Investors are starved for yield obviously with things that are happening in the markets today. We wanted to break it down with none other than Strategy and their CEO. So, we'll get into all of that here in a moment. Before we bring on the guest, I want to kind of open up where the industry is heading because if you look at the growth of what we've seen here recently, size has rapidly grown to almost 6.4 billion. Looking at some charts here specifically from Strategy around some of the assets that they have been putting out into the market, Stretch of course is the one we're going to be talking about today. So I want to have the President and Chief Executive Officer Phong Le coming in from Strategy. Phong Le, how are you?
I'm doing great. Thanks Paul for having me.
Pretty accelerated in terms of growth. Why do you think we're seeing the growth we are right now in your products? You know, Stretch specifically now is up to $8.5 billion in notional.
Last week alone, we issued $2.2 billion, which was the largest issuance any week we've had. And look, I think people are interested in the product because they want access to the asymmetric risk return that Bitcoin provides. They don't want the volatility. And we're in a yield-starved environment right now, right? Anything where you can get 11, 12% paid monthly, 5x, 4x over-collateralized, that's something people are interested in right now.
So I'm showing the Stretch effective yield compared to traditional credit. This comes from a deck you guys have published. Pretty hard to go against this. Sometimes when I see charts like this I wonder, is this too good to be true? Surely that is a question that is asked to you guys. Explain the product for us, explain how it works, what makes it so efficient.
Yeah. Well, I'll start with it's a perpetual preferred. You know, a preferred equity is listed on the NASDAQ or NIC, and this happens to be perpetual, which means that there is no maturity. You know, normal preferred has a three or five-year maturity. So one is it behaves and looks like an equity but it pays a dividend. The dividend we pay is 11.5%. We pay that monthly. We have a proposal now to pay it actually semi-monthly, so twice a month. And it's also paid in cash, tax-deferred. That's the product. How do we get to 11.5%? When somebody buys Stretch, we immediately turn around and we buy Bitcoin. And because we're the largest holder of Bitcoin in the world now, over 820,000 Bitcoin, we have a large Bitcoin balance sheet. We're very adept at buying Bitcoin. We believe that Bitcoin should go up 30% a year. And we're effectively taking that spread in between. I call it 18 and 11.5%. We're paying out 11.5% to the end customer. And we take the risk of Bitcoin volatility, call it 40% V. We strip that away and we give to the end customer a 2% V. That's effectively the product.
Interesting. Okay. So, if you look at the potential risk factors, if there are some, what metrics should a holder pay attention to?
I would say there's two things. What is our total Bitcoin base, which is about $60 billion, right? As compared to the amount of Stretch outstanding, and in this particular case is $8.5 billion. That is effectively our amplification, right? And then what leverage do we have? What additional leverage we have? Well, we have about $6 billion in that leverage. So call that simply $16 billion of amplification on $60 billion, right? So 25, 30%. That's what someone should care about, right? If we get to the point where we have $60 billion of Bitcoin and $60 billion of Stretch outstanding, $6 billion of net leverage or $66 billion of net debt, that becomes a problem. So that's piece one that someone should care about. And then piece two, what's Bitcoin price, right? Because this does rely on the long term that Bitcoin price is going up. And I tell folks, I talk to Bitcoin bulls, but I also talk to Bitcoin bears. If somebody thinks Bitcoin is going to go down 90% and sit there for five years, that could be an issue also.
So, you look at volatility because that's one of the things that I know some of the people who follow our channel in reference to these kinds of assets look for entry points. So, I'm showing your liquidity here right now. Is this essentially the best time to grab it? Is when it starts to dip into these valleys.
It depends on what you are. If you're a buy-and-hold person and look, if someone's looking to get the yield, right, over the long run, I would buy at any point in time because the price basically sits around $100. Now, it's $99.50. So, you might say, okay, I got a 50-cent gain there. If I buy at $99.50, go up to $100. But put that aside. If you're looking for 11, 12% yield paid monthly, you could enter at any point, right? And actually you're incentivized not to sell the product because it's a return of capital tax treatment, which means that as long as you don't sell the underlying, this is tax-deferred for the next 10 years. Now what you see here, there's an interesting movement amongst traders, right? If you're a trader, what do you want to do with one record date a month, right? And that's the 15th of every month. You want to buy the product on the 14th. And then you want to sell it on the 15th, hold it for one day, get paid 11.5%. And then for the rest of the days, whatever, put it back into a T-bill or something like that. Right? So that's the dynamic you see right here, which is why we're proposed in two record days. But look, if somebody wants to do that, that's fine, too. But if you're a typical yield-starved investor and you just want yield over the long term, I would just buy it and hold it.
So, you look at the potential for the semi-annual proposal. How much would this fix the volatility if you go that route?
Mathematically, right? And you know there's the difference between math and actual what people do in sentiment. And by the way, this is semi-monthly. So twice a month. So for once a month, twice a month, it should drop the volatility by about 50%. Right. It's already a low volatility product sitting around two to three right now.
You think that that in general is going to be good for the overall performance. It's going to give some more options to long-term investors as well as the short-term, you know, traders so to speak. Beyond that because I think there was one more sheet I wanted to show. So this is going to be the only equity right now with semi-monthly dividends. Is that right?
Yeah, it's pretty cool. You know, you see here in the universe of equities and before that in the universe of preferred, the vast majority, 95%, are paid quarterly. Right. Ours pays monthly. And when, if the shareholders approve this, when we move to semi-monthly, it'll be the only preferred-paying equity or dividend-paying equity in the world that is paid semi-monthly. Now what are we competing with out in the world, right? In the traditional finance markets, we're competing with other preferred and other equities you saw those there that pay dividends. You could argue, although we are not a money market or a savings account, we're competing with people trying to get yield on short-term money, right? Call it six months money, one year, two-year money. And so we're competing with that. You could also argue that over time as stablecoins become more prevalent and as people are able to make yield off stablecoins, which is a big topic for discussion and debate right now, that we would potentially compete with yield-bearing stablecoins also. Right, that's sort of one category of short-term money that we compete with. Then the other category is long-duration money that earns 10, 11, 12%. Right. A good example might be private credit. Right. And in that case, you get your money locked up for four or five years, but you're able to get potentially high dividend. You pay high fees. What we've brought is the best of both worlds. High yields, tax deferral, plus short duration, right? The ability to get in and out quickly and low volatility. And you mentioned the innovation. Like that's sort of a sweet spot that hasn't been met before and I think it'd be hard to meet again.
We just did a video on banks that were really lacking in the innovation. And it seems like more companies like yourself and, you know, I would call it the kind of the next generation fintechs that have really kind of pressed the limit on these new products out there. So kudos to you guys for that. If you look at what you guys are doing in the tokenized side here, of course is Stretch right here. It's one of the top tokenized, most popular tokenized stocks. So this is interesting to me. Could there ever be a time where dividends at some point in the future would be paid like daily or real-time? Do you think that's ever a future opportunity?
I would love to see that. First of all, I think, you know, you mentioned innovation. The innovation in the capital markets is going to happen in the tokenized DeFi world. These are, you know, companies building tokenized products on top of Strategy. I'd love to see an issuer, fully regulatory approved tokenized world where we can issue tokenized Stretch trades 24/7. It doesn't have some of the, I would say, requirements or some of the structural inhibitors that typical US exchanges puts on top of it. And yeah, I think like why wouldn't you want to have daily accruals? So it might still pay monthly like an ETF, right? And so that would make a lot of sense and that would be friendly to a shareholder.
