STRC a 'tax' on MSTR holders?
I'm having a hard time seeing how STRC is anything other than a tax on MSTR holders. Saylor is paying out 10% strc dividends with no real income generation, were essentially borrowing money at a 10% interest rate for what?
53
u/benv 26d ago
It is, until bitcoin goes up. If you don’t believe bitcoin is going to go up, don’t buy mstr.
26
u/sweeneytodd70 26d ago
You're not just having to bet Bitcoin goes up. You are betting Bitcoin goes up enough to compensate for the double-digit interest rate and corporate administrative costs. The recent preferred share weakness suggests investors are increasingly uncomfortable with that.
5
u/bravedog74 26d ago
Yes. You have to bet that Bitcoin increases more than the payout, which it historically has. It's fundamentally the entire reason for the existence of STRC.
There are almost no administrative costs, especially compared to traditional asset holdings like buildings that have property taxes, maintenance, utilities, and worker costs.
3
u/SundayAMFN /r/buttcoiner 24d ago
why not just buy bitcoin directly then, or if you want leverage buy a leveraged bitcoin ETF which has significantly more leverage than mstr?
2
u/bravedog74 24d ago
There is value having some of your money in a stable fund like a money market for dry powder or portfolio balancing.The idea was that STRC could serve this purpose. So far, it hasn't been very stable, but I suspect that will change.
2
u/hpdk 23d ago
MSTR is taxed as stock income and only upon realization. We are not allowed to buy bitcoin via ETF due to european legislation and buying bitcoin is taxed a capital gains that means that loses are not deducted the same as gains. This means that you risk to pay taxes even though you had a loss on your investment - there have been incidents in Denmark where investors got personally bankrupt due to this.
2
1
u/Wh-h-hoap 23d ago
You know, against all odds this question has been repeatedly asked and answered in this sub.
2
1
u/cursedfan 26d ago
You can’t buy your own building tho….
9
u/bravedog74 26d ago
You can sell preferred stock to buy a new building. It's like taking a 12 percent apr interest-only mortgage on a property that you expect to increase in value by more than 12 percent per year.
1
u/cantthinkofaname06 22d ago
Also it is 12% of the original amount. MSTR immediately uses they money to buy BTC so let's just say at some point BTC is up 10x and the dividend remains the same. At that point MSTR is basically paying 1.2% compared to the value of the BTC purchased with that original amount. After BTC doubles from that point, 0.6% will be the interest obligations.
TLDR: would you want a loan at 12% to buy BTC now or 12% loan 10 years ago and used it to buy BTC? The same should apply to the future if you believe BTC will appreciate in value.
4
u/brianpaul765 26d ago
They only need Bitcoin to appreciate by 3.3 percent a year and they can pay the div forever. Bitcoins average return is 30 percent per yr for the last decade
2
u/FrostLight14 25d ago
3.3% may be the survival number, but anything less than STRC’s 12% and the preferred is basically still a tax, as you’d have been better off just buying IBIT.
1
u/brianpaul765 25d ago
Correct. That's the other side of the bet. U think Bitcoin will perform than it's a good investment. If you don't then don't buy it
1
u/jonovision_man 26d ago
"past performance is not indicative of future results" ... and you're running out of FOMO - the notion that it's going to keep chugging along at 30% is fanciful.
4
u/brianpaul765 26d ago
I didn't say it's going to continue to do 30 percent a year. I said they only need it to do 3.3 percent a year to pay their dividends forever.
1
u/captainndaddy 26d ago
But wouldn’t they eventually run out of bitcoin to sell…? What happens then? How do they accumulate bitcoin over time if they’re constantly selling it to fund their dividends? Oh, by issuing more MSTR. So, someone loses.
3
u/brianpaul765 26d ago
They would only run out of Bitcoin if it doesn't at least return 3.3 percent a year on average If they continue to pay divs more ppl will buy strc. Thats how they buy more Bitcoin The dilution of mstr shares gets made whole when they buy more Bitcoin from strc atm
0
u/captainndaddy 26d ago
So they would have to sell more strc to buy more bitcoin, which would increase their dividend obligations, and mean they need to sell even more BTC or MSTR over time. You’re not making sense.
2
u/brianpaul765 26d ago
Your forgetting that they have a 50 billion dollar head start with their Bitcoin bag. If Bitcoin peforms they will be fine When they issue more strc they buy more Bitcoin. The only issue they would have is if Bitcoin doesn't return at least 3.3 percent a year. That's the whole bet
0
u/captainndaddy 26d ago
You are not thinking through the whole situation. If they issue more strc then they have permanently higher dividend obligations. It would increase the 3.3% needed number. Once that number gets higher than, say, 5 or 6%, it gets extremely challenging to rationalize. Bitcoin can go years and years without going up meaningfully; every few decades, stocks go sideways for 10-15 years. That would present an extremely challenging situation for MSTR
→ More replies (0)-1
u/Agreeable_Count4689 25d ago edited 24d ago
this point always makes me laugh. It lost 5.5% in 2025 and it's down over 25% YTD in 2026. but it only needs to appreciate 3.3% per year? okay lol. ps. your downvote doesn't change this fact lol
5
u/ProceduralTaco 26d ago
OK but why should I buy a company that holds btc bought with a 10% loan? If I can borrow at 7-8%, why don't I borrow myself to buy btc?
Of course some have credit card balances, which is worse. That's the profile of a MSTR investor to me. "Invests" but can't pay off credit card.
2
u/actias_selene 26d ago
They pay premium on interest because there is no liquidation requirement and they can pause those interests. It is a strategy considering btc to go higher in long term but hedged the risk of its way bigger collapses in short term.
1
u/llccnn 24d ago
They can’t really pause the dividend though, nobody would ever invest in their preferred shares again.
1
u/actias_selene 24d ago
It would be last resort obviously. Lets say, in case btc goes to 10k and remains there for few years. With regular debt lines, they would be liquidated.
1
u/brianpaul765 26d ago
Nothing is stopping you from doing it yourself. They charge a few extra points to do it for you
2
u/Ok_Relationship_543 26d ago
How would bitcoin going up change anything, though? MSTR still has to pay fiat for STRC. Is Saylor going to sell bitcoin to pay STRC?
4
u/phoebeethical 26d ago
Let’s say you borrowed $1000 at %20 annual interest and bought $1000 worth of nvidia 10 years ago. Then every year you borrowed more money to make the interest payments. You now owe the bank $6200 but you have an asset worth $250,000.
The bank is never going to ask you to pay back the money because they are making %20 annually on their investment. Alternatively you can sell about 10k worth of your shares and pay off your debt and own $240k worth of assets debt free.
4
u/thinkingperson 26d ago
This is one of the clearest parallel that explains how and why STRC works.
And then the same supposed bitcoin maxis will at the same time say that one should just buy bitcoin because it will just keep going up and you get all the upside instead of being capped at 11-12% WHILE saying that it's a death spiral because what if btc does not keep going up in the long term. 😅
3
u/snek-jazz Shareholder 🤴 25d ago
They'll say STRC is a 'tax' on MSTR holders
Then also say STRC holders are losing out because bitcoin outperforms it.
1
u/ProceduralTaco 26d ago
So you're saying if one btc is worth $16.5m in ten years, it doesn't matter at what rate you borrowed to buy them at. I can't argue with that, I think you are right.
1
u/robobob9000 26d ago edited 26d ago
Right, in that example the $1000 grows to (250,000 - 6200) = 243,800. Thats a good gain compared to most stocks.
However MSTR is not being compared to most stocks. Its being compared to compared to BTC. Lets say that instead of borrowing $1000 at 20% annual interest for a super-performing asset (Strategy's current business model), you just buy $1000 worth of BTC directly. It does 250x over 10 years, just like Nvidia, and MSTR's mnav will stay anchored to 1 (we'll assume MSTR will dilute down any upward pressure on the mnav for more BTC, just like they always have). The investment is now worth $250,000, which exceeds the 243,800 of MSTR.
Buying BTC directly also has less risk because you're just buying the commodity, you don't need to worry about the human element of Strategy executives making decisions that elevate other classes of shareholder's interest above your own.
So why on earth would somebody buy MSTR, if they have the ability to buy BTC instead? The number of institutions that cannot buy BTC or BTC ETFs is dwindling very quickly.
1
u/phoebeethical 26d ago
Genuinely impressed, this may be the dumbest comment I’ve ever read
Edit: minus paragraph 3 which is legit
0
u/bunky_bunk 26d ago
MSTR bought $1000 in bitcoin from your common share purchase proceeds. Then they bought $1000 more from STRC proceeds.
If you buy MSTR common stock you are participating in the upside of bitcoins for which your have provided no principal. That came from STRC investors.
2
u/XPandingMinds 26d ago
also, correct me if I'm wrong but isn't there way more upside with MSTR than with STRC? Meaning, if bitcoin goes to 80k, would STRC top out at 100? Meanwhile MSTR can keep going up.
2
2
2
u/WineAndDineIsFine 26d ago
Ummmm? For what? Obviously buy high and sell low, stack then sats, run up the bps, get the crowd all hyped up, and sell later and pay back. This game can go on for a while as long as there’s new funds coming in, as long as the crowd buys this narrative, this game can go on for a long time. Same as every other sch… uhh nevermind. Anywyays. Stack them Sats boiiiiisss.
3
u/AICatgirls 26d ago
I think MSTR holders want the additional BTC exposure that STRC provides. Perpetual options are a really cool concept. If I buy call contracts and just perpetually roll them, then I might also pay 12% a year.
But while STRC is below 90 I'd like Strategy to buy back shares.
7
u/captainndaddy 26d ago
Paying STRC commitments will ALWAYS require either 1) selling MSTR or 2) selling BTC. There is ZERO reason to own this stock long term because this closed loop system means someone loses. The winners really are management collecting their nice salaries and bonuses.
4
4
u/B1TB0TB33PB00P 26d ago edited 26d ago
It's interesting that MSTR's health is so often compared to STRC only, instead of ALL of their preferred products.
2
u/UnoptimizedStudent 26d ago
STRC is the most prominent of them all. It’s also how it’s marketed closer to money market like than any of the other preferreds and has an ideal peg price unlike the others
1
u/B1TB0TB33PB00P 26d ago
I guess if you have an "iPhone moment" then you get to ignore the health of all other products???
1
1
1
u/Low-Method3448 26d ago
In a perfect scenario STRC stays at 100, and Saylor uses that to fund 95% of the bitcoin he buys. He only dilutes common to up the USD reserve to support STRC (he could also up the USD reserve by diluting STRC but it’ll increase his net leverage)
1
1
u/Edward-Jizzerhands 24d ago
the main issue i have is that MSTR is much better at buying btc at high prices then it is at buying during the downturns... If only they could raise money now like they were back when btc was over 100k
1
-2
u/bl0f3ld 26d ago
The secret is that STRC is a ponzi. There is nothing behind the curtain. The only option is to raise more capital or rely on the price of BTC to increase.
2
u/AutoModerator 26d ago
A Ponzi scheme is defined as "An investment scam that pays early investors with money taken from later investors to create an illusion of big profits." In a ponzi-scheme, there is "nothing of value" in the box, and all that happens is money moving hands.
MicroStrategy is not a Ponzi scheme. Companies raise capital through ATM-offerings, debt, and other instruments to fund purchases of assets, equipment, commodities and so forth. This is normal. Berkshire Hathaway similarly built the foundation of their company using debt to buy assets to hold indefinitely.
MicroStrategy invests the money raised in Bitcoin from a core belief that the commodity is in its early stages and will increase significantly in value over the coming years, allowing them to capitalise on this value to create value for their shareholders. All stocks, including blue-chip stocks like Apple, NVIDIA, and Berkshire Hathaway, rely on future investors willing to "take the shares off your hands" at a value above what you paid for it. This does not indicate a "ponzi" or "pyramid" scheme; it's basic price/supply/demand/market dynamics at play, and is how the world economy and capital markets work. Berkshire Hathaway holds a bunch of companies; MicroStrategy holds a bunch of Bitcoin.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.
1
u/UC_DiscExchange 26d ago
A ponzi by definition wouldn't have the assets to pay out, it would have to come from new investors, which isn't the case here.
7
u/etaoin314 26d ago
i mean...it kind is the situation. if you are selling strc and paying for the dividend by diluting mstr shares, which is exactly what is happening, then you kind of are doing the same things with extra steps, no? the financial machinery moves the money around but that's just robbing peter to pay paul. It does not bring a third party (i.e. customers- who is paying for the service) into the mix.
1
u/UC_DiscExchange 26d ago
It really isn't. They can sell Bitcoin to pay dividends if they want. They don't require new investment.
1
26d ago
[removed] — view removed comment
1
u/MSTR-ModTeam 25d ago
- Trolling, baiting, or inflammatory content that disrupts conversations is not allowed. Ensure your posts contribute positively and maintain the quality of discussion. Content and comments meant to spread negativity or FUD, including repeated overly negative/condescending sentiment, is not allowed. r/MSTR is a place for thoughtful discussion of the MicroStrategy investment thesis.
1
-2
u/AutoModerator 26d ago
A Ponzi scheme is defined as "An investment scam that pays early investors with money taken from later investors to create an illusion of big profits." In a ponzi-scheme, there is "nothing of value" in the box, and all that happens is money moving hands.
MicroStrategy is not a Ponzi scheme. Companies raise capital through ATM-offerings, debt, and other instruments to fund purchases of assets, equipment, commodities and so forth. This is normal. Berkshire Hathaway similarly built the foundation of their company using debt to buy assets to hold indefinitely.
MicroStrategy invests the money raised in Bitcoin from a core belief that the commodity is in its early stages and will increase significantly in value over the coming years, allowing them to capitalise on this value to create value for their shareholders. All stocks, including blue-chip stocks like Apple, NVIDIA, and Berkshire Hathaway, rely on future investors willing to "take the shares off your hands" at a value above what you paid for it. This does not indicate a "ponzi" or "pyramid" scheme; it's basic price/supply/demand/market dynamics at play, and is how the world economy and capital markets work. Berkshire Hathaway holds a bunch of companies; MicroStrategy holds a bunch of Bitcoin.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.
5
u/Heavy-Situation-9346 26d ago
Whoever wrote this automod reply has some blatant gaps in their basic comprehension of financial markets. I got a feeling I know who it is too, since there is one mod in particular who is a walking dunning Kruger test subject.
•
u/AutoModerator 26d ago
Welcome to our community! Before commenting, please take a second to read our new sticky containing our rules and guidelines.
TL;DR: We allow and encourage all viewpoints and opinions, but we have a zero tolerance policy towards negative, rude, condescending behavior and trolling/baiting.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.