Micro Strategy launches new chess: preferred stock STRD appears, but the community doesn’t buy it?

Author: Fairy, ChainCatcher

Edited by: TB, ChainCatcher

Strategy has come up with a new move.

In order to continue to increase Bitcoin positions, MicroStrategies has frequently "made blood" in recent years, from common stocks, convertible bonds to preferred stocks, three ways have been made, and financing has been continuously carried out.

The bull market has not yet ended, and the chips have doubled. Yesterday, Strategy announced the launch of its new preferred stock product STRD, which is another bargaining chip on its Bitcoin heavy holding path. How is this "new card" different? What signals does its structural design, potential risks and market game release?

STRD: High interest rate, but no guarantee of receipt

STRD is the third preferred stock product launched by Strategy, and plans to issue 2.5 million shares publicly. The funds raised will be mainly used for Bitcoin acquisitions and working capital supplements. STRD is essentially another structured expression of BTC long strategy, continuing the framework of STRK and STRF, and making new designs on the profit distribution and exit mechanisms.

Similar to the previous work, the underlying asset behind STRD is still Bitcoin, but this time Strategy adopts a more "defensive offensive" structure: the annualized coupon is 10%, but it does not have the obligation to pay for compulsory payments, and the interest is not accumulated.

Encryption KOL Phyrex interpreted it as one sentence: "The essence of STRD is to lend money to Strategy with 10% annual interest financing, but Strategy may not distribute 10% annual interest as promised. If it is not issued, it will not be reissued in the future. In the explanation, Strategy promised to pay it on time, provided that the company's profits are improving."

As for where this interest comes from, Strategy theoretically has three possible payment paths:

• Selling BTC positions: If Strategy monetizes part of its holdings, it will obtain cash flow, but this will face capital gains tax and is contrary to its long-term holding strategy.
• Continuous financing rolling: It is possible to raise interest by reissuing debt or other tools, perhaps Strategy's current preference.
• Business cash flow: If the company's other businesses are profitable, it may also be used to pay interest.

While Strategy has the right to not pay interest, the cost of doing so will be extremely heavy. Once interest rate is issued, the market price of STRD will inevitably be under pressure, investor confidence will be frustrated, and refinancing will face greater resistance in the future. Therefore, the market generally believes that as long as the Bitcoin market performs stably, Strategy will most likely choose to fulfill its contracts on time to maintain its market reputation and the sustainability of its capital chain.

****" Three Swords at the same time": Strategy's multi-level preferred

stock****

After talking about the features of STRD, you might as well look back at Strategy's current three preferred stock products. STRK, STRF and STRD have their own positioning in liquidation ranking, income design, and risk structure, forming the key puzzle of Strategy's multi-layer capital structure. Here are three product comparison tables compiled by Juan Leon, senior investment strategist at Bitwise (the table content is translated by ChainCatcher):

From the perspective of investor adaptation, STRK is more in line with the conservative allocation needs that pursue stable returns and have a low risk appetite; STRF is aimed at neutral investors who expect to lock in higher fixed returns but can accept certain credit risks; STRD focuses on offensive funds with high risk tolerance.

In addition to product-level extension, STRD's launch may also be a hike from Strategy to the capital structure chassis. According to the chart shared by community member @DogCandles, STRD has “low status” but “major role”, and optimizes the overall capital structure by improving the credit support of upper-level products.

The community doesn 't buy it, STRD has a lot of controversy

The release of STRD is a carefully designed move by Strategy, but the community is not consistently applauding. Many voices point directly to their "capital magic":

• @chaojidigua: Jiang Taigong is fishing, and the wishes are taken to the bait.
• @MemeSiguoyi: Although the currency circle can print money in air coins, our stocks also have their own method of printing money in voids.
• @Softelectrock: Ponzi doll.

"Bitcoin Age" author Adam Livingston pointed out directly: STRD is essentially a BTC plagiarizing it as a revenue tool to increase its holdings of options . When BTC rises sharply, Strategy redeems at face value; when BTC falls sharply, it will not issue interest rates directly. Investors are actually paying for his belief in "Bitcoin Ultimate Adoption".

Dylan LeClair, director of Bitcoin strategy at Metaplanet, called his "genius design" from a structural perspective: "The issuance of STRD actually improved the credit quality of STRF."

Regarding Strategy's future development path, Crypto KOL Phyrex gave a bolder prediction: "It is possible that Strategy will make some plans to stock Bitcoin, such as lending BTC, and participating in some quantitative transactions to maintain cash flow. Strategy may become a BTC-based bank in the future."

Strategy's chips have been pushed to the center of the table. Use structured products to wrap up faith, use risk-return models to cover up unilateral bets, and use "high interest rates" to attract market sentiment.

This financial experiment based on faith is becoming more and more complex and worthy of attention.