343PG on Nostr: As #MSTR announced the first #$STRK preference share at the market offering today, ...
As #MSTR announced the first #$STRK preference share at the market offering today, some thoughts on how this might play out in the coming months.
Firstly, $11m is extremely small as a way to start. It would take around 1,900 weeks at this level to exhaust the $21bn! But what I suspect will happen is they will continuously ramp this up in the wake of bitcoin price appreciation in the months to come.
Let's consider how they might do this. The current price of STRK is $88.45, so MSTR are offering about a 9% yield in selling into the market at current levels. That price is made up of two components, essentially, the value of the perpetual fixed dividend payment of $8, and the value of potential future conversion to equity at 1/10th of the number of STRK shares held.
Bear in mind if bitcoin price rises, the value of that potential conversion to equity will also rise (eventually, if MSTR traded well above $1,000, STRK might end up trading more like MSTR stock since the $8 dividend would prove so small by comparison).
Just like when selling MSTR shares into the market, there is no free lunch - by selling more STRK ATM, it will depress the STRK price, and all else equal require them to pay a higher yield to the market the more they sell. Selling at $100 is clearly better for MSTR than selling at $88.
What they could do though, is decide that at any level of STRK price above X, say, they will relentlessly issue the ATM in to the market. Let's say this price is $100 (which leads to the originally 8% dividend). As the MSTR share price rises, the increasing value of the equity conversion, and perhaps the increasing security coverage on the dividend payments may help them to sell more and more STRK into the market at this level.
PunterJeff (nprofile…4knj)
BenWerkman (nprofile…7jq0)
Firstly, $11m is extremely small as a way to start. It would take around 1,900 weeks at this level to exhaust the $21bn! But what I suspect will happen is they will continuously ramp this up in the wake of bitcoin price appreciation in the months to come.
Let's consider how they might do this. The current price of STRK is $88.45, so MSTR are offering about a 9% yield in selling into the market at current levels. That price is made up of two components, essentially, the value of the perpetual fixed dividend payment of $8, and the value of potential future conversion to equity at 1/10th of the number of STRK shares held.
Bear in mind if bitcoin price rises, the value of that potential conversion to equity will also rise (eventually, if MSTR traded well above $1,000, STRK might end up trading more like MSTR stock since the $8 dividend would prove so small by comparison).
Just like when selling MSTR shares into the market, there is no free lunch - by selling more STRK ATM, it will depress the STRK price, and all else equal require them to pay a higher yield to the market the more they sell. Selling at $100 is clearly better for MSTR than selling at $88.
What they could do though, is decide that at any level of STRK price above X, say, they will relentlessly issue the ATM in to the market. Let's say this price is $100 (which leads to the originally 8% dividend). As the MSTR share price rises, the increasing value of the equity conversion, and perhaps the increasing security coverage on the dividend payments may help them to sell more and more STRK into the market at this level.
PunterJeff (nprofile…4knj)
BenWerkman (nprofile…7jq0)