Michael Saylor Reveals Why Wall Street Prefers Cash to Bitcoin
Michael Saylor admitted Bitcoin backing alone couldn't keep Strategy's 12% yield preferred stock at its $100 target, forcing the company to provide cash collateral to win over credit investors.
The Strategy executive chairman made the admission at ParaFi Investor Day, revealing that credit investors demanded a cash cushion before returning to the company's perpetual preferred stock, STRC. The stock pays a 12% annual dividend and targets a $100 share price but slipped below par early in the summer, later falling to roughly $75.
According to Saylor, the company repurchased about $1.5 billion of STRC, pushing it back to within a few cents of par. This experience changed his thinking about collateral, as credit buyers prefer three years of dollars over 30 years of Bitcoin.
Digital Credit Alloy
Saylor now describes digital credit as an alloy of capital and cash, comparing it to stainless steel when structured as 70% Bitcoin and 30% cash. The company now holds about three and a half years of dividends in cash reserves and plans to pay STRC dividends daily if shareholders approve.
If you created it as 98% Bitcoin and 2% cash, it tends to buckle. If you make it 70% Bitcoin and 30% cash, think of stainless steel.
Investor Trade-Offs
Saylor expects STRC to eventually trade 400 to 500 basis points above the risk-free rate, roughly 200 to 300 basis points tighter than today. However, the cash focus has come at a cost, with Strategy spending more on buybacks than on new Bitcoin recently.
Critics like gold advocate Peter Schiff argue the company has lost its Bitcoin-buying power, but Saylor counters that credit investors typically want a three-year track record while digital credit is only in its second year. Before wider acceptance, Saylor said digital credit must prove it can survive bear markets.
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