Strategy countdown to collapse? Preferred stock interest leads to financial crisis? Unfortunately, that is wrong!

To begin with, through detailed data calculations, I found that even with an increased interest expense of 3%, Strategy can still support itself almost risk-free for four years.

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After seeing my friend @Airdrop_Guard discuss the possibility of Strategy collapsing, overall the writing was quite serious, and the data statistics were fairly accurate. Indeed, there are only 1.1 billion dollars on Strategy's books, but in fact, there are not four preferred stocks but five. My friend underestimated the Euro preferred stock $STRE.

According to what my friend said, the interest to be paid on these five is 1.711 billion dollars, which can only cover about 235 days based on the current dollar deposits, or approximately 7.7 months. This data is completely correct.

So, why do I say the data is correct but the conclusion is incorrect?

The key point is that my friend overlooked a very important fact: the main source of interest payments for Strategy comes from ATM, not cash reserves or selling bitcoin:native. This is crucial, and do you know how much Strategy can ATM currently?

The answer is close to 51 billion dollars! Among them:

$MSTR remaining ATM quota 25.74 billion dollars

$STRC remaining ATM quota 17.51 billion dollars

$STRD remaining ATM quota 4 billion dollars

$STRK remaining ATM quota 2.1 billion dollars

$STRF remaining ATM quota 1.62 billion dollars

Now comes the interesting part. If we simply add up all the remaining 51 billion dollars in ATM quotas, then Strategy can support itself for about 30.4 years.

(This does not account for the 1.1 billion dollars in cash on hand)

Of course, the reference significance of 30.4 years is very low because once preferred stock ATM is issued, new dividend obligations will ensue. Common stock ATM has no fixed dividend, making it the cleanest form of financing. Preferred stock ATM essentially trades new fixed-income securities for cash, which will continue to raise future cash expenditures.

Thus, if the remaining preferred stock ATM is fully issued and dividends are roughly calculated, STRC is 14.5%, STRF is 13%, STRD is 13%, STRK is 11%, and STRE is 13%. After issuing all five remaining preferred stocks' ATM, the new annual preferred stock dividends will be about 3.5 billion dollars.

The current annualized dividend and debt interest payment pressure for Strategy will increase from 1.711 billion dollars to about 2.18 billion dollars. So the total annualized payment will be approximately 5.68 billion dollars.

Therefore, if we calculate a bit more rigorously, if we use up all of Strategy's ATMs, we can cover the interest of the five preferred stocks for about 9 years.

Of course, since we are calculating, we should be a bit more rigorous. We cannot just consider debt interest; we also need to consider the maturity repayment of Strategy's debt principal. It is important to distinguish that the 1.711 billion dollars already includes debt interest but does not include debt principal. This means that the debt interest is already included in the annualized payment pressure and cannot be counted again. What has not been accounted for is future convertible bonds maturing, repurchases, redemptions, or repayment of principal when conversion is not possible.

According to Strategy's latest disclosure, after completing the 1.5 billion dollars buyback of 2029 convertible bonds, Strategy's convertible bond principal has decreased from 8.2 billion dollars to around 6.7 billion dollars.

Adding to what was mentioned earlier about the dividend increase test, the final annual payment pressure will be around 5.68 billion dollars. Using the 45.39 billion dollars left after debt principal to cover 5.68 billion dollars, the coverage time will be approximately 8 years.

It must be emphasized that this does not mean that Strategy can last for 8 years, nor does it mean that problems will definitely arise after 8 years. This is because debt principal does not expire all at once today; many convertible bonds still have conversion, repurchase, refinancing, or resolution through common stock ATMs. As long as the $MSTR common stock ATM can continue to sell, Strategy's cash pressure is manageable.

Wait a minute, actually, 8 years is not complete yet, because the funds from Strategy's ATM are not only used for debt repayment and cash reserves but also need to purchase Bitcoin spot. Based on the current half used for reserves or paying interest and half used for purchasing bitcoin:native spot, the actual support time is 4 years.

(A rough calculation, the actual is probably around 3.7 years)

In short, as long as the $MSTR common stock ATM can still sell, Strategy still has relatively comfortable money to use because selling common stock will not create fixed interest pressure.

If the common stock ATM does not sell, it can only continue to sell the preferred stock ATM, which does not mean it will lead to immediate issues because preferred stock ATM can still convert to cash. The problem lies in that this cash is getting more expensive; for every additional preferred stock sold, the dividends to be paid annually will continue to increase.

The real danger is if the common stock ATM cannot sell, and neither can the preferred stock ATM, while convertible bonds cannot be refinanced. At that moment, Strategy will truly face dual pressures, needing to repay debt principal while also continuing to pay preferred stock dividends.

In summary, as long as Bitcoin does not crash (small declines are not a problem), based on the current situation, Strategy can support itself for another 4 years, which means until 2030, it is basically not a problem.

(And it will continue to buy nearly 22.6 billion dollars' worth of Bitcoin)

Ending.

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