At the conference this week, a lot of the discussion was about Strategy’s preferred stock, STRC. The product targets a $100 par and pays a discretionary dividend monthly, likely soon to be twice a month, currently yielding 11.5%. The vehicle has been used to raise amazing amounts of capital recently, all of which is used to acquire more bitcoin. In order to be confident that STRC is going to pay the dividend, you essentially have to believe that bitcoin is going to outgrow the 11.5% dividend obligation. If you believe that, then you are already bullish bitcoin, and could run the STRC trade yourself. What I find interesting is how many people seem to be bullish bitcoin, holding STRC, not understanding that they are giving away the upside return by not running the trade themselves. What I mean by “running the trade” is, instead of buying STRC, buying bitcoin, and then peeling off 11.5% annually by selling a small portion. That way, if the trade works and bitcoin outgrows the obligation, then you keep the upside. If you don’t think that trade will work, why would you hold STRC? If you do, then why not do it yourself?
There’s an argument that the buyers of STRC can’t run that trade themselves, for one reason or another. I suppose that makes sense, until their rules change and they can…