If you’re not following this: Strategy has an undistinguished enterprise analytics software company which has a complicated financing strategy designed to fund Bitcoin purchases with non-recourse leverage, including at-the-market share issuance of the common stock.
Response to MSCI Index Matter
Strategy is not a fund, not a trust, and not a holding company. We’re a publicly traded operating company with a $500 million software business and a unique treasury strategy that uses Bitcoin as productive capital.
This year alone, we’ve completed five public offerings of digital credit securities— $STRK, $STRF, $STRD, $STRC, and $STRE —representing over $7.7 billion in notional value. We also launched Stretch ($STRC), a revolutionary Bitcoin-backed treasury credit instrument that provides variable monthly USD yield to institutional and retail investors.
Funds and trusts passively hold assets. Holding companies sit on investments. We create, structure, issue, and operate. Our team is building a new kind of enterprise—a Bitcoin-backed structured finance company with the ability to innovate in both capital markets and software.
No passive vehicle or holding company could do what we’re doing.
Index classification doesn't define us. Our strategy is long-term, our conviction in Bitcoin is unwavering, and our mission remains unchanged: to build the world’s first digital monetary institution on a foundation of sound money and financial innovation.
For much of the last few years, this has allows them to sell stock for $1, slightly overpay for Bitcoin, and get rewarded by the market with $1.50-2.50 of enterprise value, which they have used to buy Bitcoin.
So: who is buying the stock?
Partly it has been retail speculators. Partly it has been wrappers on top of the stock, which take advantage of retail interest and *extremely* high volatility; its price should and has whipsaw around even more than Bitcoin, and that is a useful property in a very narrow sense.
And then because of the wrinkle that a) there is strictly nominally a software company hiding under the pile of Bitcoin and b) that software company is now very large because of all the Bitcoin it holds, index funds passively invest in it, in proportion to market cap weight.
This has been quite reflective as that dynamic has progressed , because the more stock the company issues, the more Bitcoin it can buy, the more the market cap increases, the more index funds are forced to buy.
And we’re coming to the “But.”
But, the people who run indexes have criterias for inclusion. It would be a bad thing if an index listed an ETF with the same underlying theme as the index itself. That would create an unclean Russian dollar structure. It would be worse if it included an unrelated ETF.
MSCI is a very large index provider, and has a January date for looking at whether Strategy should still be in their equity indexes.
The argument against: this is a pot of Bitcoins functioning as a pseudo-ETF, which is not the exposure an investor wanting US equities asked for.
In a hypothetical world where a stock is taken out of an index, all consumers of the index (the ETFs) will, very shortly, sell their entire position in the stock.
This would be pretty disruptive. Helpfully, a service that various funds provided to capitalism is speculating on future changes in the index and propagating them into the present. If you expect lots of forced selling in January, you can sell now and cover in January.
That has probably happened in the last few days, in size.
Management is attempting to rally markets by suggesting that their pot of Bitcoin that they sell as being a pot of Bitcoin is not really a pot of Bitcoin. Rather, it is some valuable intellectual strategy attached to a valuable capital markets function attached to some software.
I will repeat a disclaimer I have made in the past: I have puts on this company, for almost the last two years, because I thought I understood the endgame better than management and common shareholders did.
I think I continue to be correct on that, but FWIW it remains unlikely that I successfully get paid for being right. As always: I do not recommend this or any other trade.
* reflexive; got autocorrekt
15,48 тыс.
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