LIVE: Strategy Q&A with Michael Saylor hosted by Natalie Brunell

Thanks.

You know, I think we enjoy keeping everybody guessing. It definitely makes X a lot more interesting. Our view is business as usual here. We're kind of matter-of-fact about this. The goal of the company is to drive Bitcoin per share and to increase its Bitcoin and increase the enterprise value continuously forever. We'll make decisions about how we fund our liabilities week by week, day by day. Sometimes we make them minute by minute. To tell you the truth, we set algorithms where we're looking at what is most long-term advantageous to the company. Are we managing our credit risk? Are we creating Bitcoin per share? And are we best off to pay a liability with cash or to pay a liability by issuing equity or to pay a liability by issuing credit or to pay a liability by selling Bitcoin? We've done a lot of multivariate models and in all the models what we find over the long term is that by far the best thing for the company is to engage in a mixture of those four instruments. Any model that we put together that's limited only to equity or only to credit or only to Bitcoin always underperforms. So ultimately the way to think of it is seven years out we would like to have maximized our Bitcoin per share and what is it that we should be doing now that's going to maximize and optimize the company's performance so that we've maxed out Bitcoin per share seven years from now. And I think it's not unlikely that we'll sell some Bitcoin between now and the end of the year. I don't know how much. We still consider these things but it's also likely that we'll sell a mixture of equity, a mixture of credit, you know, we'll manage our USD, our cash positions and we do it in a very thoughtful programmatic fashion where we're running our multivariate models and we're literally running them. We're making trading decisions. To say every minute might be an understatement. We oftentimes make trading decisions every second and we'll continue to do that.

The short answer on that is no. We've stated that we're going to be able to have ROC dividends for stretch and for all of our preferreds for the foreseeable future likely the next 10 years. The reason selling Bitcoin doesn't result in a threat to that is primarily because we have cost bases of Bitcoin everywhere from $10,000 to $125,000. So if we're able to sell Bitcoin at a high cost basis and take a tax loss which we can keep on our balance sheet for a while, that's positive. And it doesn't affect our ROC dividends.

I'm really excited and impressed by what Strive has accomplished. I'm thrilled to see them bringing a daily dividend digital credit instrument to market. I'm also impressed at how rapidly they did it. I think it's quite an extraordinary thing for the space. I believe it's actually great for them. It's great for the digital credit space. It's great for Bitcoin. It's great for us that they're able to bring that instrument to market. It's obviously working very, very well right now. They've been sitting around par for the last week or so and so that it's working in the market. I don't feel like we need to steal their thunder. I actually wouldn't mind seeing them get 10x bigger than they are right now. As they actually use SATA as the engine to drive growth at Strive and you know I think we're all in a cooperative relationship there. We're a Delaware company, they're a Nevada company. We have different corporate governance requirements than they have. We're also 100x bigger in terms of scale. And so I think it behooves us to move forward deliberately. And right now for us going from monthly to semi-monthly is a bold and I think a very progressive step. I think that will play out over the course of the next four weeks. We have a shareholder vote coming up in early June. I think that will dramatically improve the performance of STRC. Once we've gotten to semi-monthly, then I think the market will have a daily credit instrument from Strive and a semi-monthly credit instrument from Strategy. I think it's quite possible that the market will benefit by having the two different frequencies. I'm humble enough to know what I don't know and I'm looking forward to seeing how the market trades STRC, how it trades SATA. If both of them reach their full potential, that's great. We'll watch that performance and over time if it turns out that there's overwhelming demand from our own shareholders to go to daily, then that's something we'll consider. But I don't really think that we need to copy what they've done. I almost would rather have them be the only instrument in the world doing that because that's insanely good publicity for them, insanely good publicity for digital credit. And for those people that absolutely need that, that's going to be a great market expanding innovation. Phong, you might have comments of your own on this topic.

I think that where we like where it is right now, 11, 12% seems to be working very, very well in the marketplace. We're not, you know, we think of it this is as we're kind of piloting, you know, an aircraft carrier or a cruise liner and it takes a while to change direction. Once you get it up and running and there's a certain amount of momentum, you prefer to just leave it that way. So, we're not anxious to over-control the vehicle one way or the other. And I think we think over 20 years that the dividend will gradually be lower, but we're thinking in terms of 20 years, not 20 months. And ultimately, the dividend rate for STRC will be driven by the health and the growth of the crypto economy and specifically the Bitcoin economy. So we will manage this in order to create our goal we want to minimize volatility. We want to minimize uncertainty. We want to maximize the growth in the credit instrument so that we can maximize our acquisition of Bitcoin so we can maximize Bitcoin per share. And all things being considered, we would rather do something which is low volatility, stable, enthusiastically embraced and pay 11.5% than save a few basis points and pay a little bit less but create uncertainty, anxiety or instability in the marketplace. And so I don't think we presently expect a change in that dividend policy, but we have to look at the performance of the credit, the one-month VWAP, the strength of the credit, the strength of the underlying Bitcoin economy, the volatility of Bitcoin, you know, and people's views toward digital credit, digital capital, etc. and make the responsible adjustment from time to time if we needed to. Phong.

Yeah, we view ourselves as powering the Bitcoin economy and so powering the Bitcoin economy sometimes means buying Bitcoin and raising capital via equity or credit issuance to buy Bitcoin. But you know the best thing is the very healthy digital equity. So MSTR, MNAV expanding and then very healthy digital credit, low volatility, high liquidity, high performance, stable credit. And so we're always thinking about those things. I expect that Bitcoin price will go up forever. And if Bitcoin price goes up forever, you could buy it forever getting exponentially less as the price goes exponentially higher, right? And that would be good for the entire economy and I mean for the entire crypto ecosystem, but we don't have any hard target one way or the other and it all comes down to the equity capital markets and the credit markets.

We don't have a legal obligation per the security itself, but it is the company's number one business objective. So the way to understand it is we have about an $80 billion enterprise and if you were to ask what is the number one thing that we want to ensure month by month, quarter by quarter, it's we want to ensure the stability of STRC around $100. If STRC doesn't hit the $100 peg each month, then the company's going to take action in order to strengthen it. And we've shown ourselves will want to do it. We raised the dividend. Was it six months? Six times in a row or five how many times, Phong?

We raised the dividend multiple times. We raised billions of dollars of capital and bought Bitcoin with it. We raised billions of dollars of capital and we put in a US dollar reserve. We have just bought back one and a half billion dollars of debt which is senior to STRC. So we will restructure the capital structure. We will raise capital. We will adjust the dividend. We went and put a presentation or proposal in front of our shareholders to double the frequency of the dividend. So all of those things I just named are all in pursuit of stability around the $100 target. So, so you can think of it as a business objective and it's almost you could almost view it as that's the reason that the company is here like that is the primary KPI for Strategy is to stabilize and make the digital credit successful. And I would contrast that to you know we're not terribly concerned about the price of a convertible bond trading in the OTC market. And if you were to ask how do we feel about the price of STRD, STRF, STRK, STRE? Well, we'd like them all to be higher, but we don't get up every week and every morning and obsess over what we need to do in order to deal with those securities performance in the market or you know in the near term MSTR is going to move around. The primary flagship security of the company is STRC and the primary objective is to strip the volatility and stabilize the instrument at par.

You know, when you design a structure to be anti-fragile, whether it's a skyscraper in Manhattan or whether it's an aircraft wing, it's important that it flex. If you try to take the flex or the motion out of the building or out of the wing, it'll be rigid and then it will snap. And so we're not really defending the peg of a $100 in the same way that say a stable coin issuer would. If you were a bank or a money market or a stable coin issuer, you have deposits and they're daily deposits. They're almost debt like one day loans and you literally have to defend them down to the penny or to a sub-fraction of a penny. That's not the design of STRC. STRC is designed so that it will trade at par for some portion of the month and then it will trade down 50 or 100 basis points. And that's all part of the engineering. If you look at those DeFi protocols, let's say there's one with $300 million in it. We have $10 billion of AUM in STRC. How does the instrument perform when someone wants to sell 300 million or 500 million or a billion of STRC in a single day? Well, we already know the answer. It'll trade down 50 to 100 basis points. Maybe in the extreme it'll trade down 150 basis points and someone in our ecosystem, not us, a hedge fund, right? A large hedge fund that has 50 billion or hundred billion dollars will step in and they will buy it and that's why it is so anti-fragile. So I think that and I think you can see it. It seems like we have about a billion dollar to $2 billion of support when the instrument trades down 75 to 100 basis points that'll just walk into the market very quickly. But if someone were to dump $2 billion of STRC on the market in an hour, right? Like just take an extreme amount. There's you'll see the support for STRC will exponentially increase as the price falls. So below 99 there's a lot more support. Hedge funds will walk in and buy it because they get a quick 150 basis point gain in a couple of days. Below 98 you will see even more support. Below 97 even more support. This is if you study the way ships are designed where they have a center of gravity and the whole point of nautical stability is there's a force as you push the ship down there's more force pushing it up and as the ship sways left or right there's more force bringing it back. It's basically stability theory. And so I think what we're not concerned about the fact that someone may decide to sell some large amount of STRC. The instrument's literally designed so that it's insanely profitable for the hedge funds and the other credit investors to buy it that they would if I were to talk to them there's a lot they will buy it at 97 or 98 if they had the opportunity. They'll sell it at par, right? That they exist to actually support it back up to par. And when it's trading at $99.98, they don't have much incentive to step into the market. The incentive for all of the third parties that support our ecosystem increases exponentially as it trades further away from PAR. So you could think about the entire thing as a very elegantly designed servo mechanism where it's much better than us stepping in to defend the peg. We have an entire cohort of investors and they have hundreds of billions of dollars of capital and they will step in to defend STRC because they trust us and they know over the long term it's a very good investment. So we can't know that a corporation won't get up and decide to dump $200 million of this tomorrow. And we already know that once a month someone buys a billion and they sell it the next day. So we already know that happens. In fact, it's part of the design of the instrument for that to happen. And that's why we're comfortable that the entire digital credit layer is anti-fragile because it's designed to flex and not to fail.

You know, Bitcoin is its own asset and it's driven by geopolitical capital flows. So for example Chinese crypto investors, Asians, South Americans, Africans, Europeans, they all have their own capital flow dynamics. And so an edict coming out of India, Pakistan, China, Iran, Russia or Ukraine could drive Bitcoin flows having nothing to do with the US equity capital markets. Right now the headwinds that it faces are rising interest rates on the high end of the yield curve everywhere in the world. And that is drawing capital out of this ecosystem. It's also facing the headwinds of AI. There's a lot of capital flowing into the AI trade right now. And that has drawn capital out of Bitcoin from on the investor side. And also, if you're watching the miners, a lot of the Bitcoin miners have been diversifying or transitioning into doing AI high-powered compute and they're selling Bitcoin or they're not holding Bitcoin in order to fund their transition. So, that's a bit of a headwind. I think that the trade wars are a headwind. I think the hot wars are a headwind. And I think the lack of the roll out of bank credit networks which is evolving but it still has not taken place yet. Those are all headwinds and if you look at the equity capital markets the equity markets aren't influenced by the lack of credit from JP Morgan. They have a lot of it. The equity markets are being driven by the AI trade. They're benefiting from it. The equity markets they don't have the drag of China crypto policy which has an impact on Bitcoin but not on equity capital markets and so equity capital's got its own dynamic, you know, metallic capital gold has its own dynamic, digital capital has its own dynamic and you just kind of have to humbly make your peace with them they're different asset classes they're not always going to correlate in lock step and you don't want them to correlate. They're different things for different investors with different degrees of utility.

I think they represent very important optionality and complementary products to STRC. So we don't think it's in the best interest of the company to retire them. By the way we do think it's in the best interest of the company to retire the six convertible bonds. So and of course the point is the bonds are dead and there is no shelf registration on them. So they're not really sources of future bitcoin yield or bitcoin per share accretion and they're senior to the other credit instruments. So our view on this is the bonds are liabilities and we will retire them. The four perpetual preferreds, Strife, Stride, Stream, and Strike. They're opportunities. To Phong's point, they're undervalued. That's why if you look at our weekly filings, we haven't been selling any of those instruments pursuant to those shelf registrations. We think they're undervalued. And so the number one thing we're doing to help if you own any of those four is we're removing liability senior to you. So we're improving the credit of them by retiring the debt. And the second thing we're doing is we're not selling them. So we're keeping the supply very scarce. So, I would think probably the single most important thing that I could say on this call if you were an STRF holder or STRD or STRK or STR is we think they're undervalued. We're not selling them, right? And so, if you're an investor, you know that the company's view is that over time, they should trade up. And so, our view, I agree with Phong. They're institutional products right now. They're long duration. They're more complicated. They have more delta. So they have more delta, more volatility, more duration. And so for the classic retail investor, the retail investor just kind of wants pure synthetic yield. They don't want duration and delta and volatility. They want all that to go away. And so STRC is the flagship for that reason. But there are institutional investors that do want a perpetual senior credit instrument or perpetual junior credit instrument or a convertible credit instrument. And so that's why we leave them outstanding and we will continue to take actions to improve their credit to improve that should be credit positive for them. This should result in the price improving over time. At least theoretically, right? The market will decide what happens and the market is kind of above our pay grade in a way. But the strategy of the company is to nurture those four instruments to the benefit of the company and the investors over the long term.

You know, that's an easy one. We've already done it. I mean, STRF is a fixed 10% dividend yield at par. That's senior. And STRD is a fixed 10% dividend yield at par, which is junior. So, I would direct Orion to go check out Stride and Strife because those are exactly what those two instruments are. They guarantee you that 10% dividend yield forever.