Strategy Q1 2025 Earnings Report

Strategy EPS Results

• Actual EPS: -$16.49
• Consensus EPS: -$0.02
• Beat/Miss: Missed by -$16.47
• One Year Ago EPS: -$0.83

Strategy Revenue Results

• Actual Revenue: $111.07 million
• Expected Revenue: $116.66 million
• Beat/Miss: Missed by -$5.60 million
• YoY Revenue Growth: -3.60%

Strategy Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 5:00PM ET

Strategy (NASDAQ:MSTR), formerly known as MicroStrategy, provides artificial intelligence-powered enterprise analytics software and services in the United States, Europe, the Middle East, Africa, and internationally. It offers Strategy ONE, a platform that allows non-technical users to access novel and actionable insights for decision-making, and Strategy Cloud for Government, which provides always-on threat monitoring designed to meet the strict technical and regulatory standards of governments and financial institutions. The company also delivers Strategy Support, helping customers achieve system availability and usage goals through responsive troubleshooting; Strategy Consulting, offering architecture and implementation services; and Strategy Education, which includes free and paid learning options. In addition, the company is actively involved in Bitcoin development. The company offers its services through direct sales force and channel partners. It serves the U.S. government, state and local governments, and government agencies, as well as a range of industries, including retail, banking, technology, manufacturing, insurance, consulting, healthcare, telecommunications, and the public sector. The company was incorporated in 1989 and is headquartered in Tysons Corner, Virginia.

Strategy Q1 2025 Earnings Call Transcript

Presentation

[Shirish Jajodia, Head - IR & Treasury at Strategy]

And good evening. I'm Sherid Jajodiya, corporate treasurer and head of investor relations at Strategy. I will be your moderator for Strategy's twenty twenty five first quarter earnings webinar. Before we proceed, I will read the safe harbor statement. Some of the information we provide during today's call regarding our future expectations, plans and prospects may constitute forward looking statements.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

Actual results may differ materially from these forward looking statements due to various important factors, including the risk factors discussed in our most recent 10 Q filed with the SEC and our eight ks filed on 04/07/2025. We assume no obligation to update these forward looking statements, which speak only as of today. Also, during today's call, we will refer to certain non GAAP financial measures. Reconciliations showing GAAP versus non GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at strategy.com. I would now like to welcome you all to today's webinar and let you know that we will be taking questions using the q and a feature at the bottom of the screen.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

And you can submit your questions throughout the webinar, and Michael, Fong, or Andrew will answer the questions at the end of the session. Please be sure to provide your name and company's name when submitting your questions. I'll now walk you through the agenda for today's call. First, Fong Lee will cover the business highlights for the first quarter of twenty twenty five. Second, Andrew Kang will cover the financial results for the first quarter of twenty twenty five.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

And then Michael Saylor will provide an in-depth strategic review of our Bitcoin treasury strategy. And lastly, we will open it up to q and a. With that, now I'll turn the call over to Feng Li, president and CEO of Strategy.

[Phong Le, President & CEO at Strategy]

Thank you, Suresh. Hello, everyone. I'd like to welcome all of you to today's webinar. With just a few days to go, I'm excited to invite you all to Strategy World twenty twenty five next week, May in Orlando, Florida. Sherish, you may wanna thank you.

[Phong Le, President & CEO at Strategy]

Come meet our software customers, partners, and employees, explore innovations in AI and BI, and engage with global corporate and thought leaders shaping the future of Bitcoin for corporations. You can visit our website to register if you haven't already, and I look forward to seeing many of you in Orlando. Moving on to the Bitcoin highlights for Q1 twenty twenty five. Strategy remains the largest corporate holder of Bitcoin in the world, now holding 553,555 Bitcoins with a total bitcoin market value of $52,000,000,000 as of April 28. In the first four months of twenty twenty five, we acquired an additional 106,085 bitcoin for a total purchase cost of $9,900,000,000 at an average price of approximately $93,600 In Q1 twenty twenty five, Bitcoin's momentum accelerated meaningfully, driven by a series of landmark government actions.

[Phong Le, President & CEO at Strategy]

Most notably, the Trump administration announced the establishment of a strategic Bitcoin reserve. This bold move marked the first time a sovereign government publicly recognized Bitcoin as a national reserve asset. In parallel, the administration's broader pro Bitcoin regulatory stance has further legitimized the asset class and attracted heightened institutional interest, setting the stage for deeper integration of Bitcoin into The U. S. Financial system.

[Phong Le, President & CEO at Strategy]

On the capital markets front, we have also made significant progress. In the first quarter of twenty twenty five and quarter to date, in Q2 twenty twenty five, we raised $6,600,000,000 net proceeds through our at the market or ATM equity offering program and raised $2,000,000,000 through the issuance of a convertible note offering. We also raised $1,400,000,000 through our newly listed preferred stock, Strike and Strife. We expect to continue issuing innovative fixed income securities and seek to enable our common stock to outperform Bitcoin via intelligent leverage. Strategy has added to its balance sheet in every single quarter since August 2020 across 60 plus announcements and 100% of our Bitcoin holdings remain fully unencumbered, demonstrating our long term conviction and unmatched consistency in executing our Bitcoin strategy.

[Phong Le, President & CEO at Strategy]

This makes us the most committed corporate holder of Bitcoin globally, representing 2.6 of all Bitcoin in existence. As the chart shows, our pace of accumulation accelerated meaningfully over the past two quarters, reflecting both market opportunity and strong treasury operations execution. As the world's first and largest Bitcoin treasury company, we remain hyper focused on capital markets innovation and our Bitcoin operations to strategically accumulate more Bitcoin. We've now utilized $37,300,000,000 of capital to increase our Bitcoin holdings and drive shareholder value. That capital was acquired through three primary mechanisms.

[Phong Le, President & CEO at Strategy]

First, dollars ten point six billion of debt issuances, of which $8,200,000,000 in aggregate principal is outstanding. And second, dollars one point four billion in perpetual preferred equity through strike and strife, reflecting investor demand for both yield and Bitcoin linked instruments. Third, dollars twenty five point nine billion of Class A common stock issuances and fourth, eight thirty six million of cash flows from software operations. As we reflected in this quarter's capital markets activity, 2025 continues the momentum we built in late twenty twenty four, with $10,000,000,000 already raised year to date through a diversified mix of securities. This included $6,600,000,000 in equity and $3,400,000,000 in fixed income instruments, demonstrating the breadth of our investor support and the strength of our market access.

[Phong Le, President & CEO at Strategy]

These offerings reflect our ability to tap multiple capital sources efficiently and strategically. Q1 demonstrated that the $18,100,000,000 raised in Q4 wasn't a one off. We're operating at a new baseline. Rather, it represents the foundation of our evolving and scalable capital strategy. In terms of the largest treasuries in the world, we've gone from virtually negligible to now the thirteenth largest in treasury compared to the S and P five hundred universe entirely through our Bitcoin holdings, and we're growing fast.

[Phong Le, President & CEO at Strategy]

Over the next two to four years, we believe we have the potential to surpass many of the companies ahead of us on this list, continuing to scale our Bitcoin treasury with conviction and discipline. Five years ago, when we embarked on the Bitcoin journey, we were the only corporation with the courage and conviction to do so. Today, there are over 70 publicly listed companies globally holding over 700,000 Bitcoin who are adopting our playbook. There are newer corporate entrants adopting Bitcoin, and some are recurring Bitcoin stockers like us. We welcome all corporates to Bitcoin and are extremely proud to see Bitcoin treasury companies emerging in The U.

[Phong Le, President & CEO at Strategy]

S, Japan, India, France and other countries. We believe our unique attributes and track record of transparent investor relations, conviction in our Bitcoin strategy, innovative offerings, high volatility combined with the scale of our Bitcoin holdings will continue to differentiate us. Since we adopted our Bitcoin strategy in 2020, MicroStrategy stock has outperformed every major asset class in every S and P 500 company, appreciating 2,870 2,887 to date. To put that in perspective, Bitcoin itself is up 692%. The S and P 500 has risen just 65% over the same period.

[Phong Le, President & CEO at Strategy]

And while NVIDIA has been the top performing S and P 500 stock during this period with an 874% gain, we've outperformed NVIDIA by more than three x. It's not even close. If you look at the last twelve months, we've similarly outperformed all the largest companies as well as all of the key indices. And if you look at the last three months when the broader macro when the broader macro markets witnessed the most volatility since 2020, we still managed to outperform the magnificent seven and key indices. Our performance metrics speak to the uniqueness and strength of our position in the market.

[Phong Le, President & CEO at Strategy]

Since launching our Bitcoin strategy, MicroStrategy has MSTR has not only outperformed Bitcoin itself, but every stock in the S and P 500. That kind of return doesn't happen by accident. It's the result of strategic focus, intelligent leverage, and our disciplined execution. We're also one of the most heavily traded and closely watched equities in the market today, both in spot and in options markets. MSTR consistently ranks among the top across open interest, daily trading volume, trading volume as a percentage of market cap.

[Phong Le, President & CEO at Strategy]

This level of engagement reflects more than just price action. It's a sign of growing institutional interest, retail participation, and the market's recognition of strategy as the capital market center of gravity for Bitcoin. Now I'll turn to our capital plan. In October of last year, we introduced the 2121 plan, a bold but disciplined framework to raise 21,000,000,000 in equity and 21,000,000,000 in fixed income capital. We designed it to be agile, scalable, and responsive to market dynamics.

[Phong Le, President & CEO at Strategy]

Since then, we've reported having raised $20,900,000,000 in equity and $6,400,000,000 in fixed income capital, meaning we're 65% complete. Notably, 99% of the equity portion has been completed in a mere six months. We believe the accelerated progress is a testament to the strength of our market access and the credibility we've built with all groups of investors who've demonstrated increasing demand for our securities. So what's next? Remember our original inspiration from the Hitchhiker's Guide to the Galaxy, the answer to the ultimate question of life, the universe, and everything.

[Phong Le, President & CEO at Strategy]

The number was 42 for our $42,000,000,000 capital plan. And given our success, we're now gonna double down with a new plan, the forty two forty two capital plan. That's $42,000,000,000 in equity and $42,000,000,000 in fixed income targeted through the end of twenty twenty seven and inclusive of our original $42,000,000,000 capital plan. This gives us the scale to pursue our strategy with conviction and the flexibility to continue to adapt across market cycles. So to that end, we're pleased to announce that today, we've filed for a new $21,000,000,000 ATM program.

[Phong Le, President & CEO at Strategy]

Later in the presentation, Michael will share with you a framework for how we think about our securities and credit risk as it pertains to our Bitcoin strategy, including illustrative examples of how this framework would apply to the different types of securities we've offered, MSTR or convertible bonds, strike and strife. And we're excited about this opportunity to discuss the framework, which we believe is helpful for understanding our capital financing decisions. Under the new 04/1942 plan, we are 32% complete. That leaves us with around $57,000,000,000 of additional capital to be raised through the end of twenty twenty seven. As we move forward, we'll focus more on the fixed income side of our plan through instruments like strike, strife convertible notes and potentially new structures we may explore over time.

[Phong Le, President & CEO at Strategy]

At the same time, we'll continue to utilize the equity ATM when conditions are favorable and when it represents an accretive and efficient option for our shareholders. The market has shown strong demand for instruments, and we tend to continue tapping new pools of capital in a thoughtful value accretive manner while maintaining a disciplined leverage ratio between 2030%, allowing us to responsibly scale while maximizing long term value. We intend to remain highly efficient with our use of our overall capital. We have $185,000,000 of total fixed annual obligations for interest and dividends, which we can cover using a fraction of our daily trading volume To put in perspective, our ATM activity this year alone has raised $6,600,000,000 and our obligations represent just 3% of the daily traded volume of our equity and less than 1% of the total equity we've raised in the last twelve months. As a result, we're comfortable raising additional fixed income capital to buy more Bitcoin without being restricted by available cash or cash flow from our software operations to service all of our interest and dividend obligations.

[Phong Le, President & CEO at Strategy]

Mike will explain later why this strategy is highly accretive to our shareholders. We're tracking well ahead of our KPI targets for 2025. Year to date, we've achieved a 13.7% BTC yield, putting us well on pace to reach our full year target of 15%. BTC yield reflects the Bitcoin gain we generated through our treasury operations. Our BTC gain is approximately 61,500 BTC year to date, representing a BTC dollar gain of $5,800,000,000 in the current at the current Bitcoin price.

[Phong Le, President & CEO at Strategy]

Given our strong year to date performance in the favorable market environment, we're raising our KPI targets for 2025. We've raised our BTE yield target from 15% to 25%, reflecting confidence in our ability to create value for our shareholders. And at the same time, we're increasing our BTC dollar gain target from $10,000,000,000 to $15,000,000,000 These new targets better reflect the scale of our strategy and the value we believe we can unlock through disciplined Bitcoin acquisitions. We remain disciplined in the use of both the ATM and other capital raising sources, doing so in a way to achieve our BTC yield and BTC dollar gain targets. I'm now going to turn the call over to Andrew, who will discuss our financials for the quarter in further detail.

[Andrew Kang, Executive VP & CFO at Strategy]

Thank you, Fang. I will begin with a quick review of the software results, then go into more detail on our Bitcoin results. In q one, total software revenues were approximately $111,000,000 down 3.6% year over year. The lower product license revenues along with support revenues in q one continues to be as expected, and our overall revenue trend continues to reflect the ongoing transition of our software business from on prem to the cloud. Our cloud results in q one, subscription services revenues increased 62% year over year and now make up approximately 33% of total revenues, continuing our quarter over quarter double digit growth.

[Andrew Kang, Executive VP & CFO at Strategy]

Our subscription billings also grew again by 38% in q one to $24,500,000. The decline in product license revenues and support revenues continue to be offset by growth in cloud, and we continue to see growth in demand from our cloud platform and anticipate this trend to continue and strengthen in the coming quarters. Lastly, cost of revenues were $34,000,000 up 13% compared to q one of last year. The increase was driven primarily by higher cloud hosting costs, which we expect to continue in future periods as a direct result of our growth in cloud. Moving on to Bitcoin.

[Andrew Kang, Executive VP & CFO at Strategy]

We adopted fair value accounting for our Bitcoin holdings on January year, which has fundamentally changed how we value our Bitcoin treasury asset. To the left of this slide, we began the year with our Bitcoin holdings valued just under $42,000,000,000 On Jan one, upon adoption of the new rule, we recognized $17,900,000,000 to our beginning balance of retained earnings, which was the difference between the carrying value on our books and the fair value based on Bitcoin price as of 12/31. '1 fundamental difference now under fair value accounting is that our holdings are marked on the last day of every quarter, not throughout the quarter as before. Any new Bitcoin purchased during the quarter are initially held at the purchase price of those Bitcoins, and all prior quarter and new quarter purchases are fair valued as of the last day of each quarter. In Q1, the price of Bitcoin declined from approximately $93,400 at the end of the year to roughly $82,400 at the end of Q1, resulting in a $4,900,000,000 unrealized fair value loss on our pre Q1 holdings.

[Andrew Kang, Executive VP & CFO at Strategy]

We also purchased, throughout the course of Q1, an additional 80,715 bitcoin at an average price of approximately $94,900 representing $7,700,000,000 of new purchases. On the last day of Q1, because the market price of Bitcoin was approximately $82,400 these new purchases also reflected a fair value decline of about $1,000,000,000 As a result, our overall Q1 unrealized fair market value loss was $5,900,000,000 which flowed directly through our income statement. The next slide is an illustration on how fair value could impact the current quarter. This waterfall chart begins with our March 31 Bitcoin holdings on the left, valued at $43,500,000,000 Since threethirty one, we have seen a substantial recovery in Bitcoin price, which has increased since the end of Q1. Using a Bitcoin price of $95,000 as an example, the change in Bitcoin price would reflect an illustrative $6,600,000,000 unrealized fair value gain on our Bitcoin held at the end of the previous quarter.

[Andrew Kang, Executive VP & CFO at Strategy]

In Q2 so far, we have purchased an additional 25,370 Bitcoin at an average price of $89,303, which represents a $2,300,000,000 investment. At the example price, the new q two purchases would reflect an increase of roughly $100,000,000 in fair market value. In this illustration, our unrealized fair market value gain would be approximately $6,700,000,000 and the market value of our total Bitcoin held today would reflect a fair value of approximately $52,600,000,000 As Fang mentioned, Q1 was a milestone quarter for us with the IPOs of two new innovative preferred equity offerings. Strike, our 8% convertible preferred, is trading with an effective yield of roughly 9%. Since launch, Strike has delivered a 8.4% price return, outperforming the median return of all prefs offered since 2015.

[Andrew Kang, Executive VP & CFO at Strategy]

Strike is trading with an average daily volume of roughly $33,000,000, which is nearly 80 times the typical pref trading volumes, demonstrating strong institutional demand and a deepening market for this product, which is strengthened through a 21,000,000,000 ATM, institutional block trades, and follow on retail demand. Stripe, our 10% fixed coupon perpetual preferred, has shown even stronger liquidity and investor demand and has quickly emerged as a top tier preferred instrument. With a price return of 7.5% since issuance, it has meaningfully outpaced the broader preferred market as well. Average daily volume for Stripe has been $26,000,000, again, significantly higher than the peer set. When you compare the strong BTC risk and BTC credit profiles of these prefs, there is tremendous unlock through the eventual recognition of the underlying BTC support of these instruments and the potential changes in the rate environment in the future.

[Andrew Kang, Executive VP & CFO at Strategy]

Both Strike and Strike stand out as one of the most liquid and high performing preferred stocks issued in the last decade. They serve to provide innovative securities to institutional investors, insurance companies, Bitcoin longs, retail investors, as well as the broader fixed income universe. This slide highlights why we believe Stripe and Stripe are structurally superior to traditional debt. These instruments provide us with permanent capital with no maturity, no refinancing risk, no restrictive covenants, and no collateral requirements. They're also publicly listed, giving us flexibility to tap follow on capital as needed, both institutionally and for retail investors.

[Andrew Kang, Executive VP & CFO at Strategy]

In contrast, traditional bonds comes with fixed maturities, repayment or refinancing risk, and often require covenants and collateral. Over a thirty year period, that can lead to significant leakage from refinancing costs and added operational complexity. Our preferred equity allows us to maintain leverage without repayment risk while providing durability and scalability. Bitcoin is a one hundred plus year asset. These instruments provide a one hundred one hundred plus year exposure.

[Andrew Kang, Executive VP & CFO at Strategy]

In q one, we issued a new $2,000,000,000 convertible note, which was well received by the market. The notes due March 2030 have a 0% coupon and priced with a 35% conversion premium, reflecting a conversion price of $433 per share. We also redeemed our 2027 convertible notes in q one, and our nearest debt maturity is now not until late twenty twenty eight. The remainder of our scheduled debt maturities are evenly spread out through 02/1932 with a weighted average scheduled debt maturity of approximately four point nine years. We now have $8,200,000,000 of total unsecured convertible debt outstanding with a low blended interest rate of approximately 0.42%.

[Andrew Kang, Executive VP & CFO at Strategy]

Since issuance, nearly all of our converts have increased in value significantly. On a blended basis, convertible bonds are up 62%, even outperforming Bitcoin itself. What is even more striking is strategies converts in comparison to other traditional securities such as US high yield and investment grade corporates and other US convertible bonds. The traditional convert market has historically offered investors such as hedge fund hedge funds access to volatility across different industries and asset classes. The innovation we introduced through our converts still provide volatility, but our converts offer increased volatility through Bitcoin exposure.

[Andrew Kang, Executive VP & CFO at Strategy]

The differentiation of our converts from others is the credit coverage that we offer, which Michael will discuss in more detail shortly. Strategy was the largest issue of convert issuer of converts in 2024, and our success can be attributed to expanding the investor base of this historically closed market. In addition to traditional hedge funds, we have seen increasing participation from long only investors, and now with access for retail investors through vehicles like the BMAX ETF, the Bitcoin Corporate Treasury Convertible Bond ETF. Our outstanding debt and preferred securities, including Converts, Strike, and Strike, are significantly supported by the value of our Bitcoin reserves and even more so by the scale of our common equity market value. As of April 28, we have $109,000,000,000 in equity market cap, and so we have about 100,000,000,000 in equity cushion and over 43,000,000,000 in Bitcoin cushion over our fixed income liabilities.

[Andrew Kang, Executive VP & CFO at Strategy]

The point is that we believe our capital structure is extremely well fortified. This chart gives you a simple way to think about our capital stack across both seniority and volatility. To the far right, you'll see m MSTR equity. That's your full exposure to our high performance Bitcoin strategy. Then there's Strike, our convertible preferred.

[Andrew Kang, Executive VP & CFO at Strategy]

That's a step up in seniority, and it pays an 8% dividend, but it also gives investors some upside through equity conversion to MSGR. Above that is Stripe, our 10% perpetual preferred. It's nonconvertible, noncallable, and really meant for the kind of capital that wants long dated fixed income exposure to our balance sheet without the volatility of the equity. And at the top, we've got our convertible notes, senior instruments with capped upside but higher protection in the capital structure. So what you're seeing here is a full spectrum of choices.

[Andrew Kang, Executive VP & CFO at Strategy]

Whether someone wants equity upside, yield with optionality, or pure senior exposure, that's what makes our overall capital structure so scalable. We are building a platform where investors can pick their spot on the risk return curve, and we can raise capital intelligently from each part of that curve. Thank you for your time today and for your continued support of strategy. I'll now turn the call over to Michael for his remarks.

[Michael Saylor, Executive Chairman at Strategy]

Okay. I wanna thank everybody for being with us today. And I'm going to start with an observation. Strategy is the world's most widely held Bitcoin security, and you could think of it as the most widely held Bitcoin proxy. In fact, substantially more widely held than any of the spot ETFs in the world.

[Michael Saylor, Executive Chairman at Strategy]

We did we did some review of that in the past few months, and we found that there are 13,000 institutions that have accounts holding MSTR. And these institutions are not just asset managers, a lot of pension funds, insurance companies, and even sovereign wealth funds. We traced 814,000 retail accounts, and we have 500 plus ETFs and funds and indices that were embedded in, like, the Nasdaq one hundred, the Russell one thousand, the MSCI index. Some of these are extraordinary. For example, you know, the Norway sovereign wealth fund, it's it's benefiting every single citizen of Norway.

[Michael Saylor, Executive Chairman at Strategy]

We've traced we've traced our holdings to insurance companies that have millions of beneficiaries and pension funds that have many, many millions of beneficiaries. So all told, our best estimate is 55,000,000 beneficiaries who are either indirect holders of MSTR or they're beneficiaries of the institutions that are invested in MSTR. We can go to the next slide. I'd like to talk a bit about our BTC models. And you're probably familiar with BTC yield and BTC gain because we've talked about those a lot over the past six months.

[Michael Saylor, Executive Chairman at Strategy]

But in fact Mhmm. I get lots of questions about how the company is going to continue to outperform Bitcoin. How are we gonna continue to grow the stock? What is the basis for the premium to NAV? And in and of themself, yield and gain only tell you part of the story.

[Michael Saylor, Executive Chairman at Strategy]

If you wanna understand how we create shareholder value, we have to look out much more than just the common the the current period. We're looking out a decade, and we're considering the consequences of all of our capital markets transactions. And so so, we internally use a variety of these BTC metrics, and I'm sharing them with you today. And I'm gonna explain how we use them, how we think about them. Some of them are valuation metrics.

[Michael Saylor, Executive Chairman at Strategy]

Some of them are credit metrics. We've got some that are forecast metrics, if we go to the next slide, like volatility and ARR. And then we have treasury metrics where we're calculating the value of our treasury, and we have and we have metrics that allow us to assess how accretive any particular trade or any particular transaction is at any point in time. We even have some risk metrics. We have not just credit risk metrics for the credit instruments, but we have BTC risk metrics where we where we assess the hurdle rates and the breakeven points of our various capital markets transactions.

[Michael Saylor, Executive Chairman at Strategy]

So let's dive right in. First of all, the the degree to which any capital markets transaction is is accretive and gonna create shareholder value is a function of some out out outlook or expectations. One thing that's really important is, what do you think about BTC? Do you think that Bitcoin is gonna go up 0% a year forever? And if you do, we call that a skeptic.

[Michael Saylor, Executive Chairman at Strategy]

Do you think that Bitcoin is gonna track the S and P index about 10% a year or so on average? We call that a trader. Do you think that Bitcoin looks like a magnificent seven stock or a digital a dominant digital monetary network, a Google, a Microsoft, and Amazon. Those normally have growth rates of 20%. We call that an investor, a tech investor, if you will.

[Michael Saylor, Executive Chairman at Strategy]

And then do you believe that Bitcoin is destined to demonetize lots of other assets as digital capital? That makes you a maximalist. My long term forecast personally that I shared last last July in Nashville was that I thought Bitcoin was gonna go up 29% ARR on average for the next twenty one years. So you can see my forecast over the next twenty one years is about a maximalist forecast on average for a long period. If you are more aggressive than that and in the near term, especially over the next five years, or ten years, you might have a shorter time horizon, Or you might just think that the base case is conservative, and you might have a more bullish case.

[Michael Saylor, Executive Chairman at Strategy]

You might be a double maxi and think a 40% gain is coming, or even a triple maxi and think a 50% a year ARR as possible. So just keep those numbers in mind as we do this analysis because the important takeaway is your view of the equity and the credit instruments as an investor will be a function of your view of BTC.

[Michael Saylor, Executive Chairman at Strategy]

So

[Michael Saylor, Executive Chairman at Strategy]

first point to be made. Why do people want to hold MSTR? What drives what drives the premium to NAV? What creates the magnetic appeal or the gravitational attraction of this asset? Well, one thing is the volatility, and we have a volatility which is higher than BTC.

[Michael Saylor, Executive Chairman at Strategy]

It is also higher than any of the S and P 500. When you have that kind of volatility, you can generate yield by simply selling that volatility. We've quantified that value of that volatility in a metric we call the MSTR rate. Think of it as as the simple annualized yield you can generate by selling at the market call options with a thirty day to expiry. If you just keep rolling those call options and keep selling them all the time, you generate a 3% simple annualized yield on MSTR.

[Michael Saylor, Executive Chairman at Strategy]

That's substantially higher than Nvidia or iBit and substantially higher than the Nasdaq one hundred. You can look at it is again is like the magnetic attraction to capital. People might very well buy MSTR to sell that ball not even knowing what BTC is, not even knowing what MSTR is. All they know is they want that 103 percent. Now another point that I'll make is if you're in a taxable account, you're getting a 3% yield that's taxable, and so your after tax is gonna be 70%, sixty %, whatever that is.

[Michael Saylor, Executive Chairman at Strategy]

But if you're in a tax free account or a tax advantaged account or could be a retirement account, or if you're an offshore vol trader, if you're sitting in Dubai or you're sitting in in a zero income tax and you reinvest this rate, you can get to 200% or more annualized yield. So, of course, that makes our our security, MSTR, globally interesting to traders and very interesting to people that would simply like to sell vol. And, another point that I'd make is that when you're considering, an equity to sell vol on, what you'd like is volatility. You would also like liquidity. You would also like durability.

[Michael Saylor, Executive Chairman at Strategy]

You you want a hundred and three vol with $5,000,000,000 of equity trading every day, and you want it to continue for a decade. And you need you want credibility. So think volatility, liquidity, durability, credibility. And now think about three classes of companies. Weak struggling companies occasionally are volatile, but their underlying operating business is losing money.

[Michael Saylor, Executive Chairman at Strategy]

So they're not durable. So if you have a volatile business and you're losing cash, it's interesting to trade for a while, but the trade doesn't stick around. And, on the other hand, strong companies, well run companies, the Microsofts of the world, they actually have a management team that engages in very decisive actions to strip the volatility away from the balance sheet and strip the volatility away from the p and l. So so the primary philosophy and dynamic of a well run company is to get rid of the volatility. And if you have a meme company, a meme stock of sorts, or a random company, you might get massive volatility either for a good reason or a bad reason.

[Michael Saylor, Executive Chairman at Strategy]

But the management team normally doesn't have credibility and durability. How are you gonna keep it for a decade? And so you see what we have done is we have created a volatility engine. When you take volatility, when you take a fire and and you cultivate it, it it becomes a furnace. And if you're smart, you make it a reactor, and it becomes a power plant.

[Michael Saylor, Executive Chairman at Strategy]

And, of course, what we're doing is creating a crypto reactor that could run for a long, long period of time. So that's that rate combined with the credibility of the management team and the transparency and the durability plus the liquidity, that actually drives and attracts a lot of capital, to MSTR. Next. Now let's talk about, equity analytics. On any given day, we consider how are we going to raise money and how do we generate, yield, how do we generate gain, how do we generate shareholder value.

[Michael Saylor, Executive Chairman at Strategy]

So if we were to sell a hundred million dollars of MSTR equity at a multiple to NAV of two, then generally what happens is we capture a BTC dollar gain The spread is 50%. We capture $50,000,000 of that as the gain. That is the accretive component to the existing common stock shareholders. That converts to a BTC gain of 526 Bitcoin.

[Michael Saylor, Executive Chairman at Strategy]

That converts into a yield that is dividing our our BTC gain by our entire stack of Bitcoin works out to nine basis points. So we're capturing a yield by selling the equity and buying the Bitcoin. When we do that with convertible notes, we do it at a zero coupon up 40 in this model, and we're just using that to make the math simple. The same transaction with converts would result in a 12 basis point yield, a $64,000,000 BTC dollar gain, a 64% spread, if you will, and we get not 526 Bitcoin, but 676. If we do the same thing with Strike, given, given our general model for Strike, which is an 8% dividend and a 50% conversion premium, Now you're saying we're getting to a 15 basis point yield, 842 Bitcoin, an $80,000,000 gain.

[Michael Saylor, Executive Chairman at Strategy]

That's an 80% spread. So you see the leverage is getting greater. That 842 Bitcoin is achieved without dilution to the common stock. So all of the capital, all of the investment income or the capital gain, if you will, from the 842 Bitcoin forever will accrue to the existing shareholders, the existing common shareholders, and and not to the new strike shareholders. So that's how we're creating an upside opportunity.

[Michael Saylor, Executive Chairman at Strategy]

Now we've got a strife. Strife is the simplest model because we're selling a hundred million dollars of a preferred. We're not diluting the common stock at all. So we've got a hundred million dollar gain of Bitcoin without any share dilution, works out to a thousand 53 Bitcoin. And that's a 19 basis point yield.

[Michael Saylor, Executive Chairman at Strategy]

So there you go. You see, as we go as we go to more debt like instruments, we're generating less dilution. They are more accretive, and they generate a higher BTC dollar gain. That we call BTC KPIs. We report that up front.

[Michael Saylor, Executive Chairman at Strategy]

We can immediately calculate these numbers. And and you're seeing them generally week by week. Now let's go to the next part of the analysis. Think about the next ten years. When we sell that hundred million dollars of equity, we capture the $50,000,000 gain upfront.

[Michael Saylor, Executive Chairman at Strategy]

Okay. That's great. That is that is shareholder value created. But in fact, the question is, what happens over the next ten years? And we use ten years as a long time frame.

[Michael Saylor, Executive Chairman at Strategy]

Most investors don't really have patience. Long time or forever is about ten years. So you'll see a lot of analysis here that's about ten year analytics. What you can see here is if you're a maximalist like me, and like many of our, many of our common stock shareholders are maximalist, and you crank in a 30% BTC ARR forecast, that hundred million dollars of capital grows to be $1,379,000,000 in year ten. So now what has happened?

[Michael Saylor, Executive Chairman at Strategy]

Well, we've created $50,000,000 in gain one time, but we've actually created a lot of investment income. And half of that investment income is attributable to the equity dilution, and so the new shareholders are benefiting from it. But the other half of the investment income is captured by the common stock shareholders that existed before the transaction. So that's what we call, BTC dollar income. BTC dollar income is the value that's created for the common stock shareholders of MSTR by having sold the hundred million dollars of equity.

[Michael Saylor, Executive Chairman at Strategy]

And if you if you ask the question, well, how much value is created for the shareholders over the course of the decade? Well, it works out to be the gain plus the dollar income, and so you end up with value of $689,000,000. So we call it a BTC dollar value, 689,000,000. Now you can take the ratio of the value created to the capital raised, and that works out to what we call BTC torque. That's sort of a return on capital measure.

[Michael Saylor, Executive Chairman at Strategy]

What is our return on capital? 6.9 x. So why is that valuable? Well, if you want to outperform BTC, then you're going to need to find a way to get leverage. So that that torque is leverage that allows the MSTR equity to outperform BTC over time.

[Michael Saylor, Executive Chairman at Strategy]

If you wanna drive up the price of the value of the stock or if you wanna drive up the MSTR stock, you have to create value. And you can see right here, if we create $689,000,000 of either gains or incremental investment income without dilution, that is the value creation. So we're creating a a $6.9 of value for every dollar of capital we raise, when we do this kind of transaction. Now, there's another metric you can calculate, which is, BTC multiple. And BTC multiple in this case is equal to the the total BTC NAV, like, 1,379,000,000 over the equity issued.

[Michael Saylor, Executive Chairman at Strategy]

And you can see that the equity was 600, $90,000,000 or so. So in this case and this makes total common sense. Right? We started with an MNAV of two. We sold a hundred million dollars of equity.

[Michael Saylor, Executive Chairman at Strategy]

Half of it was a gain. You know, the the investment income and the attributable to that gained amount is one half, and the investment income that's attributable to the equity dilution is the other half. Now I think that if you look at this BTC multiple, that will tend to set the floor for MNAV. It's not the ceiling. It's not necessarily the average.

[Michael Saylor, Executive Chairman at Strategy]

There there are about a dozen other factors that drive a premium, to BTC, and they drive the MNAV north. One of them, in isolation, is our equity sales or our equity financing here. And so, yeah, focus upon the two BTC multiple and, you know, think that if we do a lot of capital markets activity around a two multiple, that will tend to drive the MNAV toward or above or or keep it above two. And the degree of impact it has, of course, is a function of how fast we raise capital and the amount of capital we raise relative to the existing Bitcoin NAV. Now there are there are three possible objectives of our capital markets activity.

[Michael Saylor, Executive Chairman at Strategy]

The first and the principal objective is drive up the price of MSTR. Second, outperform BTC. Third, increase, the MNAV. And if you think about it, you said, well, which one do you want the most? Well, you want the price of MSTR to be maximized, but the other two are consistent with it.

[Michael Saylor, Executive Chairman at Strategy]

And and how are we gonna do these things? Well, it's a function of raising capital at a high spread such that we create shareholder value at the fastest possible rate. So bear in mind, this chart's the baseline. Now let's go ahead and look at what happens if we substitute convertible bonds. Well, the converts have 40% leverage in them.

[Michael Saylor, Executive Chairman at Strategy]

And so what you can see here is that our torque goes up to 8.9. So there's a lot more torque on this. Almost almost $9 of value creation for every dollar a capital raise. Or $9 of BTC dollar value for every dollar capital raise. And you see the BTC multiple moves to 2.8.

[Michael Saylor, Executive Chairman at Strategy]

So that's going to tend to drive up or support a much higher MNAV. It's also going to tend, tend to create more, more BTC dollar income, for the common stock shareholders. Now let's go to what happens if we go to strike. At strike, you can see we have a higher premium. And so now the torque is even increasing.

[Michael Saylor, Executive Chairman at Strategy]

The return on capital looks even more impressive. Of course, a 50% premium ought to do that. And what you can see is the is the expected equity dilution, and this is the theoretical equity dilution, is much lower. The BTC multiple goes to four. You could imagine that tons of financing of strike will tend to justify, an MNAV of more than four If we can if we can change this to be a substantial mix to our capital raising on an isolated basis.

[Michael Saylor, Executive Chairman at Strategy]

Now there are couple of other dynamics here. One one point I make is this is really on an isolated basis, and and it's a theoretical calculation. Because as a practical matter, the $340,000,000 of equity you see in year ten is sitting in the strike instrument. And if strike is generating a dividend, it's quite likely that people that buy strike will never wanna convert strike into equity. They have the right to do so, but they may not do it.

[Michael Saylor, Executive Chairman at Strategy]

So so this is an example of a theoretical equity dilution. But practically speaking, you're getting a lot of leverage from this instrument because you're attracting a new class of investors, and they don't want to actually convert this to pure equity if they're buying it in order to hold it for the liquidation preference and the dividend. But, you can see, torque is improving, multiple is improving, and we're generating $10 of of BTC dollar value for every dollar of capital that we raise. Now let's talk about strife. So the torque for strife increases to 12.8.

[Michael Saylor, Executive Chairman at Strategy]

You see a lot of torque because at the end of the ten years, you've only issued a hundred million dollars of equity. That's equity that we assume we issued to pay the dividends. We've got $1,370,000,000 of NAV. What's interesting here is you see the BTC multiple goes to 13.8. So Strife is incredibly leveraging to the common stock shareholders, and and it generates potentially extremely high return on asset and extremely high return on equity.

[Michael Saylor, Executive Chairman at Strategy]

Now let's look at broader cases here. Coming back to my chart, you can see that, when we do these transactions, only a small part of the story is the BTC gain. Right? $50,000,000 worth of gain immediately, but we're looking at $639,000,000 as the share of BTC of investment income attributable to the shareholders, you know, without expected dilution. So the real VAT BTC dollar value, 689,000,000, of which less than 10% of it is the gain upfront.

[Michael Saylor, Executive Chairman at Strategy]

Most of the leverage you can see is really coming on the back end of the transaction. And you can see as we go to the right, you know, you're getting to a substantially larger value creation, 800,000,000, a billion, 1 point 3 billion. That's all assuming a ten year time horizon, 30% ARR, and two times NAV. Now let's look at other cases. I'm gonna show you BTC torque for one times NAV.

[Michael Saylor, Executive Chairman at Strategy]

If we were to sell equity at one times MNAV, then you can see there there isn't any torque. Right? You you know, if you're basically selling the equity at the MNAV, you're not really creating shareholder value on an isolated basis. That is the first order result of the capital market transaction is simply to expand the equity capital of the company. By the way, that's not necessarily a bad idea.

[Michael Saylor, Executive Chairman at Strategy]

You might be expanding the equity capital of the company, making the other credit instruments more creditworthy. You might increase liquidity. You might actually increase volatility because of name recognition and and for a lot of other second order reasons. But on an isolated basis, you're not generating torque here. If you look at the convertible notes, you generate a little of torque.

[Michael Saylor, Executive Chairman at Strategy]

You can still generate some torque. And if you're a maximalist, you expect 30% ARR, you're gonna generate a 3.9 torque, $4 for every dollar capital raise. So so you can generate shareholder value using convertible financing if you are very bullish on Bitcoin. When you go to strike, it becomes easier. You know, for strike, you can see you're generating a lot of shareholder value here even just as a trader with a more skeptical outlook, and the torque increases a bit faster.

[Michael Saylor, Executive Chairman at Strategy]

But, of course, you know, the real strategy if you've got a low MNAV to get the engine going is you're selling Strife because Strife is generating extreme torque. Strife is generating 13 x $13 for every dollar a capital raise even with MNAV of one. And so you see the Strife numbers go from, you know, from 1.6 as a trader all the way up to 56 x if you're a triple maxi. So that's our one MNAV chart. Let's look at it for for other multiples.

[Michael Saylor, Executive Chairman at Strategy]

Here's two MNAV. Now what you see here is when you get to two times MNAV, you can generate pretty decent torque with the equity, $7 for every dollar capital raised. You can generate a lot more with the converts. You can generate a ton with strike. And then strife, you know, what you'll notice is the torque is exactly the same.

[Michael Saylor, Executive Chairman at Strategy]

It is it is invariant to the MNAV. Right? It's just a it's a pure fixed income instrument. Now let's go to three times MNAV. Now you see at three times MNAV, you're starting to generate you know, $9 for every dollar capital raised, you know, over the ten years if you're a maximalist.

[Michael Saylor, Executive Chairman at Strategy]

And and, of course, it that really improves the returns of convertible notes and strike dramatically. And you know what doesn't get any better? Strife. Right? Strife torque is exactly the same regardless of what the MNAV is.

[Michael Saylor, Executive Chairman at Strategy]

But you see that it it's getting easy to generate torque with MSTR and convertible notes as the MNAV increases. Now let's take a look at a BTC multiple. This is also instructive. So you're sitting with an m a multiple of one. Your BTC MNAV is or BTC NAV is equal to your BTC equity.

[Michael Saylor, Executive Chairman at Strategy]

And what you can see is it doesn't really matter what your outlook is for BTC. Your multiple is one. And with converts, it's 1.4. And with strike, it's gonna get there is a little bit of sensitivity. You can get up to a 2.3, you know, a 2.3 multiple, the 2.4.

[Michael Saylor, Executive Chairman at Strategy]

You can see when MNAV is pretty low, you have to go to strike or to strike. But now look at Strife. Look at the BTC multiples for that. You're going from one to 57. And if you're a Bitcoin maximalist and you think you're gonna get 30% ARR, you're getting 13.8 multiple.

[Michael Saylor, Executive Chairman at Strategy]

You could imagine, driving the MNAV up, you know, from two to three to four to five to six using strife type financing, you know, even when the MNAV is one. Right? The MNAV could be one, but the issue is how much capital do you have? How much Bitcoin do you have that's collateral? Because if you have a lot of Bitcoin that serves as collateral and you can sell a lot of strife or other kinds of currency swaps or fixed income instruments, you're going to actually put leverage back into the capital structure, and you're going to drive that MNAV back up.

[Michael Saylor, Executive Chairman at Strategy]

And, of course, you're going to drive you're going to drive outperformance against BTC as well. Let's look at two when MNAV goes to two. Well, now you can see the equity's pretty you know, it's pretty predictable to action no matter what your BTC forecast is. And Strife is pretty predictable as well. But the convertible notes start to become more effective, and Strike becomes a lot more effective when you're when you're doing that capital raising at two and at three.

[Michael Saylor, Executive Chairman at Strategy]

Now you see convertible financing at two at three, and you might very well put a floor of of four or five m nav underneath the stock. And with Strike, you're getting to numbers like four or five, six. With Strife, of course, Strife doesn't really care. So, this gives you a sense of the sensitivities of BTC torque and BTC multiples to MNAVS. Now let's try to chart it.

[Michael Saylor, Executive Chairman at Strategy]

We've got a yield curve, and I'm showing you the BTC yield curve. And on one side of the yield curve is strife. And what you can see is I I've created the yield curves for various MNAVS ranging from one to two to three to four to five. So when the MNAV is one, you've got a very steep yield curve. And you can see here that that you're getting max yield with strife and some with strike, and then you're getting a bit with the converts.

[Michael Saylor, Executive Chairman at Strategy]

I mean, they all work. And then you see the equity isn't generating any BTC yield. But as the MNAV increases, the yield curve flattens. And of course, you can see at an MNAV of two, you're getting decent healthy yield across all parts of the yield curve. And as the MNAV increases and it flattens, then you can see the the yields on the the the equity and the convertible equity instruments start to approach the yields from the hard you know, from strike and from strife.

[Michael Saylor, Executive Chairman at Strategy]

And this is important to keep in mind. Let me convert that to spreads for you. Spread is the percentage of of the capital we raise that results in a gain to the shareholders. That is how much of the capital is an accretion. You know?

[Michael Saylor, Executive Chairman at Strategy]

If I've got a spread, I've got an MNAB of five. That means when I sell a hundred million dollars worth of equity, $80,000,000 is the value of the gain. And so our shareholders are capturing 80% of this of that capital. Right? It's an 80% spread.

[Michael Saylor, Executive Chairman at Strategy]

So you can see here that, you know, Strife is a % spread instrument. Strike generates spreads anywhere from 60 to 92% based upon the MNAVS. The converts will generate spreads from 29 to 86%. And, of course, MSTR, if the MNAV is one, it generates no spread. When the MNAV but when the MNAV is two, it's 50% spread.

[Michael Saylor, Executive Chairman at Strategy]

There's a pretty big difference between two and one. Massive difference. When you get to three, it's 67% spread, and that is two thirds of all the capital you raise is a gain generating yield for the shareholders, and that yield is what allows us to outperform. Why don't we go to the next slide? So you're asking the question probably, well, this is all well and fine.

[Michael Saylor, Executive Chairman at Strategy]

If I'm selling these fixed income instruments, I'm getting a higher yield. I'm generating a higher spread. But what's the risk? You know? You you've got an 8% coupon or dividend on strike.

[Michael Saylor, Executive Chairman at Strategy]

You've got a 10% dividend on strike. So we think about what is the hurdle rate that we have to overcome in order in order to avoid missing our numbers. Or in this case, if I report that we generated a % a % spread on strife, and we show you BTC gain equal to a hundred million dollars, well, under what circumstances would that not be true in a decade? And the answer is, as long as BTC, ARR, is north of 7.2%, then that gain holds. So in essence, the hurdle rate is 7.2% for strife.

[Michael Saylor, Executive Chairman at Strategy]

The hurdle rate for strike is 6.1%. The hurdle rate for the converts is 2%. And the hurdle rate for the equity, intuitively, this should not be surprising, is 0% As long as, Bitcoin is appreciating more than 0%, then there will have been a gain and a yield on an equity transaction. And so, you know, generally, most of our equity investors expect BTC to appreciate more than 7.2%. And as I said, the maximalist thinks 30%.

[Michael Saylor, Executive Chairman at Strategy]

So, generally, if you believe BTC is going up 10%, twenty %, thirty %, you know, most of the financing we're doing is comfortably above these hurdle rates, which means that when we say we generated a, you know, a BTC yield of some percentage or a BTC gain of something, I think you can be comfortable that it's a it's a reasonable metric for you to to take into account. Now let's think about breakevens. Under what circumstances would it be a mistake will to have done any these financings? Or another way to say it is, are there any circumstances under which we don't create shareholder value? I'm using a ten year time frame, and so I'm going to show you some numbers.

[Michael Saylor, Executive Chairman at Strategy]

If we sell equity at one times MNAV and the price of BTC is 95,000, the breakeven price is 95,000 in ten years, and the and the BTC ARR, or the breakeven rate, is 0%. That's kind of common sense. Now what if I sell it in MNAV of two? Well, the breakeven price drops to 47,000. Bitcoin could decrease 6% a year for a decade, and you would still be better off as a common stock shareholder with us having done that transaction.

[Michael Saylor, Executive Chairman at Strategy]

So in fact, when we're selling equity at MNABs of two, three, four, five, we're derisking the, the company. We're not increasing the risk. And so you can see here, I've got the breakeven prices and the breakeven rates for the equity for the converts. I've got it for strike. I've got it for strife.

[Michael Saylor, Executive Chairman at Strategy]

You know, common you know, it's it's kind of a bit of a surprise, but, you know, we sell, we sell a lot of strife. We attach a 10% dividend to it, but it turns out that even if Bitcoin goes up 0% a year, we're still breaking even over the ten years. So we're we're not actually taking, I think, as much risk as it might be perceived by a traditional investor who doesn't really think hard about what's going on here. Let me show you some pictures to make this easier. This is a breakeven price for equity over the ten years.

[Michael Saylor, Executive Chairman at Strategy]

And what you can see is that if you thought that Bitcoin was gonna go down to 65,000 a coin over ten years and you had a chance to sell it at two times MNAV, you should do it. Right? Whenever a a BTC treasury company, a BTC company is selling at two, three, four, five times MNAB, they're derisking the entire value proposition for their investors. They're not increasing risk at all. And you can see, if you get a chance to actually sell equity at five times MNAV, Bitcoin could crash to 20,000 a coin, and you would have created shareholder value having done it over a decade.

[Michael Saylor, Executive Chairman at Strategy]

Let's go to the next slide. This shows that same breakeven price for convertible notes. And as you can see, it's really it's a lot less risky than you might think it is. I mean, you're staring at the numbers. Bitcoin can literally go down, and you're you wouldn't have wanted to have done this.

[Michael Saylor, Executive Chairman at Strategy]

And and and this is on an isolated basis too. That is to say, we're just isolating this transaction. We're not considering the second and third order benefits of having raised billions of dollars of capital. If you raise extra capital, you get more liquidity. You might get more volatility.

[Michael Saylor, Executive Chairman at Strategy]

The will go up. People will come at you know, it'll increase the MSTR rate. It'll attract new capital, etcetera. So there's a lot of integrated benefits from this. But on an isolated basis, you know, there's there's the breakeven price.

[Michael Saylor, Executive Chairman at Strategy]

Let's go to the next. So you see with strike, the, breakeven price is a function of MNAV, and it's a a lot less correlated than the equity is. But you can see the higher the MNAV, the less risk there is. And and the truth is, you know, when you're doing a transaction like this, it's, you know, it's it's kind of beneficial to you under most circumstances. It derisks the balance sheet.

[Michael Saylor, Executive Chairman at Strategy]

Next. And, of course, Stripe. This is very simple. 85,000, 80 5 thousand. Right?

[Michael Saylor, Executive Chairman at Strategy]

Doesn't matter what the MNAV is. It doesn't and you can figure out that if you think that, BTC is going up in value, then probably this is a good idea. If it's going down, it's probably not a great idea. Let's go to the next. So now I'm gonna talk about, you know, the hundred billion dollar question, which is why does MSTR trade at a multiple to BTC NAV?

[Michael Saylor, Executive Chairman at Strategy]

And and, you know, there's a lot of misconceptions about this and people you know, you hear all sorts of things. People think it you know, they don't really understand why. And I think I'd like to share some of my observation as to why. First of all, MSTR, the security, has a compliance advantage over BTC, the commodity, or BTC spot ETFs for many investors. Many classes many investors, either they have their money locked up in funds where they're they're not allowed by the trustee or or the custodian to buy BTC.

[Michael Saylor, Executive Chairman at Strategy]

They, there are many wealth managers that won't let you buy the ETFs. There are countries, like in The UK, where there are examples where they would let you buy MSTR, but you couldn't buy BTC. There are places there are many, many brokers. They will let you buy MSTR. They won't let you buy the BTC spot ETF.

[Michael Saylor, Executive Chairman at Strategy]

So when the security has a compliance advantage, then there pools of capital that are going to buy it because their choice is to not get any BTC exposure or to do it through MSTR. That creates a premium to NAV. The second point, MSTR is a credit advantage to BTC. If I have an if I have a a security trading on the Nasdaq that's deeply liquid, I could borrow against it via margin loan. Maybe I get a SOFR plus a hundred basis point loan.

[Michael Saylor, Executive Chairman at Strategy]

That means that, you know, I have I have a lot of capital, and and now it's liquid. I can borrow against it from a big bank that I trust. I can't borrow at SOFR plus 100 basis points against BTC from my Morgan Stanley or JP Morgan or Bank of America or or fill in the name of a big bulge bracket bank. So I can't get margin loans on BTC at all. And in and in most cases, you can't get a margin loan against BTC spot ETFs.

[Michael Saylor, Executive Chairman at Strategy]

It's very, very hard to find people that will extend margin credit. So this this impacts the market in two ways. One, I could buy a bunch of MSTR and hold it forever and just live off of loans that I take against it while it appreciates. And and that's a nice strategy. The other way it impacts is if I had a portfolio with, you know, fill in the blank.

[Michael Saylor, Executive Chairman at Strategy]

If I had a hundred million dollars of equities, I could buy a million dollars of MSTR borrowing the money from my prime broker with no cash down. So people can buy and leverage into a company that has a credit advantage, and then they can borrow against it and margin it. And so you have to ask the question, if you live in a neighborhood and the houses on the left side of the street are eligible for Fannie Mae or Freddie Mac mortgages, and the houses on the right side of the street, you have to pay cash for and you can't put a mortgage on. All things being equal, if the two houses are identical on either side of the street, which house is gonna have the higher price? And I I don't think it's it's complicated to figure out that if I can borrow the money to buy the house on the left side of the street, I'll pay more for that house because there's no money down and there's 20% deposit.

[Michael Saylor, Executive Chairman at Strategy]

And if I have to come up with cash to buy the house on the right side of the street, I'm going to offer less as a cash buyer because it takes me twenty extra years of my life to come up with cash. I mean, it's not complicated. Right? It's it's financeable. And BTC is not really being financed.

[Michael Saylor, Executive Chairman at Strategy]

I don't know of any major bank in the world that'll finance BTC. And I and it's very, very difficult, you know, to to find anybody that'll finance BTC spot ETFs. So let's go to the third point. MSTR has a higher volatility than BTC. And we talked about it.

[Michael Saylor, Executive Chairman at Strategy]

You know, if if if Bitcoin is trading with a vol of 50, we'll often times be 80. If it's 60, we might be 90. That results in a higher MSTR rate than, say, the IBET rate. That means that you have a larger, deeper, richer options market. Why would I want to accept 60% when I could get a %?

[Michael Saylor, Executive Chairman at Strategy]

Right? I mean, it's it's it's very simple apples to apples thing. So the volatility drives the options market, drives the yields, attracts capital. The next point I'll make is that the options, they have a they have that higher simple annualized interest rate for those selling vol, and that makes it possible to create ETF instruments like MSTY and IMST. And and those ETFs, they basically are selling the ball of MSTR, and they have very, very high annualized dividend yields.

[Michael Saylor, Executive Chairman at Strategy]

So for a typical investor that wants to capture a hundred, a 50, two hundred percent dividend yield by selling the vol, they don't wanna it's difficult to trade in the options market, and so maybe they just buy MSTY or IMST. That makes it easier for investors to monetize that volatility. How popular is this? Well, MSTY today looked like it had 3.1 or $3,200,000,000 of AUM in it. And IMST has raised something like $40,000,000 of capital in a few weeks, a week or two weeks or something not that long.

[Michael Saylor, Executive Chairman at Strategy]

And so these are attracting capital flows. When they and they're they're attracting capital that wants to that wants to monetize that volatility, and they're part of our emerging ecosystem. And so why MSTR? Because we're the most liquid, we're the most volatile, we're the most durable, and we're the most credible place to get that. So our our equity is becoming volatile liquid collateral for traders, and that creates a demand for the equity that drives up the price of the equity as these as these instruments are delta hedged or as people buy the underlying equity so they can sell the covered calls.

[Michael Saylor, Executive Chairman at Strategy]

My next point I'll make is that our convertible bonds, they attract capital from a new class of arbitragers and hedge funds that otherwise they wouldn't buy BTC, And otherwise, they wouldn't buy BTC spot ETFs. So if you're unique, you've got a differentiator. And we're an operating company. We can issue convertible bonds. A spot ETF cannot.

[Michael Saylor, Executive Chairman at Strategy]

And there isn't any comparable type instrument on top of a BTC commodity. That takes me to my next point, which is BMAX, which is another ETF that was launched. It provides investors with a very convenient way to access MSTR converts. So most investors, if you're not QIB or one forty four a certified or compliant, you can't just buy the convertible bonds. They're over the counter traded.

[Michael Saylor, Executive Chairman at Strategy]

But but you could buy Bmax, and Bmax buys it's like 80% or something exposed to MSTR convertible bonds. So that's a unique characteristic of MSTR. Again, the uniqueness, the opportunity is a differentiator. MSTR, the security, is included in QQQ, MSCI, and crypto indices. And as we get built into all these ETFs, that drives passive capital flow.

[Michael Saylor, Executive Chairman at Strategy]

And so, you know, on a day when the Nasdaq one hundred is surging up 2%, there's a lot of capital, that's gonna go into the risk on trade. It's gonna go into QQQ that will find its way to us. That is an advantage over underlying BTC. The BTC ETFs and BTC itself, they're not in the Nasdaq index. And so if you're wondering, why would there be more demand for our stock?

[Michael Saylor, Executive Chairman at Strategy]

Because we're a security and because we do get index like this. The next point I'm making is that the MSTR brand is recognized worldwide. And so our brand recognition and our scale, they drive superior investor interest. It's very common, and it's very interesting to note. If you combine this with the next point, many investors, they're obligated to invest in securities or they're biased toward investing in securities because the history of commodities is not good.

[Michael Saylor, Executive Chairman at Strategy]

Right? The only commodity that you could ever invest in over the long term is gold, and gold is considered to be kind of a slow debt asset. So most investors, the great majority of their money is made investing in securities. So when I'm speaking at investor conferences and I'm telling everybody how great Bitcoin is, and I'm giving them a hundred reasons why Bitcoin is great, it's not uncommon that they say, well, I decided to buy your stock. I don't have to ask them.

[Michael Saylor, Executive Chairman at Strategy]

They they're like, well, I I get it. The Bitcoin is great, but my prime broker doesn't handle Bitcoin, And I just wanna buy the security. It's quick, easy. It's marginal. I can buy it in fifteen seconds.

[Michael Saylor, Executive Chairman at Strategy]

And people can't you know, it's like, why did Domino's Pizza get successful? Domino's Pizza was successful because people like pizza and because anywhere in the country, you could pick up the phone, call the operator, and say, give me Domino's and say, hey, send a pizza. And you know that there's a Domino's Pizza somewhere close to you. And it's like, I the brand is weaker for the next 100 pizza companies. Maybe their pizza's better, but I just don't know who's in the place I'm traveling to.

[Michael Saylor, Executive Chairman at Strategy]

So it's just like why do people buy Diet Coke? I go to a restaurant and I ask for some other kind of Coke. They don't have it. And then I ask for diet whatever, they don't have it, and I get frustrated. And after I get beat down because they don't have it, I think, I'm just gonna ask for Diet Coke because I know there's a 95% chance they're gonna have it.

[Michael Saylor, Executive Chairman at Strategy]

So you're an investor. You have a lot of money. You don't have a lot of attention span. You know, what is this Bitcoin thing? What's the stock I can buy?

[Michael Saylor, Executive Chairman at Strategy]

My you know, MicroStrategy or strategy, I see that on the screen. The brand does matter. It makes things easier. You know? It's I'm gonna buy the third best or the fourth best or the fifth best, I gotta research it.

[Michael Saylor, Executive Chairman at Strategy]

I don't you know, no one's heard of it before. There's a lot of impedance. And so with that, you see, the next point I'll make is that MSTR represents the strongest BTC exposure in the strongest capital market. A lot of people want to buy a stock in The United States on the NASDAQ or the New York Stock Exchange. They trust it.

[Michael Saylor, Executive Chairman at Strategy]

And if you're looking for BTC exposure, give me the biggest, and give me it in the safest place. It's very simple. The last three points I make on this NAV thing is that strike is a unique security. It's a lot more leverage than equity. It's a lot more leverage than a convertible bond.

[Michael Saylor, Executive Chairman at Strategy]

Again, as I pointed out, it's quite possible we'll sell you know, we could sell a lot of strike, billions and billions of dollars of it that's backed by a lot of equity, and the equity never the conversion rate never takes place because people don't choose to convert it to common equity. And so you're creating a lot of leverage when you finance with strike. And when you're you're acquiring a new class of investors that maybe would be afraid to invest in common equity because it's too much of a roller coaster. By the way, there are

[Michael Saylor, Executive Chairman at Strategy]

a lot of

[Michael Saylor, Executive Chairman at Strategy]

people that might like Bitcoin, and they're afraid to invest in a spot ETF because what they want is kinda like Bitcoin with guardrails and or Bitcoin with a downside insurance policy. And and strike looks more like something with guardrails, you know, than than just buying the straight spot ETF that gives you pure Bitcoin vol. Strife, another example of a unique fixed income security. It attracts new types of capital. It's a perpetual dividend.

[Michael Saylor, Executive Chairman at Strategy]

There's no one offering a 10% dividend at par forever. It's very uncommon to see that. I've I've never seen that in any other security. And and it's also you know, as as Andrew pointed out, these things are high performing, but they're very liquid. And the fact that they're high performing and liquid is a is an appeal to an investor, and they draw new capital.

[Michael Saylor, Executive Chairman at Strategy]

And as capital flows into strike and strive, that's extremely accretive and leveraging for the performance of the equity. If you study banks, you know, you notice the number one strategy of most banks in order to create leverage for the common stock is they issue preferred stock. It's a safe way to do it. It's mezzanine capital, mezzanine equity, if you will. And so, you know, you you could say we're doing something innovative, but we're also lifting a page from the book of conventional banking by putting in place this mezzanine capital structure.

[Michael Saylor, Executive Chairman at Strategy]

And if you would ask any bank, why do you do it? The answer is it's good for our common stock. It increases the yield, the dividend on the common stock without creating risk on the balance sheet. The last point I make here is that we have the potential to generate BTC yield in perpetuity via fixed income securities. You know, the MNAV could go to zero.

[Michael Saylor, Executive Chairman at Strategy]

We can still generate yield by selling strike, selling strife, selling other corporate bonds, selling any fixed income instrument. And and we also can scale up the sales of those things. In essence, if we're selling, you know, if we're selling something 10 x over collateralized by BTC, we can we can basically sell preferred instruments that are equal to 10% of the capital structure. And if Bitcoin goes up, we just keep scaling up the preferred instrument in the same way. So so this is this is an opportunity that it it isn't like it's one and done.

[Michael Saylor, Executive Chairman at Strategy]

It's like we could reasonably be doing this forever because there's always gonna be a demand for USD yield. And if you believe that BTC is gonna have the performance of the S and P index or more, then you will always be able to swap BTC yield for USD yield and capture a spread. And and if we can do that, then we can create, we can create performance which is superior to BTC, and we can maintain a multiple of NAV. I tend to think that, a very reasonable way to calculate the right BTC premium for the company would be, to take the expected BTC yield and multiply it by a multiple of 10 to 20. So if we can generate 25% BTC yield, then 10 times that would be a 250% premium to NAV, an MNAV of 3.5, if you will.

[Michael Saylor, Executive Chairman at Strategy]

And if if we can if you put a 20 multiple on it, you could get find your way to a 500% premium, to NAV. And, and so you look at all these things in their entirety, and then you take into account the rate at which we raise capital and the spread at which we raise the capital, then all of those things give you a sense of how we outperform Bitcoin and how we grow the NAV. Let's go to let's go to the next section. You know, one thing yeah. Let's go let's go to the next page.

[Michael Saylor, Executive Chairman at Strategy]

Sorry. Yeah. What's our strategy to maximize shareholder value? Well, continuously adjust the rate and the mix of our BTC treasury operations based on market conditions. We're gonna work the yield curve.

[Michael Saylor, Executive Chairman at Strategy]

When the yield curve is steep, we go to the far end of the yield curve, and we do fixed income. When the yield curve is flat, we work all sides of the yield curve. And, also, there's a function of how much demand is there in the market for every type of security we're selling. And then we're balancing near term capture of BTC yield and gain with long term BTC value creation. Yeah.

[Michael Saylor, Executive Chairman at Strategy]

I mean, I can maximize the yield and the gain this year, but I also got to look out over the next decade. And as you can you could see from my slides, 90% of the gain is gonna be over the ten year period that follows the transaction. So we're always balancing short term versus long term, just like Amazon did that for twenty years. The goal, you know, is to drive up the stock price, to drive MSTR to the max, and then and then to grow the company and reach its full potential. So we will support MNAV.

[Michael Saylor, Executive Chairman at Strategy]

Right? And our our we are seeking to drive it up over time. So when when you look at the MNAV and you're wondering, what are we thinking? Well, we're thinking we want it to go up, not down. We're we're never acting to hammer it down.

[Michael Saylor, Executive Chairman at Strategy]

When when the MNAB is expanding and when there's massive demand in the marketplace, then, of course, we're looking to sell and convert that into a BTC gain, a BTC yield, and BTC income and BTC value over time. So the best way, of course, for us to generate the to support the MNAV is maximize intelligent leverage with Strike, with Strife, and other fixed income instruments. We'll be educating the capital markets to build demand for every type of security we issue. So there's a lot of investor relations and education. We will work to attract capital, new forms of capital, by creating innovative securities for new classes of investors.

[Michael Saylor, Executive Chairman at Strategy]

Strife is, is a new type of security. Strike is a new type of security. We have other ideas for new types of securities, securities that would attract capital from global markets, attracting capital from Japan or Europe or Canada or other markets, and also attract capital from other classes of investors, different types of investors that want a different risk return ball profile and yield profile. And so we have some flexibility there. We're we're going to create and share credit metrics and models that can assist investors in valuing and assessing the risk of BTC collateralized credit instruments.

[Michael Saylor, Executive Chairman at Strategy]

And we're going to pursue credit ratings for our fixed income securities. So the credit side of this is really important because as you could see from my torque in my multiple calculations, the thing that will drive our, you know, drive our outperformance that allows us to achieve a 2X BTC return or get MNAVS of four, five, six, eight. If we want to drive that up, if we want to drive our performance up, if we want two times or three times the volatility of BTC over time, then we need to develop the credit markets. And I've thrown a lot of metrics at you, and I've talked about a lot of things. We have a lot of securities.

[Michael Saylor, Executive Chairman at Strategy]

But lest there be any confusion, MSTR, the common equity that is. That's the principal metric for shareholder value creation and company performance. So if you're asking what is winning, winning is maximizing the price of MSTR. Right? I mean, if I have a choice of driving the price up by a factor of 10 and having MNAV be three or having the price go up by a factor of two and have MNAV be six, I think that you would want me to drive the price up by a factor of 10, not a factor of two.

[Michael Saylor, Executive Chairman at Strategy]

So we're always thinking about the you know, what is going to maximize MSTR, shareholder value creation, and we're balancing every other metric against it. Now I've talked about BTC credit, and that's important to our strategy. So why don't we go into a bit more detail on that? Because I think that's also very important. I'm gonna share with you our BTC credit model and our credit analysis.

[Michael Saylor, Executive Chairman at Strategy]

So let's just start with a few important metrics. The BTC rating, that would be, the amount of collateral we have in BTC divided by the liability. So we have $10 of Bitcoin against a $1 liability. That would be a BTC rating of 10. And BTC risk is the probability of that liability, that debt instrument being undercollateralized by BTC at the end of its term.

[Michael Saylor, Executive Chairman at Strategy]

You know, I've got $10 of collateral. I got $1 bond or $1 of debt, and it's five years. In five years, am I still gonna have the $1 to cover the liability? That's the risk. BTC credit, that's the credit spread necessary to offset the risk for a given security.

[Michael Saylor, Executive Chairman at Strategy]

How much more credit spread? How much more yield do I need to be paid every year in order to offset that BTC risk that I'm thinking exist? And the BTC credit hurdle, that is the BTC ARR necessary to create an investment grade instrument. How bullish would you have to be on Bitcoin for you to look at this credit instrument and say, this should be investment grade? And our proxy for investment grade is a hundred basis point credit spread, just so you know.

[Michael Saylor, Executive Chairman at Strategy]

Now it turns out that that credit model is driven by some forecast assumptions. What do you expect the ARR to be? What do you expect the volatility to be over time? And so now I'm gonna show you how these play out, you know, in our capital structure. Let's go to the next slide.

[Michael Saylor, Executive Chairman at Strategy]

Here's BTC risk. Okay. What you can see is that if I actually ask the question, what is the risk of a 10 x over collateralized instrument? I have $10 of Bitcoin for every dollar I owe. If the volatility is 70, right, you'll see it 16 basis points.

[Michael Saylor, Executive Chairman at Strategy]

There's a point 16% probability you'll be under collateralized in a one year horizon. And, of course, if you've only got $2 of Bitcoin for every dollar of debt and you've got a 70 vol, there's a 26% BTC risk. So there's a zone, high volatility, low BTC rating, where you're looking like junk. And there's another zone where you're looking like investment grade. Now let's take this and apply this to capital structure.

[Michael Saylor, Executive Chairman at Strategy]

Can we change the slide? Okay. Sorry. This is this is a bit more elaborate BTC risk matrix. What this is showing you is how the risk builds up over time.

[Michael Saylor, Executive Chairman at Strategy]

And so if you have a five a BTC rating of five and you've got a five year bond, then that's and you've got a 50 vol, that says that you've got a 19% BTC risk, a 19% risk of being undercollateralized at the end of the five years. And you can see over ten years, you're looking at a 41% risk. So risk will increase with higher vol, risk will increase with higher duration, risk will increase with lower BTC rating. Let's go to the next slide. This is our existing capital structure.

[Michael Saylor, Executive Chairman at Strategy]

So I'm showing you eight fixed income instruments. Let's assume that you're a skeptic. You actually think that Bitcoin is not going up. Bitcoin is gonna trade 0% ARR for the next decade. So you're, you know, I'll I'll say skeptic because I think if you thought Bitcoin was going to zero tomorrow, you're not gonna buy any of these instruments.

[Michael Saylor, Executive Chairman at Strategy]

But but, hardcore skeptic thinks Bitcoin is not gonna perform like the S and P index. So if you actually calculate the BTC rating of these instruments, this is not hard. You can see the senior the senior credit instruments, the is the 28 convert. It's 52 times overcollateralized. The next one is 13 times overcollateralized.

[Michael Saylor, Executive Chairman at Strategy]

So now, what's the most junior fixed income instrument? It would be strike, which is 5.3 times over collateralized. So what you can see is now what is the BTC risk? Well, the duration of the converts is short. So the duration of the 28 note is 2.4.

[Michael Saylor, Executive Chairman at Strategy]

That means the risk is literally 0%. And the credit spread, the BTC credit you would have to have to to offset the risk is rounded down from one basis point, it's zero. So there is zero likelihood, a very, very small likelihood that we're not going to have a a billion dollars of Bitcoin collateral to pay this note off in two point four years. That makes intuitive sense. Right?

[Michael Saylor, Executive Chairman at Strategy]

You have to have a 98% drawdown on the Bitcoin. Now the question is, what's the market credit spread? Well, the market thinks that that's a 500 credit spread instrument. So the pricing of that is 500 credit spread market credit spread. The BTC credit rating is zero.

[Michael Saylor, Executive Chairman at Strategy]

That means the premium is 500 basis points. If we go to the 29 convert, what you can see is that the BTC credit calculation is 21 basis points. For the skeptic, the market credit spread is 975 basis points. Massive spread premium. If you go to the twenty thirty, you could you could take the 48 basis point BTC credit, compare it to the market credit spread of 1,075.

[Michael Saylor, Executive Chairman at Strategy]

So all down the line, what you see is for the converts. There are massive spread premiums. The market credit spreads are actually at the level of distressed debt. A junk bond index is like 380, four hundred basis points. This is double junk, triple junk.

[Michael Saylor, Executive Chairman at Strategy]

It's like the market thinks that the company is going to fail tomorrow, and it trades the credit like that. But in fact, even if you're a skeptic on Bitcoin, the BTC credit rating would be somewhere between twenty one and two hundred bps. Now you can see how you would rate the preferreds. They have a longer duration, ten, eleven years. You would come up with a credit rating of four seventy bps if you're a skeptic for strife and 514 for strike if you're a skeptic.

[Michael Saylor, Executive Chairman at Strategy]

There's still a substantial spread premium. Now if you're if you're a credit investor, you might very well take the spread premium and think, well, if I can close the spread premium, I multiply that by the effective duration of the instrument, that's how much the instrument could trade up. There's an opportunity there if these things get rated properly. Now let's look at this same capital structure if you're a Bitcoin maxi, a maximalist. When you if you think Bitcoin's going up 30% a year, look at the BTC risk.

[Michael Saylor, Executive Chairman at Strategy]

It's zero zero zero zero zero one percent one percent one percent. And then the BTC credit spread or credit rating, it looks like one BIP, two BIPs, eight BIPs, fourteen, thirteen, 13. So this has a profound impact on your view of the preferred stocks. Right? All of a sudden, the preferred stocks are looking like they're trading at a 600% spread premium because they're not that risky for a Bitcoin believer.

[Michael Saylor, Executive Chairman at Strategy]

They're just trading at a massive credit spread. You know, maybe even more so for the convertible bonds. Right? Now you're seeing thousand basis point spread premiums over what you might expect to be the risk. So this is, an interesting opportunity for, for all sorts of investors.

[Michael Saylor, Executive Chairman at Strategy]

Right? For equity investors, for fixed income investors, etcetera. Let's, take this a little bit further. Next slide. This shows you BTC credit values across various classes of investors.

[Michael Saylor, Executive Chairman at Strategy]

So you see, if you're a skeptic, you might think that the that the right BTC credit rating for the convert coming due 2032 is 238 basis points. But if you think the Bitcoin is gonna perform like the S and P index, it becomes a hundred basis points. If you're an investor and you think it's like a big tech stock, it becomes 40 basis points. If you're a maximalist, it becomes 14. So you can see the credit risk and your view of the credit is very much a function of your view of Bitcoin.

[Michael Saylor, Executive Chairman at Strategy]

And the differences with the preferred stocks are equally strong. I've got the market credit spread. And then on the right, I've got a fascinating metric. BTC credit hurdle. We're gonna make this very simple.

[Michael Saylor, Executive Chairman at Strategy]

Right? Which is how fast or how much does BTC have to go up in value each year over the next decade for this credit instrument to be deemed investment grade? Like, what's it take for it to have a a credit of less than a hundred basis points a year to offset the risk? And what you can see is for the for four of the six converts, Bitcoin could decrease, and it would still be investment grade, by our BTC credit standards. And you can see that the 31 to 32, they would require just BTC to go up 10% a year, and they should be investment grade.

[Michael Saylor, Executive Chairman at Strategy]

And you can see that if you believe Bitcoin's going up about 16% a year, then the preferreds are investment grade. And so it's very, very interesting way to see the world when you acknowledge that BTC is collateral. Let's go to the next slide. Here's, here's a nice graph. What you can see that as you move from skeptic to trader, all of these, these credit calculations, they fall below the junk grade threshold.

[Michael Saylor, Executive Chairman at Strategy]

Junk is 380 basis points right now. That's the index. And, of course, once you get to, like, investor class, they're all looking investor grade. Right? And so this is a view of BTC credit that you can use.

[Michael Saylor, Executive Chairman at Strategy]

Let's go to the next slide. Here, we calculated BTC credit across volatility. So Bitcoin is traded with a volatility between forty and eighty over the last five years. Recently, it's been in the 40 to 60 range. And so the real question is, at what point do these things not become investment grade if I'm a Bitcoin maximalist?

[Michael Saylor, Executive Chairman at Strategy]

Right? You could see, like, around 60%, sixty five vol. At what point do they become junk? Well, they almost don't become junk. Right?

[Michael Saylor, Executive Chairman at Strategy]

Next slide. The story is very different for the skeptic. Right? If you're a skeptic, you know, they they stop being investment grade, you know, when Bitcoin is more than 40 vol. And you can see they all, you know, cross junk around 50.

[Michael Saylor, Executive Chairman at Strategy]

So what what you expect for volatility matters and what you expect for BTCAR matters. But we think that that these credit models are elucidating, especially for bit for the crypto community and for the the world's full of fixed income investors that like Bitcoin. And so if you're a Bitcoin maximalist or you're a Bitcoin enthusiast, but you run a fixed income fund, a preferred stock fund, a convertible bond fund, or a hedge fund, this all of a sudden starts to really make a difference to your thinking. Shall we go to the next slide? Here's the traditional credit ratings, and we're not credit rated.

[Michael Saylor, Executive Chairman at Strategy]

So I mentioned, you know, one of our, one of our interest is to get credit rating agencies to cover and to start to rate this credit. But you can see if you thought the BTC credit was 50 to a hundred basis points, you could make a reasonable argument that this ought to be an AA rated instrument, or some of them could be AAA rated instruments. And, of course, what you can see right now is that the market treats them as less than CCC. They're just distressed debt. And so this is a massive opportunity.

[Michael Saylor, Executive Chairman at Strategy]

Next. There are two ways to see the world. I if you think about credit ratings, most credit ratings are are created for companies that borrowed money that they don't have. And so a company needs a billion dollars. They don't have the billion.

[Michael Saylor, Executive Chairman at Strategy]

They borrow a billion, and they promise to pay it back by creating a future expectation of cash flows. And they say, we're going to generate $250,000,000 of cash flow each year, EBITDA multiple's four. And so the credit rating agency is literally handicapping the future expectation of cash flows, and they're greenlighting the lending of money to a borrower that doesn't have the money. There's another way to see the world, which is a company on the Bitcoin standard. We already have the money.

[Michael Saylor, Executive Chairman at Strategy]

We have $50,000,000,000 of money we could liquidate tomorrow if we needed to, and we wanna borrow 10,000,000,000. And so if I have $5 for every dollar I wanna borrow, I've already got the money. So so the credit the credit risk analysis isn't really a question of evaluating whether or not you'll generate that money in the future. It's really just evaluating whether you're gonna lose the money you already have. And, and so there's a perverse irony here, which is that all of the credit instruments that MSTR has issued are overcollateralized by five to one or more.

[Michael Saylor, Executive Chairman at Strategy]

There isn't a single investment grade company in The United States that is overcollateralized by even three to one. That is to say, our company has better collateral, and and our our collateral position is stronger than any borrower that is that is rated by any credit agency in The United States. In fact, super investment grade might have two times or two to three times collateral coverage. But there's definitely a disruption coming in this market. There's a reason that all the borrowers don't have collateral.

[Michael Saylor, Executive Chairman at Strategy]

It's because either their treasury asset is is short dated sovereign debt. And, of course, the yield on short dated sovereign debt is much less than the cost of capital to borrow, so it makes no sense to hold that as collateral. Right? Or their treasury asset is Bitcoin, in which case it totally makes sense to hold as collateral. But unless you're on the Bitcoin standard, you won't have any collateral, and you can't tap the the credit markets being overcollateralized.

[Michael Saylor, Executive Chairman at Strategy]

So what we're really engaged in here is introducing the idea of BTC as collateral and collateral backed lending. The idea of loaning money to someone that has collateral makes all the sense of the world if you're loaning to an individual or you're loaning to an institution. But it and it happens all the time. If you're a JPMorgan or Citi and someone's got a large stock portfolio, you would loan to them based on that collateral. But it almost never happens with publicly traded companies because publicly traded companies don't hold security portfolios, and they don't hold them because of the because of securities laws that prevent them from capitalizing on securities.

[Michael Saylor, Executive Chairman at Strategy]

So we have, we are driving a new way to see the world. What happens if there's a bunch of public companies that have a bunch of collateral that's, appreciating faster than the cost of capital, and they want to borrow against it? In theory, it all ought to become investment grade if you're properly collateralized at the right vol and the right BTC rating. In practice, none of it is right now. This is a campaign of awareness that we'll be waging over time.

[Michael Saylor, Executive Chairman at Strategy]

Next slide. This is a great chart. You wonder about upside and downside. Well, when you buy our equity, you're getting 40% of the upside, 40% of the downside, 80% of the upside, 80% of the downside. It's just linear risk upside downside, and we've drawn that line.

[Michael Saylor, Executive Chairman at Strategy]

We've also calculated the delta and the downside of all of our convertible bonds and of strike. And what you can see right here is a lot of the converts, the 31, 30 two, 20 eight, and 30 a, they're high delta instruments. They're giving you 80 to a % of the upside of the MSTR common, but they're giving you less than that much downside. They're actually they're if you look at the twenty thirty convert to for a simple example, you're getting 75% of the upside and 15 15% of the downside. Right?

[Michael Saylor, Executive Chairman at Strategy]

If you look at the 29 convert, this is a fascinating one. It's about 60 delta. You're getting 60% of the upside, and it trades below par. No downside. Right?

[Michael Saylor, Executive Chairman at Strategy]

Unless the company defaults, you're gonna get paid par. So it's got negative downside. You're getting a guaranteed yield to maturity, and you're getting a 60 delta instrument. If you look at strike, strike is trading below par. So below the liquidation preference, below par, but with something like a 35 delta.

[Michael Saylor, Executive Chairman at Strategy]

So if you're an equity investor, these are all very compelling. You can construct a portfolio that's a % upside, 50% downside, or a % upside, 60% downside, or a % upside, 25% downside. They're very interesting opportunities. Right now, the market is very inefficient, and the pricing of these is very inefficient because the market doesn't recognize BTC credit. There are a number of reasons why I'll get to in a second.

[Michael Saylor, Executive Chairman at Strategy]

But I invite all of you to think about these instruments because they're opportunities. Next. So key takeaways of fixed income. The credit markets are grounded in traditional finance practices and metrics. Have not yet embraced BTC as collateral.

[Michael Saylor, Executive Chairman at Strategy]

They have not adopted real time risk management practices for BTC. You can calculate BTC risk, BTC credit every second, you know, as, the price of Bitcoin changes, as the BTC rating changes, as the volatility changes, you can update it every day as the duration of the credit instruments shrinks. Right? So their traditional credit ratings are issued by an analyst once a year, and they go stale, and they're opaque. And you can now create very transparent, crypto credit metrics.

[Michael Saylor, Executive Chairman at Strategy]

The market's not there yet, but it's this is an opportunity. The reason the credit instruments trade with such wide credit spreads is because the markets are traditional. Most most of our MSTR convert investors, they're arbitragers. They're not Bitcoin investors. They're not equity investors.

[Michael Saylor, Executive Chairman at Strategy]

They're not bond investors. Basically, they're buying a hundred million dollars of the bond, shorting $80,000,000 of the stock. And so they're not bringing a hundred million dollars of capital to the bond. They're bringing much less capital. That's one of the reasons, I believe, that the bonds are valued the way they are valued.

[Michael Saylor, Executive Chairman at Strategy]

If if we have long Bitcoin investors, long MSTR investors, or long fixed income investors or credit investors start to enter this space, then I think we're going to see those credit spreads and those spread premiums compress. The OTC market is one of the culprits. It's very inefficient. It's constrained. There are 144A regulations.

[Michael Saylor, Executive Chairman at Strategy]

And you have to be a qualified institutional buyer. And that means most retail and a lot of investors, they just they can't buy these, or it's a pain to buy them. And so that impairs the bond value. That impairs the liquidity as well. And that creates much wider credit spreads.

[Michael Saylor, Executive Chairman at Strategy]

Now, I've laid out these BTC models. And so I believe that there are strong reasons to treat MSTR fixed income securities as investment grade even though the market assigns credit spreads comparable to distressed debt. I think if you think about it, if people agree with me, if they agree with us and they like Bitcoin, they'll start view Bitcoin not as a speculative asset, but as a safe haven asset. And they'll start to view these instruments not as distressed debt, but as investment grade debt. And so as the perceptions of BTC evolve from speculative asset to safe haven, which is massive discussion in the community all the time, it's reasonable to expect major credit rating agencies to begin rating the MSTR credit instruments.

[Michael Saylor, Executive Chairman at Strategy]

Just like we expect banks to embrace Bitcoin, just like we expect insurance companies to embrace, just like the US government, the state, the local, the city governments are embracing Bitcoin, the credit rating industry is going to embrace Bitcoin. And it's just a question of when, which we can't be sure of. MSTR has the potential to issue investment grade fixed income securities, and we could emerge as the world's first investment grade Bitcoin treasury company. I I I think this is a great opportunity for us. I don't think it's appreciated.

[Michael Saylor, Executive Chairman at Strategy]

But what happens if we get an investment grade? What happens if we're able to get our our credit instruments rated, there will be new pools of capital. We'll be incorporated in new indexes. New classes of investors will be able to buy these things. That capital will flow into our securities, then into Bitcoin.

[Michael Saylor, Executive Chairman at Strategy]

It will be beneficial to BTC, to MSTR, to all of our fixed income and and credit securities, and it'll be beneficial to all the investors. Why? Because if you're an investor that appreciates the value of Bitcoin, then those securities we're selling will offer a superior yield and better performance. I think we showed you our convertible bonds are outperforming the other converts. They're outperforming the junk bonds.

[Michael Saylor, Executive Chairman at Strategy]

They're outperforming investment grade bonds. They're up our preferreds are outperforming other preferreds. Mhmm. It's it's not complicated. If you pay higher yield or give higher performance and if you can and if you can show people that you have comparable credit risk or lower credit risk, then you're gonna create demand for capital.

[Michael Saylor, Executive Chairman at Strategy]

Right? So if you believe in Bitcoin, if you're a Bitcoin maxi, then those those securities do offer superior yield and superior performance. And and they do offer substantially lower credit risk in your point of view because you believe Bitcoin is good collateral. And so that's an interest it's a very important message. It's important opportunity for us.

[Michael Saylor, Executive Chairman at Strategy]

So on the next slide. I've taken up a lot of your time today. I appreciate it. I appreciate all of your attention. And I'm pretty much nearing the end here.

[Michael Saylor, Executive Chairman at Strategy]

And I'll I'll end with a call to action for all of you and for every every interested, investor, potential investor, anyone that's interested in Bitcoin or MSTR, or if you simply, you know, are interested investor in in making the right decision. What would I suggest? I think our investors should contact Moody's, S and P, and Fitch. If you own our equity, if you own our debt, if you own our preferreds, you should call these credit rating agencies or any other credit rating agency, talk to your representative, and request that they begin to cover and rate these instruments. Everybody will benefit.

[Michael Saylor, Executive Chairman at Strategy]

When I say everybody, I mean the entire 400,000,000 people that like crypto, everyone that owns Bitcoin, everyone that owns MSTR, all 55,000,000 of our beneficiaries, everyone that owns the debt, the credit rating agencies will benefit. Right? The fixed income investors will benefit, and the world will benefit. Right? This is just a good thing for the world.

[Michael Saylor, Executive Chairman at Strategy]

It's inevitable that the credit rating industry should embrace Bitcoin and embrace this this kind of this kind of lending. If you're an equity investor, I would suggest you consider take a hard look at the MSTR convertible bonds and strike. A lot of it a lot of investors just have dismissed them out of hand because they're like, well, I just don't buy that. Or maybe they couldn't because it's over the counter, or maybe it's new or different, or they're just busy. But, you know, if you're going to buy equity with a % of the upside and a % of the downside, it makes sense that you should consider an instrument that might give you 60% of the upside and 10% or 0% or 5% of the downside.

[Michael Saylor, Executive Chairman at Strategy]

Right? There you know, if you deem yourself to be smart in portfolio construction, there's a lot of very interesting portfolios that can be constructed when the market miss prices risk and miss prices exposure. And and I think the equity investors could benefit from this because, in my opinion, the fixed income instruments are undervalued relative to the equity right now. If you're a fixed income investor, you know, you're a preferred stock or a corporate bond investor or a convert investor, I would say you should reconsider the you know, these instruments. You know, think about them again.

[Michael Saylor, Executive Chairman at Strategy]

Think about them in, you know, along the lines of the BTC credit, the BTC risk we've laid out. Build your own models. One of our objectives is over time, we will go ahead and publish our BTC model to the world. We'll open source it. We'll make these things available.

[Michael Saylor, Executive Chairman at Strategy]

But but, the math here is not complicated. You could pretty much do a similar type of math that I've showed you using ChatGPT in deep research mode if you want to. Anybody with a Bloomberg can do it. Any any qualified quant can do it. I would encourage you to do it and think about how you feel about these things.

[Michael Saylor, Executive Chairman at Strategy]

Because in my opinion, the actual credit spreads represent a substantial premium, to the to the BTC credit rating. And I think the BTC credit ratings are are a valid way to see the world and to see the risk. If you're a retail or non QIB investor, while you're locked out of the convert market because of $1.44 a restrictions, I think you should consider BMAX. BMAX is a very innovative ETF that gives that's constructed to provide or provide convert exposure to investors that aren't able or unwilling to buy the underlying convert. So look at instruments like that because because I think the convertible bonds, especially the short duration convertible bonds, again, they're treated like distressed debt, but they've got very high deltas.

[Michael Saylor, Executive Chairman at Strategy]

And then my ask of all all investors, every every MSTR watcher, every Bitcoiner is educate your peers on the opportunities presented by Bitcoin. Talk about Bitcoin, and then talk to them about BTC equity and BTC credit. They're sophisticated subjects, as you can tell by by this elaborate mini tutorial I've given you. Most people don't understand them, but it's in your interest to educate other investors and the benefit of Bitcoin. It's in your interest to explain the nuances in the MSTR equity opportunity.

[Michael Saylor, Executive Chairman at Strategy]

And if you're holding our convertible bonds, if you're, you know, if you're holding these preferreds, you know, and you talk to someone that actually makes investment in fixed income, if you introduce in this opportunity, it's good for them. It's good for Bitcoin. It's good for the world. It's good for you. It's good for the common stock.

[Michael Saylor, Executive Chairman at Strategy]

There there are no losers, so we're basically in education mode here. Let me these these aren't my opinions. I will note that. You can form your own opinions, but but I think there is plenty of reason to think that they're reasonable opinions. Shall we go to the last slide?

[Michael Saylor, Executive Chairman at Strategy]

I just wanna end with our principles. The we presented these October 30, last year, and, they're just as valid today. Just remind everybody, our plan is buy and hold BTC indefinitely, prioritize the MSTR common stock, treat all investors with respect, consistency, and transparency, structure our company to outperform BTC. We're working to create more vol, more leverage than BTC, keep acquiring Bitcoin, generate positive BTC yield, do this as rapidly and responsibly as we can, subject to market dynamics. And they literally change every day.

[Michael Saylor, Executive Chairman at Strategy]

You know that. We will issue innovative securities backed by BTC from time to time if we think there's a market need for them. We'll think hard about it before we do it. When we do things, we try to make sure they're not just accretive, but they're also structurally, you know, responsible and durable and scalable. We're gonna protect the balance sheet.

[Michael Saylor, Executive Chairman at Strategy]

We want a pristine balance sheet. And, and finally, we're gonna promote global adoption of BTC as a treasury reserve asset. So with that, I wanna thank you for your time. I really do appreciate it. I know this went long, but, hopefully, we gave you a lot of food for thought.

[Michael Saylor, Executive Chairman at Strategy]

For many of you, I'm looking forward to seeing you in Orlando next week. We're gonna we're gonna go into deeper details, and I'm sure that there'll be a lot of questions. And we're gonna answer a lot of questions, and we're gonna have a lot of other Bitcoin treasury companies there. And and we will continue with strategy to educate the market and build a very healthy BTC ecosystem for everyone involved. So thank you for your support, and wishing you the best.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

Thank you, Michael, for the very insightful, session today. I know we went a, you know, very low a lot over the original one hour mark, but we'll take three quick questions here, and, I'll begin with the first one for Andrew. So now that you have adopted the fair value accounting, how do you feel about the big swings in earnings as a result of the Bitcoin price volatility?

[Andrew Kang, Executive VP & CFO at Strategy]

Sure. Thanks, Suresh. I guess, first off, the fair value accounting, even with the swings, is far more transparent for our investors and more accurately reflects, the true value of our Bitcoin holdings versus the previous accounting rules. So certainly a win for us and other companies adopting Bitcoin. The old accounting was in many ways a barrier, I feel like.

[Andrew Kang, Executive VP & CFO at Strategy]

But with that hurdle gone, we should continue to see a steady stream of new corporate adopters of Bitcoin as a treasury asset. So the transparency, I think, is is vitally important. So how do we feel about the swings? We, of course, like the positive swings more than the negative swings, but the reality is that Bitcoin is volatile. So I think, you know, overall, I think we're unfazed by the downswings and believe over time, there will be more upswings.

[Andrew Kang, Executive VP & CFO at Strategy]

As I noted earlier, my 95 k Bitcoin price example would reflect a $6,700,000,000 gain. Right now, Bitcoin is trading closer to $96.05. So today, we're the end of the quarter, and that were the price for our that were the price at the end of the quarter, our unrealized gain would be closer to something like $7,600,000,000 in gain in a single quarter. So I think in the long term, you know, we all believe that coin price is gonna go up. And over that same long term, our reported gains will reflect that same trend in our overall earnings.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

Great. Thanks, Andrew. The next one is for Michael. What are your thoughts on the recent MSTR playbook adoptions from other companies, and how does the company plan to sustain its leading role?

[Michael Saylor, Executive Chairman at Strategy]

You know, I think it's a very virtuous cycle, and it's a it's a mutually beneficial competition. The more companies that adopt the Bitcoin standard, the more legitimizing it it is. As more companies adopt the Bitcoin standard, they're out there educating equity investors, and that brings more equity capital to the market. As they they start to issue credit instruments, they will educate fixed income investors and credit investors. That brings new capital to the market.

[Michael Saylor, Executive Chairman at Strategy]

There's only $4.50 Bitcoin a day. And so as we're all buying that Bitcoin, the price of Bitcoin is stabilized, supported, and then driven up. And, you know, 99.9% of the capital in the world is invested in the traditional fiat physical financial economy. Just we're just at 1% or point 1%. And if it grows from point 1% to 1%, then the advantages of accelerating institutional adoption, are profound, and they offset any any possible competition for capital.

[Michael Saylor, Executive Chairman at Strategy]

I also think, you know, each capital market needs its own, set of BTC companies. In France, you need a local French company. You need a local company in Brazil. You need a local company in Japan. You need yeah.

[Michael Saylor, Executive Chairman at Strategy]

Yeah. The US market could can absorb dozens and dozens of companies because there are so many ways to differentiate. And every company is gonna have its own, its own approach. And, of course, a lot of investors, you know, they they say one, you know, one, incident or one data point is just a a random point. And two two, you know, is a line maybe, but three is a trend.

[Michael Saylor, Executive Chairman at Strategy]

Right? And so when you get to the point when there's three, four, five, six companies, a lot of a lot of investors will be more comfortable investing in the space because they're going to wanna limit their exposure to anyone to a certain risk responsibility in their portfolio. But they're gonna look for the next one, the next one. So I think I think the more companies that join, the better it is for Bitcoin, the better it is for the companies in the space. And they're really going to ex accelerate the transition to the Bitcoin standard such that the companies that don't join will find themselves pressured to join over time.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

Great. And the last one here for form. Can you please update us on the pace of capital raises under the $42.42 plan and how you're thinking about striking the right balance between equity capital and the fixed income capital going forward? And how do you think about the impact of dilution from another 21,000,000,000 equity?

[Phong Le, President & CEO at Strategy]

Well, I'll start with that. I think that's the that that's the big question that we spent the last two hours addressing. Right? And, yeah, we have conviction in our capital raises and adding to our capital plan, and we talked about that. But but, you know, we you have to start with why did we lay out a BTC financial framework because the existing fiat financial framework doesn't work for BTC.

[Phong Le, President & CEO at Strategy]

Right? So dilution, our BTC KPIs say we look at things on a BTC yield, BTC per share, BTC gain basis. And I think you saw in Mike's presentation, every single capital raise we've done via our ATM, if you look at our Strategy.com website, has been accretive on a BTC yield and a BTC per share and a BTC gain basis. And so, if we issue ATM or equity at greater than one times MNAV, all other things being equal, that's accretive, and it's not dilutive to shareholders. That said, if you look at our fixed income instruments, those are even more accretive.

[Phong Le, President & CEO at Strategy]

You look at BTC yield, all else being equal, but we need that fixed income, market to become more mature and more efficient. As MNAV rises, the yield curve starts to flatten, and issuing equity starts to look more and more like issuing fixed income. And fixed income instruments do require more BTCARR to get positive income. But I think I think the the ask and and and for all of us who are interested in Bitcoin is we need to develop and make that market for fixed income more efficient, and that's an opportunity for strategy, and that's an opportunity for Bitcoin. It's not a lot of loss on us that we've pushed the ATM more heavily than we've pushed fixed income, but the market for fixed income is actually larger if it's in the market for equity.

[Phong Le, President & CEO at Strategy]

So it it it's it's incumbent upon us, Bitcoin folks, to make the fixed income market become more efficient. We're gonna work on that. And as that happens, we're gonna continue to issue equity, issue debt, and we're gonna do it in a way that's accretive to our shareholders. So I think it'll you know, the more everyone processes the last couple of hours, they'll start to understand the BTC financial framework, and they'll understand how we at Strategy think about, what we're doing, to raise capital.

[Shirish Jajodia, Head - IR & Treasury at Strategy]

Excellent. I think that brings us to the end of this webinar. So, any final remarks from Gong?

[Phong Le, President & CEO at Strategy]

Yeah. I I I wanna, share with Mike and Andrew Thanks for everybody for sitting through and understanding more about how we think about Bitcoin and think about strategy over the last two, hours and ten minutes. We appreciate all of your support. For those who will be in Orlando next week, very excited to meet and interact with all of you.

[Phong Le, President & CEO at Strategy]

For those who won't, we'll talk to you again, in, twelve weeks or so. Thanks, and have a good evening.

Participants

Executives

• Shirish Jajodia, Head - IR & Treasury
• Phong Le, President & CEO
• Andrew Kang, Executive VP & CFO
• Michael Saylor, Executive Chairman