Can Strategy Recover After Selling Bitcoin? CEO Phong Le Explains

You know, one thing that I think people sometimes forget is this company, formerly MicroStrategy, was founded in 1989 by Michael Saylor. It went public in 1998. We added Bitcoin to our balance sheet starting in 2020. And so, from 1989 to 2020, for 31 years, our executive chairman had experience of running a company through ups and downs and ups and downs. And that's what makes a company resilient and strong. So, for me, 2022 was a tough time. It created resiliency for those who stuck through it. And so, what is it like? It's going to build strength. And ultimately, why am I not phased? Because I believe in the underlying. I believe in Bitcoin. I believe that Bitcoin creates self-sovereignty and freedom for people all around the world. I believe it is a much better way for finance to move along rails, digital rails. I believe it is a programmatically superior digital asset and scarce asset. And so, if you believe in that underlying, then everything else will work itself out.

Yeah, it's good to see you, too. Thanks for hosting me.

You know, they say in the short term, the market is a voting machine, and in long term, the market is a weighing machine. And we don't look for people to vote on how do we accrete Bitcoin per share. We transparently provide our KPIs, and we provide them with a long-term view. And so, we've been at this since 2020. And we've certainly every single year since the beginning driven increases in Bitcoin per share to our common shareholders. We issued a set of debt including convertible debt that was extremely accretive to the debt holders, and now we have preferreds that are out there that are also accretive if you look at a total shareholder return for the most part, especially in a Bitcoin bear cycle. So, I'll say there's always the short-term reaction, and then there is long-term are we creating value for all classes of shareholders and Bitcoin, too, for that matter. So, what do I do? I don't spend too much time reading all the comments on X, but I think it's useful to see how that short-term voting machine is. It's good to see how our security's price is. It's good to see what happens to Bitcoin. But everything we're doing, we take a daily lens, we take an annual lens, and then we take a long-term lens. That long-term lens is what's most important for our decisions. We sold Bitcoin and bought it back in 2022. So, this isn't the first time. This is the second time. It was a much more material amount then. This time we sold two and a half million dollars of Bitcoin and we bought a hundred million dollars the next week and the previous week we actually bought about a billion and a half of Bitcoin. So, the total is we're not aggregators of Bitcoin and we're not trying to increase Bitcoin per share for everybody.

Look, there is a responsibility we have which is we provide week to week transparency into what we're doing. That's voluntary through 8-Ks and disclosures and we do that because we want to be more transparent with everybody and that'll lead to people providing positive feedback and negative feedback and I guess that's the responsibility we have with the transparency and also being the largest holder of Bitcoin, largest identified holder of Bitcoin in the world.

That was not the driver. I don't think we were that concerned that there were levered D5 protocols built on top of stretch that were going to create this cascading loop. The primary reason is a large amount of stretch is owned by retail, about 80%. A good amount is owned by large institutions that buy and hold. And so the percentage that is owned by D5 protocols is pretty small. I think it's less than 10% if my recollection is correct. When we say inoculate the market, what is important here? One, we do have a category of shareholders, especially our stretch shareholders, and our debt holders that want to know that our largest corporate asset that makes up almost 100% of our asset base, Bitcoin, can be utilized at periods of time when we need to, right? And so we've been, we said that we won't sell our Bitcoin and those sorts of things and they say, 'Well, now you're saying you would sell your Bitcoin if you needed to to pay a dividend on stretch as an example,' which is not why we did it. But if we needed to, we would and they're like, 'But you're also saying you won't.' So, we said, 'Okay, let's sell it just to show people that we are willing to sell our Bitcoin,' right? And so if you're a credit digital credit holder, if you're a bond holder, the folks on the debt and credit side of our balance sheet, those folks want to know that we're willing to sell our Bitcoin and the ratings agencies want to know that we're willing to sell our Bitcoin. That's one part of inoculating the market. The other part is testing out processes. So, we provide transparency into who our custodians and how much Bitcoin we hold with those custodians. We don't provide proof of reserves because we don't want to disclose our Bitcoin addresses right now. Although we're looking at ways to provide that. But as an example when we move Bitcoin from cold storage to a hot wallet, there are people who are looking at what we're doing, trying to guess which wallets are ours, identifying what we might do. And so we want to see how that entire flow works when we sell Bitcoin. So that's part of a test of the market. So those are a couple of things when we say we're inoculating the market, what are we doing? And we're the largest corporate holder of Bitcoin. We should be able to sell our Bitcoin without the market overreacting to a 2 and a half million dollar sale. And so hopefully the next time we do this, the market doesn't overreact.

Yeah, so I'll zoom out and then in. At a corporate level, we're a publicly traded US company that's listed on the Nasdaq. It's a well-known season issuer. We don't have a majority shareholder anymore. Mike does not have a majority share. And we have eight board members. And then we have all of our shareholders, right? And of the common, we have shareholders of the preferred and we have holders of debt. And then we also look at the Bitcoin holders, the broader community. And frankly, I look at the crypto community all as people that we have to answer to in some way, shape or form. Big picture, we actually on a quarterly basis try to provide updates to what's happening with the company. And those updates, for example, last quarter, we talked about all the optionality that the company has. The fact that we can sell equity, we can sell preferreds, we can sell US dollars, we can sell Bitcoin. We can buy all those things, too. We can buy back convertible notes. And we talked about this as a deliberate strategy to make sure the market understood as the largest corporate holder of Bitcoin in the world, largest holder of Bitcoin in the world now, that we have a lot of optionality. And we talked about that with the board, got the board on board with this idea. And then we talked about it in our investor relations call, our earnings call. And so that's a pretty big deal. And then we talk about it on podcasts, we do presentations, Mike Saylor and I are on, other people are on. And so we have this responsibility, first of all, to come up with a corporate strategy, get alignment with the board, talk about it with our shareholders, look at the reaction from our shareholders. That's sort of a corporate quarterly thing, right? And then monthly, we look at, okay, what should we be doing? How does it impact Bitcoin per share? How does it impact Bitcoin yield? And then, how does it impact debt? And so we have a model that we run that looks at our equity and looks at our credit and the quality of both. It's a pretty sophisticated, detailed model. We run different scenarios on it, run simulations on it. And then on a weekly basis, Mike and I will talk and we'll say, 'Hey, here's our goal for the week.' And literally on a daily basis, every morning, we'll discuss, 'Okay, what are the instructions for today?' And we discuss that with our treasury team, with our IR team. We talk about it with our traders. And so that's the cascading of how decisions are made, how do we make a decision to buy back 1 and a half billion dollars of notional convertible. We start at the board level and that cascades all the way down to the execution of that with our banks. We didn't talk to the board about was it 32 Bitcoin, but we talked to the board about, 'Hey, we think it makes sense to sell Bitcoin.' And what are the trades we want? And then the day-to-day decisions are made between Mike and I and members of our Bitcoin team in the company. But I say that because there is not an action we take that isn't thoughtfully and thoroughly deliberated with many many constituents. And then we look at the reaction of what happens and then we adjust the decision based off the reaction. And that reaction happens to our share price. And the share price of our preferreds. We look at the reaction on X. We do Grok sentiment analysis on X, and we say, 'What did people think? What's the percentage positive? What's the percentage negative?' We look at how people visit our website and who's using our strategy app. I mean, we are an analytics company. We do a lot of analytics to every decision we make.

Yeah, I mean, so what are the different things we can do? We can issue equity, right? And as long as that is accretive to Bitcoin per share over the long run, we could do that. So as an example, we issue equity quite often to pay our dividends, right? And our equity trades with $2.7 billion a day. It's one of the top 20 most liquid stocks in the world. It is the most liquid stock in the world when compared to our market cap. So that is a fundraising mechanism we've used historically. We can issue prefers and to your point, we wouldn't issue stretch below par, but we could issue other prefers if we wanted to. We can sell Bitcoin, if it made sense and it was accretive to Bitcoin per share. And then we could issue more convertible debt. The market's quite open to us. We've made a decision not to. Issuing convertible debt could be long run accretive to Bitcoin per share, but we're putting a senior obligation on top of our prefers. That's why we choose not to and there's a lot of other reasons why we choose not to do that. By the way, we also own 845,000 Bitcoin. We could do nothing. Like we could do nothing during a bear market, which is sort of what we did in 2022. We reached French. We paid back some of our senior secured notes and our Bitcoin backed debt. And otherwise we did very little during the year of 2022. We sat there with a Bitcoin stack, and as Bitcoin went back up, our company accreted Bitcoin per share and it accreted valuation and everybody won. So, the doing nothing option isn't necessarily a bad thing. In fact, the temptation when you're going through a Bitcoin bear market to do something like sell Bitcoin in mass, that's not something we would contemplate doing either. So, I guess we have a lot of options. Doing nothing is one of those options.

You know, one thing that I think people sometimes forget is this company, formerly MicroStrategy, was founded in 1989 by Michael Saylor. It went public in 1998, and we added Bitcoin to our balance sheet starting in 2020. And so, from 1989 to 2020, for 31 years, our executive chairman had the experience of running a company through ups and downs and ups and downs. And that's what makes a company resilient and strong. I've been here as CFO since 2015, became CEO in 2022. So, I've been here 11 years running as a public company officer. And Mike's got a lot of gray hair. I've got quite not quite as much as him. But, we've been through a lot. Amazon didn't become what it was without a few near-death experiences, ups and downs. The same can be said with Tesla. People forget about the funding secured tweet. Companies have their ups and downs. And it's those down moments, it's the tough times that define the strong leaders and defines the strong companies. So, for me, 2022 was a tough time and it created resiliency for those who stuck through it. Bitcoin and digital assets and a Bitcoin treasury company. And so, what is it like? It's going to build strength. And ultimately, why am I not phased? Because I believe in the underlying. I believe in Bitcoin. And I believe that Bitcoin creates self-sovereignty freedom for people all around the world. I believe it is a much better way for finance to move along rails, digital rails. I believe it is a programmatically superior digital asset and scarce asset. And so, if you believe in that underlying, then everything else will work itself out. Jeff Bezos believed that Amazon was a revolutionary company, creating true value to hundreds of millions of consumers in the US and around the world. And so, you can go through ups and downs if you believe in the underlying.

There have been waves of GenAI. When GenAI sort of really started to get introduced in the fourth quarter of 2023, it was mostly a conversational tool through which you could ask questions and get natural language answers, and it could write notes for your meetings, and people realized that wasn't really very useful. It could help you answer questions that otherwise would have taken 10 minutes. And that's a little bit useful. It could help you ask questions and ask strategy questions and design products that otherwise might have taken you months, and you would have been faced with a no no no no no. That's where we started using GenAI to build a product like Stretch because it's such a novel revolutionary product that otherwise we would have talked to accountants, banks, lawyers, and they would have said no no no no no. But if the AI says no, you actually can do this, here's the case law, here is the financial KPIs you can use, etc. That accelerated Stretch from probably taking 3 years to taking 8 months, over the course of 2025. So, what's next? So, then you get into, okay, there are two other sort of avenues that AI goes. You get into truly now agentic AI moving past natural language. And where that is exciting internally, it is now deploying a set of agents into the organization to summarize information and make decisions. Our software business, we're starting to build self-healing code where the agent identifies a bug that a customer sees, decides whether that's a real bug or not, creates a case for, creates a requirement for, creates a project for, builds the code and releases it into nature. Now, we have a set of agents doing things. You could imagine internally doing that in the finance in the Bitcoin world, too. When I talked about the decision making framework and matrix, speeding that up. Now, you go external. The world of agentic AI and I think everyone realizes it. They haven't fully internalized it. When you go from 6 billion people to 6 trillion agents, making autonomous decisions for individuals, for corporations, for nation-states. And then physical humanoids robots, they're all going to transact not on the traditional finance rails, but on decentralized finance rails with crypto as the underlying. And they're going to want to create products that create great yield with Bitcoin as the underlying store value asset. So, the world and where this is all going is quite amazing and quite bullish for Bitcoin. And it's not just that SpaceX has whatever billion and a half dollars of Bitcoin on their balance sheet. That's sort of funny and cute. But when SpaceX builds a million humanoid robots sitting in Mars and sitting on the moon, what are they going to transact in? I'm pretty sure they're not using Visa, MasterCard, American Express, or other traditional rails. They're not using the Swift network. They're going to be using crypto rails. And that is quite bullish for cryptocurrencies and Bitcoin.

Look, when I really went deep in the Bitcoin, I wanted to tell everybody I knew about why it was useful to buy Bitcoin. And I did not ask people to pass an IQ test or loyalty test before I tried to orange pill them. I didn't ask them what their religion was, what their sexual orientation was, what country they're from, what their net worth is, whether they have a degree in computer science. I didn't ask them to take a 20-page loyalty test. I wanted everyone I could talk to to learn about Bitcoin and buy it. And even then, I got convinced quite a few people, but even then not enough. And so, we asked ourselves, I asked, and Mike asked, what's the product that can give people exposure to Bitcoin that they would be more interested in. And MSTR was one of those products. STRC was another. And frankly, for Bitcoin to work in the world, the more people who have exposure and access to it, the better. So, others have said it, Bitcoin's for everyone, spread Bitcoin with love, and that's our philosophy. For Bitcoin to work and win, more and more people will need to have access to it either through the underlying in self-custodial wallet, either through holding it through an exchange like a Coinbase or a custodian, either through owning IBIT or through owning a set of Bitcoin Treasury companies, or through owning a digital credit instrument, or owning a digital money instrument like APEX, which is on a DeFi protocol with exposure to STRECH, with exposure to Bitcoin, or if somebody creates an ETF, which some have done it, on top of STRECH. Those are all noble ways to spread Bitcoin with love. And I support all of those.

Stretch has been around for 10 months. Bitcoin's been around for almost 18 years. Bitcoin is getting into adulthood. Stretch is still very much not even a toddler, it's an infant. We're learning a lot about the product. Our goal is to get it to trade between 99 and $101 and as close to 100 as possible. So, we utilize as an example the US dollar reserve to buy back a billion and a half of notional of convert. Mathematically that was the right decision. Our spreadsheets and our models said that was the right decision. I think bringing the US dollar reserve down pressured Stretch, especially some of our institutional holders. We'll bring the US dollar reserve back up, and so that's one of the things that'll get Stretch to start to trade back to par. We've done that over the course of the last couple weeks. We will continue to do that over time. But we're going to make the product work. We went from monthly to semi-monthly. And so actually June 30th will be our first of our semi-monthly record date, so that'll be fun to see how it trades around that price level. The product is extremely over collateralized. Paying the dividend is something that we're very committed to. I don't think it's a hard thing to pay the dividend. It's not something that causes me to lose sleep at all. So, we'll get the product to grow up, mature, and to trade around $100. And I feel reasonably confident that we can do that.

I did follow that entire back and forth and all the drama associated with how Polymarket resolved. What I'll state is, what they did is up to them. They run the market and people made money and lost money and it's unfortunate for those who lost money. We put out our 8Ks almost methodically 8:00 a.m. every Monday morning and those 8Ks reflect the activity of the previous week after the last 8K. So, we certainly sold Bitcoin during the previous week. We reported it and recorded it as part of that 8K. Now, how someone chooses to parse what that means, as far as a contract in Polymarket, I'm staying out of that fray, but I certainly know what we did internally.

Thanks for having me and thanks for what you're doing for Bitcoin and crypto.

Thanks.