new this year, I believe, to this fundraising strategy and give us a sense of how like how big that is vis-a-vis the common shareholder base.

Sure. Well, at this point, strategy has five different flavors of perpetual preferred stock out in the market. It just added STRE, which was focused on Europe. And, you know, each of these has its own characteristics, you know, that appeal to different segments of the fixed income market. I think that one of the things that gets overlooked here is that Michael Saylor and his team have pioneered entirely new assets. class, which is Bitcoin linked fixed income. And these perpetual preferred issues are the first ones that are out there in the market. We'll see if others follow. They're certainly trying because they understand the advantages that permanent capital gives to any crypto acquisition strategy. But the company now has just under $7 billion of these outstanding. And it does have dividends that it needs to pay on an annual basis that are associated with this. So to look at the capital structure, you know, writ large, company has 8.2 billion of convertible bonds that are outstanding. They have an average maturity of 4.4 years, an average coupon of just 0.42% because

the company hit the convert market at the right time, was able to get extremely favorable terms. You know, with that said, Scheler has stated that the company intends to equitize those converts over the next few years and effectively replace them with more perpetual preferred issues so that its entire capital base will be effectively permanent capital. So where has there been, you know, some hullabaloo is the fact that you have 35 million in interest associated with the converts. You know, you also have. on top of that, another 734 million of annual dividend payments. You know, put it together, you're right around $789 million is their annual nut.

And the question is, since the company's software business only throws off something like $60 million of free cash flow, where is the cash going to come from, you know, to pay for those obligations? And, you know, we just saw an answer because the company established a U.S. reserve, you know, starting off at $1.44 billion should cover 21 months of its obligations with the goal of, you know, extending that to beyond 24 months. Can I just point out something? That was at the expense of common shareholders. It was.

He diluted the commons. He's diluting the commons to pay the prefers. I mean, look, and obviously the, you know, the definition of a Ponzi is when you get new investors to pay old investors. That's a classic definition. Maybe not quite so in this case, but he is diluting one class of shareholders to pay four other or five other classes of shareholders. And that is a concern. I would say that that would be in the category of an investment.

Because what are you doing here? You are establishing this reserve to address these concerns where the detractors of strategy had become quite vocal. And so strategy management responded to that. by making it very clear, very transparent, exactly where that cash was going to be coming from. Yes, it did involve dilution, but I think in this case, you know,

that dilution was ultimately to the benefit of the common shareholder because it's going to address one of the biggest concerns that the critics have raised about the stock and, you know, allow the company to get back to the business of executing on its plan, which is continuing to raise capital

and use the proceeds to buy more Bitcoin. Yeah, I mean, but it kind of flies in the face of everything Saylor's been saying up to now, which is, you know, you know, don't sell your Bitcoin, sell a kidney, use the money to buy Bitcoin. You know, now he has to hold cash. So why wasn't he doing this when the MNAV was 3 or 2.8? Why is he doing it with the MNAV is 1.1? I think it was just a lack of foresight and just, you know, naivety about the crypto market. Because he, look, I've been in crypto for, 11, 12 years now. In my mind, Saylor's a little kid. He just come along the block a few past few years. He doesn't really, you know, 10 years ago, he was tweeting out how much he hates Bitcoin and how he thinks is going to collapse. And so, you know, I think it's just naivety. All it is is he didn't understand the vol and how the ball is going to affect him.

And again, you've stacked up a bunch of these prefs against some commons and other commons have to support the prefs. And so, look, again, I think the preps are fine. If you're going to, you go and borrow money against Bitcoin and effectively what he's doing, he's got like a, you know, 10 or 12x coverage of the current prices, that's fine. And you could go any lender right now and lend Bitcoin and probably at a 2x, right? So he's an ample coverage. That's not the issue. The issue is that, first of all, if we're in a bear market, that ratio does come down. So it does put pressure on the reserves.

But as that number comes down, that's where the concern is. Like, do we have enough cash or do we have to sell Bitcoin to pay the interest on the debt? And he's saying we're never going to sell Bitcoin, which is a fine position to take. Again, my point was he should have done this at 2.8, 2.7, 2.5 MNAV, not 1.15. Yeah, well, I think if you look back at the last five years, you know, since the company launched its Bitcoin acquisition strategy, you know, there have been a lot of learnings that have been acquired by strategy, largely by making mistakes and then having to undo those mistakes. And frankly, Michael Taylor was the first one. Sorry, making mistakes that have been made before. I mean, we've seen this through FTCs.

We saw this through Mount Gox. We see this through all the different crashes over the years. Like there was enough, there was enough institutional knowledge within the industry around how to manage risk in a high volatile environment like Bitcoin that he just ignored over the past couple of years. And again, my point is, I don't think it's necessarily a fiduciary responsibility to common stockholders. But he has actually, he's been harming common stockholders. and that's been reflecting in the price of commons. Commons have gone from mid-500s to 180 right now,

170 down to 160, I think, earlier this week. So this is the issue, right? Like, it's what, does he have a fiduciary responsibility to making sure that the commons are looked after? Or is it just, hey, you know, raise as much debt as possible, as much Bitcoin as possible, and to hell with the commons. And if Bitcoin goes to a million dollars, everything will be okay. That's kind of like the bet he's placing, right?

Well, if you look at, first of all, with regards to taking care of the common shareholders, if you look at the performance of strategy shares since the company adopted, it's Bitcoin acquisition strategy. We did have a stock split that's blended in there, but it's been one of the most successful investment strategies that's ever been introduced to the market. And, you know, it's outperforming Navidia, outperforming the S&P 500, outperforming Bitcoin by leaps and bounds. But when I was talking about, you know, the company making mistakes and acknowledging and learning from its mistakes. What I was talking about was some elements that it had in its capital structure

that were not consistent with a Bitcoin acquisition strategy, specifically, you know, some of the debt covenants that it originally had when it had senior secured debt outstanding. And the fact that there was a level at which the company would need to refresh the collateral underlying, its then $205 million Bitcoin-based list. loan, you know, which got a lot of negative attention. There was a lot of misinformation floating around on social media about that. You know, the company acknowledged that was a mistake to have any sort of trigger, any sort of debt covenant, any sort of situation where they could be facing a margin call because the folks on social media are just going to grab that run with it and

make it out to be much more than it is. So what do we have now? We have a capital structure that's been refined. We do still have $8.2 billion in converts. The company has an intention and a plan to equitize those and replace them with an instrument that has no triggers, has no margin calls, has no covenants, which are the perpetual preferred shares. So, and again, strategy is the only one in the market that's been able to go out and not only issue these, but issue almost $7 billion of them to make it the foundation of its future capital structure. So, I think that all of this is being done in the best interest of shareholders. You know, ultimately, if you flash forward and the company has permanent capital,

you know, no fixed maturity rate, it could be on the books for 100 years. You know, that's the ultimate flexibility that matches very well with a company that's going to be, you know, looking to acquire a volatile instrument like this. And, you know, there have even been, you know, folks talking about, you know, if the price of Bitcoin gets down below, the company's cost basis, they'll be in trouble, which is nonsense. I agree. I think carbon shareholders are in trouble,

but I think the company's fine. I think the preface will still get paid out. I agree with you on that. But back to that point, actually, the average cost for Bitcoin for sale is 75K. And it's going to say, right now with the past three or four years, he's been accumulating the bulk of it.

He's made less returns than gold than pretty much anything else as a stance today. So it hasn't been a very successful strategy buying the tops and buying Bitcoin at 125 and 120 and 115 right going into the end of a cycle. I mean, I don't think he understands the cycles of crypto or Bitcoin very well. Maybe he just says, oh, well, long term, it doesn't matter what happens in the interim. Again, my point. So let me ask you a question. What percentage of the total capital your fund has invested in micro strategies stock, you know, issuances is the commons versus the prefs? Well, we don't we don't have a fun per se. I'm an equity research analyst, so I'm just providing, you know, views on this. But, you know, I absolutely agree that the preferreds are a screaming buy, you know, given the yield that they are offering, given the collateral coverage that you see there. You know, I happen to believe, though, that the equity at these levels also falls into the category of screaming by simply because,

because, you know, the current valuation, the current price level reflects a temporary liquidity squeeze that can be traced back to the flash crash on October 10th. You know, we're right around the corner, I believe, from seeing the Clarity Act put into place, that will give a green light to institutional investors who've been on the sidelines to come into the space in earnest. And I don't think that the market fully appreciates exactly how important that Clarity Act is because, you know, right now we have, a presidential administration and SEC that is favorable toward crypto. That wasn't the case four years ago. It might not be the case again in 2029 and beyond. So codifying these changes that would make it very clear what the rules of the road are for crypto is crucially important for any institutional investors who's going to be looking out, you know, five plus years and, you know, would still be concerned that the rug would be pulled, you know, by the government after they got fully invested

in this space. The Clarity Act, like the Genius Act, is a game changer. And I believe that strategy is going to be one of the beneficiaries of that when it finally does get enacted. Two quick questions. Mark, I want to go on just to follow up a couple things you said. Vinnie, I think you mentioned this too. Sailor, I guess by design, famously buys at every local top. I mean, that's often because there's, there's so much excitement about the space and Bitcoin that it's easier to raise funds. But, I mean, he was quiet during the drawbacks. And there's a lot of questions surrounding like why he's not able to, quote, unquote,

buy the dip. I mean, that's good advice for a lot of other investors that are looking to sort of DCA, dollar cost average. I understand the mechanics of raising funds and getting that additional dry powder. It's harder to do it during bearish periods. But I wonder if there are any ways that he might be able to do that, or I guess Fong, the actual CEO, if they're able to do that to try to take advantage of these dips to get a little extra benefit for if and when the price goes back up.

Well, I think that's where the perpetual preferreds really come in, you know, because once we see these instruments mature, once the market is of fixing of investors is better aware of the advantages that they provide. It's going to be easier for the company to sell those. I know that STRC in particular, which is effectively a money market substitute, has gained a great following, but it's only scrapped the surface in terms of those who would benefit by buying it. Once that has happened, and again, this is a company that's going out and effectively building an asset class from scratch. And so getting that message out there, letting investors better understand

exactly, you know, what would STRC stretch enable them to accomplish versus their other alternatives at this point, you know, takes a little bit of time. You know, this is where it's great to have an evangelist like Michael Saylor. That's what he's been spending a lot of his time on. Once that has been established, then the common stock ATM, you know, really becomes, much less relevant and the ability to issue perpetual preferred so that they can buy the dip that comes that much greater. So I think we're in a little bit of an interim phase in that regard. You know, the company's certainly able to use, you know, the five types of perpetual preferreds that it has right now. But in order to scale those up, there's going to be need to be more awareness.

when it does come again, the common stock ATM falls by the wayside in terms of its importance and the need for it within the company's strategy. Okay. I also wanted to just follow up quickly, too, related to clarity. I've been wrong in the past about strategy. I thought that it was going to struggle, especially once the ETFs became effective, almost the exact opposite happened. You highlighted how clarity might make things easier or be beneficial to strategy. Can you maybe just get a little more precise as to why?

Yeah, well, right now, you know, you have a situation where institutional investors are still skittish about the crypto market in general. And part of that is because we don't have yet codified the rules of the road with regard to a crypto that the Clarity Act would provide. Now, there have been no questions about whether Bitcoin is a commodity or security. Even Gary Gensler during his reign at the SEC would agree that Bitcoin was a commodity and not a security. But in our view, this is one of those situations where, you know, investors are going to come into the space. They're going to buy all of coins.

They're going to buy into different structures. Bitcoin is inevitably, you know, going to be a big part of that. that push. You know, so this is the case where I think Bitcoin will benefit from the greater regulatory clarity, even though the current rules of the road, you know, are more favorable to it. You know, with that said, you know, we had the last SEC chairman who happened to be favorable toward Bitcoin, you know, it doesn't mean that in the future, Bitcoin, you know, couldn't come under attack itself. You know, I think, again, having those rules of the road is going to be good for the crypto space in general. And what's good for the crypto space in general is going to be good

for Bitcoin and ultimately for strategy. Gotcha. And Vinny, comments here. I'm interested if you have any responses to what Mark just said. But I also want to ask your thoughts on MSCI and potential, I guess, what's the right? What I'm looking for? Removal of strategy from some of those indices that then leads a lot of passive buying from funds that attract. So again, goes back to my point. The common stockholders are the ones that are going to absorb the shock of any of this happening. The prefs are going to be just fine. Maybe the yields just go up a little bit, but the prefs aren't going to get hit. So if there's an MSC ID listing because of the percentage of BTC on the balance sheet, what we're going to find is that the passive buying is going to

stop. And the passive buying typically goes into MSTR, not into the prefs. And so you're going to have less buy support to pick up MSCR. And so that price is going to come. down from 180 something to 150, 120, somewhere around there. But again, like, I don't have an issue with the prefs. I think the press are absolutely fine, except in the event that Bitcoin has a massive sort of throwdown to 20K or something like that, 15K. Because remember, right now, the, the commons are paying the interest, okay? Through, you know, especially through the issuance last week, where, you know, he raised the $1.4 billion, the commons effectively paying this for the next 3rd months and if he wants to beef up that fund is going to sell more more commons at the ATM and

put that money into the fund or whatever else you know leverage works very well in an up cycle when things are going up and you've got leverage you look like a genius when things are going down and you've got leverage it looks like an idiot and so sailor hasn't had the the amount of you know in the last cycle he didn't have this sort of leverage he had single MSDR common stock and what went up and went down. It was all linked to, you know, a bit of his business plus the underlying BTC being held. Now he's got leverage. And so the scary thing is if this thing goes into 50K or 40K, the MSTR common stockholders are going to get wiped out. They're going to get down to very small amounts. But again, the prefs are fine. The prefs are fine until the, you know, until the Bitcoin he has,

his books goes below, I don't know, like 8K, which is probably unlikely at this point. So I think he's, I think he's fine. So, look, as an investor, if I wanted the sort of yield, instruments out there. I think I think micro strategy has got the best yield instrument out there right now in terms of yield mechanism and and it's pretty easy to get out before shit gets bad because, you know, the liquidation level for the preps is so low. But I think micro strategy common stockholders are playing with fire. I think it's a, you know, if you if the Bitcoin cycle is going to base cycle for even a year or two, that's a year of two of interest, you know, 700 mil, whatever year, that's going to come out of the comments and be diluted out. And he's going to

has struggled to raise additional capital to provide buy support for Bitcoin when the MNAV is as low as it is. So as it MNAV goes two or below one, you can have the same thing that you have with GBT. And so it's just going to be kind of like, you know, hold and wait and see philosophy. Now, look, I'm just giving you a view on this. I can be totally wrong. And next year we're going to a total bull cycle. The, you know, inflation runs hot. Government printer goes crazy.

Bitcoin goes back up to 150, 200K. then he looks like a genius. But this is my point. Like it's based upon the Bitcoin, so the MNAV plus the market momentum for BTC and the common stockholders are gambling on, you know, the upside list of downside. So if you're bullish Bitcoin,

you think Bitcoin's going to 200K next year, yeah, buy some comments. Go for it. It'll do well in that event. But if Bitcoin doesn't go that way, and even if it drops 20, 30% from year, you're going to get hurt. So this is the problem.

It's a leverage. It's a leverage play. And he's quite, he's quite honest about this and he's quite open about the fact that he doesn't really care about the common stockholders on the way down he just cares about making sure he has enough but quince are on the way up uh you know so it's it's kind of an asymmetric you know offering but again people don't understand how waterfalls work i spend my my career in silicon valley doing recaps and and and and you know series a series a b and c and all these different rounds so i have a very

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Register now. The link is in the show notes. Mark, what are your short-term expectations for the comments document in particular? And I also, I'm sure you saw, an interview that Fong Lee CEO gave to Bloomberg yesterday where he actually talked a little bit about perhaps engaging some

of his Bitcoin in lending facilities and he even said that there could come a time where they would sell some Bitcoin to cover dividend payments. I think years down the road, I guess perhaps to avoid diluting

common stock shareholders too much if it ever came to that. But he definitely did not close the door on that. But yeah, what are your kind of expectations? And I know that in the past, I mean, and this is one of the reasons that the Bitcoin community loves Saylor so much. He's been so dogmatic about holding your Bitcoin, that that $200 million loan, like freaked out the entire industry that you mentioned, so they never did it again. But it certainly seems like they're open a little bit more to leveraging their balance sheet that perhaps kickstart the MNF premium

again. So what are your thoughts on all that? Yeah, you know, one thing I would note with regard to Fungley's interview with Bloomberg is that, you know, he said that the company would sell Bitcoin as a last resort, you know, and I think it's important to make that distinction. You know, this is not something that's, you know, front and center for the company. They've got plenty of other options at this stage. I think what he was just demonstrating is that the company is not so dogmatic that it wouldn't do what is in the best interest of. common shareholders under those circumstances. But. And I'm sorry.

And also when he was making those remarks, too, to piggyback on what you said, like he said, he understands the role that strategy plays in sort of the community mindset. And he knows the type of just, just like how, I guess, traumatic for like for a better word it would be for the industry if micro strategy or if strategy sells anything. So he understood that too when he was kind of giving those caveats. Yeah, you know, and I think the fact that the company is thinking about ways in which it could generate income from its Bitcoin is, I think, you know, just part of the evolution of this company's strategy and management's thinking, you know, the company has avoided doing that for a long time. And if you go back to 21, 22, you know, when Michael Saylor was asked this question, would you lend out your Bitcoin? He said, well, you know, we wouldn't do that because we are. concerned about counterparty risk and, you know, the only counterparty that has a fortress balance sheet that we would potentially do that with is J.P. Morgan and, you know, J.P. Morgan's CEO,

you know, is, you know, infamous for talking about how he's not a big believer in Bitcoin. You know, so the fact that now the market has evolved to the point that management would entertain this idea, I think is a positive step for the company. You know, We've seen others Metaplanet, which is a company that fully acknowledges that they are adhering to the Michael Saylor Playbook, you know, is taking it a step further. They've actually created a Bitcoin income strategy platform that's located in Florida that's just focused on selling covered calls and executing other strategic moves aimed at generating income off of Bitcoin. you know, if you can do that in a way that makes sense, i.e. you are protecting common shareholders by making sure that your Bitcoin is secure. Then, you know, generating incremental income, using, you know, that income to address the obligations on the perpetual preferreds and the converts.

You know, that seems to me to be a step in the right direction. So, you know, I think, you know, the company gives, you know, the company gives. given its position in the market, has had to be somewhat dogmatic up to this point. You know, they have been holding up the flag for Bitcoin and for, you know, adhering to that. So selling Bitcoin, you know, would make no sense. But utilizing that Bitcoin, putting it to work, you know, that's in no way a contradiction relative to their strategy to this point. Vinny, do you think that, I mean, what do you think of what he said? Is there a way to do this responsibly? And I'd like at this point to also sort of, because we have about 10 minutes left or so,

broaden the conversation out beyond just strategy to some of the other Bitcoin debts that are also having similar discussions and conversations, both internally and externally. Look, I mean, the real question, again, is how is the equity structure structured for whether it's a debt, well, whether it's a strategy. which has got, you know, five different instruments or six different instruments, or it's a treasury company that just has one instrument, right? So if you have one instrument and no real debt against it, then you're just basically an unleavened play on Bitcoin.

Bitcoin goes up, you go up. Bitcoin goes down, you go down. When you start stacking on all these other mechanisms, you're basically, what you know, what Sayler's doing is he's borrowing money from the future for strategy. He's saying, okay, I'm going to borrow $8 billion in the future for, to buy Bitcoin in today's prices. And I'll make sure that, I have such conviction that the price is going to go sky high of this asset,

that I don't care that the commons are going to pay the interest costs of their debt. So when the upside comes, everyone shares in it, because it's a preference, the commons pay for it. And what FOMS basically saying is that, look, if things go the other way and we go down, down, down, and we can't extract money from the commons to pay, interest and yes, we'll sell the Bitcoin. But at that point, it's going to unwind because now you'll be selling the Bitcoin at a loss because the average price will be 75. So if he gets

to the point where he's trying to sell and whether you use LIFO, FIFO, it doesn't really matter. The moment you get down low enough that you actually force to sell Bitcoin to cover it, it's a problem. I do think that the reserve that they created last week was actually a smart thing to do and good risk management. I just think, I was calling for that long time ago. I think they should have done it three or four years ago. So it's just a little bit of, Again, naivity. You just don't like that it came at the expense of the common shareholders. Not at like a 1.15, you know, MNAV.

At 2.8 MNAV, they should be raising as much cash as possible and just leaving it in the bank account and waiting for, waiting for the market to cool off or come down. But he was so adamant about pushing and pumping the price higher and higher and higher. And he's been the biggest buyer of Bitcoin over the past, you know, three years, four years. And so, you know, you've now lost the biggest buyer of Bitcoin because he just doesn't have any. the ammunition to go and buy more. And so the market's trying to figure out what the equilibrium point is without sale as a buyer of last resort, especially when there were these big dips and corrections or whatever else.

And so, look, I have a lot of thoughts on the whole crypto community and how, you know, the notion that we can just sit around and hold Bitcoin and get rich is kind of retarded in my mind. You expect to everyone else to do the work. It's very unproductive. And I'm definitely more in the, you know, the shumper to a sort of framework mindset of how values created in society and how we should work and produce goods and services and that sort of thing and it's just too many people out there sitting on bitcoin doing nothing um you know

and and it's like it doesn't it doesn't sit well and not just bitcoin i mean there's tons of unproductive assets out there which which people hold on to um and and and for a portfolio some percentage is fine but literally like i know people who have got thousands and thousands of bitcoins and they do nothing all day they're just unproductive members of society Mark, what do you think, like, longer term, like, an appropriate MNAF for a company like strategy is? Is it one plus a little bit extra? Is it going to be one? I know that the range can vary widely across companies.

Some are less than one because of management fees, et cetera. Fon definitely wanted to remind, especially the Bloomberg anchors yesterday, that strategy does have an operating business. I think he called it a $500 million software business, even though. I think only makes, what, like, $50 or $60 million a year. Like, how does that kind of fit in? Because, again, in a not financial advice point of perspective here, people listening are going to wonder if maybe now's a good entry point for a company like strategy or even some of the other debts that are trading well below one.

Like, how do you kind of see this evening? Do you see this evening out longer term? Well, I think, you know, one of the questions you have to ask is, you know, why do any of these companies have an MNAV that, it's north of one to begin with. And the answer to that question really is that there is value that should be ascribed to the activities that the company are undertaking to be able to acquire more Bitcoin over time. What strategy has been doing in terms of building entirely new asset class of Bitcoin linked fixed income, that is a value-added activity. What the company has

been doing in terms of tapping to capital markets is a value. added activity. So I think the extent to which a company can demonstrate that it is differentiated and that it is adding value should be reflected in its MNAV. Now, there are a lot of data that have been formed over the last number of months. Some of them are trading at pretty steep discounts to MNAV. And so the challenge for them is to demonstrate that there's a reason for them to exist, that they are differentiated and that they are going to be able to create value to an extent that's, you know, superior to other alternatives.

You know, that's not going to be something that all of them are going to be able to accomplish. And so that means there's likely to be consolidation in the space. There's likely to be unwinds. You know, one of the questions that I asked Michael Saylor on the company's last conference call was whether strategy would be, looking to play a role in that consolidation by buying some of these DATs at a, you know, at a discount to MNAV, you know, that activity in and of itself would be accretive because strategies MNAV is, would be significantly higher than the targets MNAV. You know, you'd be able to acquire a lot of Bitcoin and a, and a one fell swoop.

You know, his answer was that, you know, when you're acquiring one of these companies, you're not just acquiring the Bitcoin, you're also acquiring the rest of the company, including whatever operating business is there, that introduces a degree of complexity and actually can detract from transparency, which, you know, what Sailor has said from the get-go is he wants a strategy that is fully transparent and very simple. Yeah, so he's basically said at this point, he does not want to do that. but I do think that as that shakeout occurs, strategy and the others that have the wherewithal to see through this evolution

are going to be the beneficiaries, and that should be reflected in their MNAVs over time. I actually wonder, I'm glad you brought that up because I was about to ask you out that exact question. I mean, I guess two quick things, and then, Vinny, I'll come to you because I know we have to wrap up soon. Do you think that's a smart play, a smart answer from Sailor, And do you see any companies that might be more, I guess, cleaner acquisition targets than perhaps

one that's very leveraged and has a ton of converts that Saylor doesn't want to import onto his books, which I understand. And then, too, this might be a bit of a nuclear option. But I always wonder, like, I'm almost waiting for the corporate raiders to come in and try to rate some of these companies and just sell the Bitcoin or just acquire it and make the companies go away. Is that something that Salar could potentially do as opposed to trying to play nice and do an M&A? I don't think sailors should do that. I think what he should do is go to the corporate rate as the moment things go below 1.0

MNAV for a company. So let's say the MNF is 0.75. He should just provide bids and say, fine. You go in there, you buy the company, you sell me the Bitcoin off a balance sheet. I'll give you, because you can't move, you know, 10,000, 20,000 Bitcoin like in a few minutes on the markets, right? So it's, you know, he could sell them a put option or something so they can go in and then they can put it back to him. and set the price and he can absorb the slippage if any so that's what i would do i would be like if i was sailor i mean i kind of agree i don't think sails should be in the business of buying

treasure companies but i think he should be in the business of of you know selling put options to these guys who want to go do that especially for large-scale purchases and and then basically reverse all the this the craziness where he was buying bitcoin in a premium for years and buy them at a discount because he's like literally the worst trader or at least his team at strategy the worst traders ever. They buy at the wrong price point every time. And this is not even like cycle issue. This is like, they, you know, they'll publish like, hey, we just bought a thousand Bitcoin at 85,000 and the current price would be like 75. Like they spent the whole week pushing the price up, just buying it market. I don't know what they do, but they like the worst trading company ever.

Well, I don't think they'd consider themselves to be a trading company. I think that they'd be adhering to the ad notion that dollar cost averaging, you know, would make sense. time and you know they're they're not trying to to time the market they're simply trying to acquire more bitcoin so i take your point if you're lucky no but but pushing they were pushing the price up that was the issue so instead of instead of like letting the birds come to them and placing birds and and getting you know you're having sell orders go into you they were chasing up and you can see this clearly from the charts they were always every week chasing up the price trying to push it higher because look i get it when you buy it when you have that much bitcoin you can push the marginal

price of Bitcoin up by $1,000 or $2,000,000, all the rest of your Bitcoin goes up by that much as well. So there was this notion that the more they chase the price up, the more they would raise the value of the balance sheet, the more they could issue at the ATM in real time. So a lot of it was like just, you know, chasing the price up in the open markets. And then the moment they ran out of cash, the price would just come all the way back down. We would see this time and time again because the buy pressure was taken away. And I just think it was, I think it was a foolish expedition. as we've seen because they're overpaid along the whole way and the MNAV is compressed.

There's a better way of doing this. That's what I'm saying. Mark, I want you to respond to that. And I know we have to wrap up. So why don't you just share any closing remarks that you have as well? You know, I think, again, you know, the approach that strategy is taking is really focused on, you know, how much Bitcoin the company is going to be able to acquire, you know, over time and do so, you know, to put themselves in an advantage position.

I think that by any measure, they have certainly done that. The fact that they are at the forefront of issuing, you know, the ideal instrument for a Bitcoin acquisition strategy, i.e., the perpetual preferred, you know, demonstrates that, you know, but I continue to believe that, you know, strategy is an evolving entity.

You know, they have acknowledged they've made mistakes in the past. They've learned from them. They continue to evolve. We may see further evolution in terms of the company trying to generate income using the Bitcoin that it holds or in general. But what I see right now is a stock that has been caught up in a period of reduced liquidity, which is not permanent, just temporary. And there's a significant catalyst on the horizon with a potential enactment of the

Clarity Act that should lift all boats, including this one. And Vinny, just any closing remarks? No, I think my closing remarks are that, you know, people need to understand what they're buying. And I think that often with this kind of retail mania and passive buying that we're seeing in 401Ks and ETFs and, you know, MSC high listings, et cetera, you just have people buying what they shouldn't be buying, in my opinion, because they just don't know better. So the more we educate people, look, I am, again, I have. no problem people buying MSDR. If you want to leverage play, go for it. I think that this is, you know, the more instruments he has, the more he confuses the market, the more the, it is just like fog of war and you just, you kind of just buy what, you know, what you're told

automatically. I just think it's dangerous for the long term. And not to just down sale, I think there's a lot of companies out there who are getting a stock purchase, even though they don't deserve to have a purchase because of passive buying and ETF and fund buying and whatever else. So it's a systemic risk, I think, that we have. And these risks are ones that only get uncovered when the tide goes out. And so, yeah, I'll just wait until that happens. And we can refer back to this video. Well, next time we do this, we will have a bet on what the MSTR prices a year from now.

But we don't have time to do it to do it right now. So Mark and Vinny, thank you guys so much for joining. It was a really interesting conversation. And thank you to everyone for watching and listening. And be sure to tune back in for new episodes of Unchained.