Source: Fortune.com
Summary
Michael Saylor’s Strategy Inc. purchased nearly $1.6 billion worth of Bitcoin, its largest purchase since January, using a combination of common stock sales and “Stretch” perpetual preferred shares. The company has built a funding machine that relies on the price of Bitcoin going up, issuing debt, preferred stock, and equity to buy the cryptocurrency. Another company, Strive Inc., has allocated $50 million to Strategy’s Stretch securities, which promise investors an 11.5% annual payout. Strive is heavily exposed to Bitcoin’s price swings and is using Stretch to earn a yield on its reserve cash. The investment is a major bet on Bitcoin and Strategy, with some analysts warning of risks if the price of Bitcoin falls.
Our Reading
The numbers tell one story.
Strategy Inc. is betting big on Bitcoin, with a funding machine that relies on the cryptocurrency’s price going up. The company has issued debt, preferred stock, and equity to buy Bitcoin, with each layer promising investors a different mix of risk and reward. Strive Inc. is also heavily exposed to Bitcoin’s price swings and is using Strategy’s Stretch securities to earn a yield on its reserve cash. The investment is a major bet on Bitcoin and Strategy, with some analysts warning of risks if the price of Bitcoin falls. The ecosystem of companies issuing, buying, and cross-holding securities that depend on Bitcoin’s price is extraordinary.
One thing is clear: the price of Bitcoin is the linchpin that holds this entire structure together.
Author: Evan Null
