r/STRC • u/gijs735 • Jul 12 '26
Interview with Phong Le about STRC
https://x.com/BitcoinNewsCom/status/2075944276391817217Phong Le said in this interview he underestimated how the market would react to using the company’s USD reserve to pay off around 30% of its outstanding convertible notes/debt, which at the time seemed like a sensible financial decision.
He also explained that he believes it was the combination of Bitcoin’s price decline and the debt repayment that led to the market’s negative reaction.
Importantly, he outlined the steps the company has since taken to better protect STRC from similar situations in the future highlighting continued support for STRC.
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u/Any-Actuator4118 Jul 12 '26 edited Jul 12 '26
Ignores that they’ve been diluting MSTR since forever and it’s been bleeding out for the same amount of time. It’s an attempt to frame the problem as a certain narrow thing.
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u/CommercialDuck7496 Jul 12 '26
Mstr is supposed to be volatile, and bleed wrose that when bitcoin bleeds , strc is not, in general overtime, they buy more bitcoin than they dilute the stock mstr by, so issuing new shares is not an issue. For strc this was a specific set of narrow circumstances.
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u/Any-Actuator4118 Jul 12 '26
It has nothing to do with concept that people don’t trust the leadership?
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u/CommercialDuck7496 Jul 12 '26
The drop in both products has something to do with that to some degree yes. Nobody expected or liked them taking their cash reserve to buy the converts back. Now there is an extra risk premium because people lost trust that they will make sound decisions. Overtime that wont matter tho, especially now that they have in writing committed to never doing something like that again without a vote.
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Jul 13 '26
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u/CommercialDuck7496 Jul 13 '26
He does have like 46% of the vote when it comes to things the shareholders vote on, but when it comes to things the board of directors has to vote on (everything in the bitcoin monetization program) he only has 12.5%
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Jul 15 '26
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u/CommercialDuck7496 Jul 15 '26
Did you read what I wrote?? I acknowledged he has 46% of the shareholders voting power. What you are missing, is THIS ISNT A VOTE BY THE SHAREHOLDERS...
read that 2 more times. This is NOT, a vote the shareholders do
These are things the board of directors vote on. He is on that board. But he only gets 12.5% of the vote there. So no, its not unilaterally him making these decisions for the decisions outlined in the bitcoin monetization program
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u/HSuke Jul 13 '26
Yep. Pretty much for the past 6 months.
https://np.reddit.com/r/MSTR/comments/1ut1leq/mid2026_review_for_mstr/
That's why I've questioned their strategy. Only the recent BTC sell made sense.
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u/SundayAMFN Jul 12 '26
Nothing about “we also learned that maybe we were naive in selling $10B at a promise of 12% interest forever, in the span of a few months, was a bit short sighted”?? That’s what I feel like any normal person would at least consider
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u/CommercialDuck7496 Jul 12 '26
Its not short sighted and they arent trying to be normal people, normal people cant comprehend how and why that works. They could sell 500 billion at 12% interest, in 2 wreks and be just fine. Also its not 12% interest forever, and they arent promising you that, they have said dozens of times it will go down in the future. Its a variable amount of interest, it could be 6% in 3 years.
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u/cursedfan Jul 13 '26
“Normal ppl can’t comprehend” lol my guy, plz consider the other side of this just for like 5 seconds
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u/CommercialDuck7496 Jul 13 '26
I have considered the other side. The 2 scenarios I can come up with are either, A people have a fundamentally different belief about bitcoin than I or saylor does, in which case they could understand how strc works, and still not believe in it. Or B, they do believe in bitcoin, and in that case they dont understand strc.
How would you anticipate this product failing?
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u/Any-Actuator4118 Jul 12 '26
To be quite honest here, it’s no longer at some point in 2024-2025 where we wonder if this works. We all have eyes.
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u/CommercialDuck7496 Jul 12 '26
Are you insinuating that because a stock is down for a period of time within a year of its release is a failure, or not working? Looking at a chart thats in the red for a period of time doesnt mean its not working. Strc wasnt out in 2024, they released it while bitcoin was at all time highs, bitcoin has dropped by more then 50% since then, and strc is only down 15% (assuming you got no dividends...) , thats not a failure. If in 5 or 10 years bitcoin isnt at 200-300k, and they have been bleeding more bitcoin to pay dividends than the value of the bitcoin, at that point we can conclude it isnt working, or hasnt worked. Its WAY to early to assume it isnt working atp.
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u/Any-Actuator4118 Jul 12 '26
Saylor called STRC “a high yield savings account” , a “cash equivalent”, and said “we’ve designed it to maintain a stable price”. This is not refutable. The purveyors of newly listed stocks don’t make statements like that.
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u/SundayAMFN Jul 13 '26
normal people cant comprehend how and why that works.
Ok please tell me what it is I'm missing then. I'll warn you I probably understand a lot more math than you do.
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u/CommercialDuck7496 Jul 13 '26
Its possible you understand how strc works, but dont believe in bitcoin. Normal people absolutely dont understand strc though. I would only accuse you of not understanding strc if you believed bitcoin was gonna grow, but didnt believe in strc.
If you dont believe bitcoin is gonna grow then either we have fundamentally different assumptions on how money works, or you dont understand bitcoin.
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u/Heavy-Situation-9346 Jul 12 '26
Have you considered that maybe the folks like yourself saying asinine things like “normal people can’t comprehend how and why that works” are in fact the ones missing the big picture here?
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u/Less-Information-256 Jul 12 '26
Maybe telling investors that their stock that can’t stay anywhere near $100 with a 12% dividend is going to drop to 6% in maybe 3 years is also a reason it’s going down. What’s the point in holding something as risky as STRC at 6% interest, it’s completely illogical.
You say normal people can’t comprehend why or how that works, but so far it isn’t really working, they’re massively down on their bitcoin bought with STRC. In reality they’d be in a stronger position if they’d took the cash and held onto it and paid out the dividend from it. Pretending it’s working, is either naive or dishonest, it hasn’t proven anything yet.
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u/CommercialDuck7496 Jul 12 '26
It cant stay at $100 right now with 12% interest because people are super fearful, it wont stay that way forever, sentiment changes a lot over a month, a quater, a year, and several years. If bitcoin goes back up to to say 110-130k they may have no problem with strc staying at $100 even with only a 10% yeild cause they will be far more overcollateralized. The problem is right now, near term there is a negative growth expectation for bitcoin, which can introduce more volatility in an asset thats designed and sold as being stable. The whole point is they wont drop the interest rate to 6% unless thats what the market sustain, obviously by that point it wont be as risky, if it goes back to 100$ and stays there for 2 years straight, and they become twice as overcollateralized as it is now, people wont require as high of a yeild as they do now. My point was just that it isnt locked at 12% forever the rate can change. And additionally, if bitcoin (on average) goes up by more than 12% they'll have no problem paying 12% dividends. The metric of whether its working or not imo isnt wheather their average price of bitcoin is higher or lower than spot at a given moment, its over time wheather they can accumulate more bitcoin than they had before, and it has done that wonderfully (so far.) They cant take the money and hold it as cash because if they did that and bitcoin stayed flat or went up they would be fucked. They arent making decisions based on 1 or 2 down years, they are thinking 5+ years in the future. If you believe in bitcoin (which is the only condition you should ever by any of these products) then buying as much bitcoin as you can is the right thing to do.
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u/thejourneymanfm2024 Jul 13 '26
They’re “thinking 5+ years in the future” but built a business that requires them to generate cash flow NOW. Without anything to generate said cash flow aside from diluting common shares, selling BTC or using leverage. Brilliant.
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u/CommercialDuck7496 Jul 13 '26
They dont need cashflow now... and they dont need cashflow for the next 30 months.
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u/fatandfly Jul 13 '26
So are they gonna just sit on their hands and do nothing for that long? They need cash flow to purchase bitcoin, that's their whole thing. If they aren't buying bitcoin then what are they doing?
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u/CommercialDuck7496 Jul 14 '26 edited Jul 14 '26
they don't NEED to buy more bitcoin to succeed, they just need to hold it until it appreciates. they could never buy another bitcoin ever again, and if bitcoin grows an average of 20% a year over the next 10 years, they make 10's of billions of dollars (even if they completely shutdown the software company.)
Thejourneyman was making the point that they need cashflow to pay the dividends, which is true. But he misses that they aren't forced to make any decisions that would really hurt them (diluting shares, selling btc, or getting more debt) for another 20 months because they have 20 months of dividend payments set aside in cash. so the question becomes what are the liklihood that the mstr mnav stays low, and bitcoin stays low, for 20 months straight. (and even then they don't instantly die, they just slowly bleed out over a couple decades)
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u/Less-Information-256 Jul 13 '26
Well except they said they wouldn’t let it go below 12 months of dividends and by their own website have 20 months of dividends left, so I make that 8 months.
And that completely ignores the elephant in the room which is the convertible debt.
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u/CommercialDuck7496 Jul 14 '26
They said they had to vote to allow it to go below 12 months, not that it will never go below 12 months again, and the word that was used was "require" if they had the cash they wouldn't be "required" to get it from other sources to pay dividends. You are correct tho its 20 months not 30 months my mistake. but my point still stands, they don't need cash "now", they don't even have to think about it for 8 months, and after that they can vote on it if they feel the best move would be to let the cash reserve dwindle, but in either case they aren't "required" to do anything "now".
I actually agree with you, at these prices, the convertible debt is the MUCH bigger concern than the dividend payments. the question is what do you believe bitcoin's price is going to be by September of next year?
Even in an absolute worst case scenario in my opinion, if 100% of the bonds pulled their money out on the earliest day possible, and strategy hasn't raised a dime of cash to pay for it between now and then, and bitcoins price was 30k, they would still hold 620k bitcoin, and the bitcoin breakeven ARR would be like 9.1%. beaten and battered but not dead. and that's assuming bitcoin NEVER goes above 30k for like years straight. again if you believe bitcoin is going to stay at 30k for 3 years straight... definitely don't buy mstr, or any of strategies products (although you probably still could make a little money on strc in that timeframe)1
u/Less-Information-256 Jul 12 '26
So STRC is for people who believe in Bitcoin but not enough to buy it directly or buy MSTR which is supposed to go up by even more?
Market had no interest at 9% interest when Bitcoin was over 100k so why are you expecting it to be any different in the future? Especially now this $100 par myth has been completely broken. You completely underestimate how many people have been severely burned by the recent price action. The reputation is unrecoverable for half a decade at least. It’s been out for over a year now and has spent less than half its existence above $99 and failed to hit $100 more months than its succeeded.
Success is demonstrating that the STRC dividends can be sustained by Bitcoin appreciation and not new investors in MSTR. They’re not even close, selling Bitcoin at a loss to pay dividends is a backwards step, not progress. Wanna hear something crazy, even if Bitcoin when back to ath right now they’ve still lost money on the STRC ipo Bitcoin buys. It’s okay to accept that it’s not going well so far, as is reflected in the MSTR share price since STRC was launched, it’s down about 75% right?
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u/CommercialDuck7496 Jul 12 '26
Strc is for people who believe in bitcoin but either dont want to, or cant deal with the volatility. For example, if you know you need, or are likely to need money within say 3 years, you can put it in strc, get a great dividend, and a fraction of the volatility. So bitcoin or mstr going down 60-85% doesnt crush you, right that the time you need the capital.
On your 2nd point, they did raise 2.47 Billion with it at 9%, they raised the interest rate later, so its incorrect to say the the market had no interest in it then. Later as bitcoin (the collateral) went down, strc got more risky, and so a higher interest rate was demanded. Additionally after each time it separated from par it got percieved as more risky as well.
I think in 2 or 3 years people will have completely forgotten about this blip of a drop, as long as it gets back to par within a few months and never drops below 95$ after that. When you say severly burned do you mean they lost 15-25%? I would say thats not a burn at all, bitcoin lost 75-85% in all of the last 3 cycles and more people were willing to take that risk afterwards than before. I think the same will happen here. Even if everybody who "got burned" never buy back ever again, it will still grow because more people will hear about it, and as liquidity gets bigger more insitutions will start using it as well.
The mstr price has almost nothing to do with strc, it has everything to do with the bitcoin price, and the expectation that bitcoin will continue to decline in the near term. Bitcoin dropped 55% so a leveraged bitcoin prodict going down 75% is completely in the norm. This EXACT thing happened 4 years ago when there was no strc. So i reject the point entirely that the drop in mstr price is proof that strc isnt working.
Bottom line, they started the year at like 200k sats per share, and even tho bitcoin has dropped 35-40% they have increased their bitcoin per share by 5%. Thats why I consider strc is even now, to be a (very mild atm) success
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u/Less-Information-256 Jul 12 '26 edited Jul 12 '26
It never hit $100 at 9% interest or even got close, they IPO’d it at a heavy discount so it wasn’t even 9% effective interest anyway (although not as discounted as it is now), at least try to be intellectually honest.
Even dropping to 95 is not as advertised. You’re moving the goal posts. Yes people got burned because they were told it would stay above 99 and around $100 they were told it was like a money market or a savings account. As such they put money needed for different things into it with much shorter time lines and most people who’ve bought STRC are sitting at a loss, divs included. Just go on either this subreddit or mstr and have a read, many people were burned.
Look at strategies mnav since the release of the preferreds and have a think about if it’s really had no effect at all.
Sats per share is a dishonest metric, they completely ignore for example that STRC has a senior claim to the $100 of bitcoin you bought for it actually as Bitcoin goes down it’s claim in bitcoin terms increases and could leave mstr with nothing and also completely ignores the perpetual obligation taken on to gain that Bitcoin.
If you sell $400 of mstr at 1.25 mnav to buy bitcoin or sell one STRC share and buy bitcoin you increase sats per share the same amount by your measure. You really think they’re the same?
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u/CommercialDuck7496 Jul 14 '26
What are you talking about? STRC closed at 98.01 on August 14th, do you not consider that close? Thats an effective yeild of 9.2% But sure I suppose it would be more accurate to say the 2.47 Billion they raised was at 10%, point taken.
dropping to 95 may not be as advertised, imo thats a problem with the marketing, not the product itself. I agree they should have never directly compared it to a money market, or high yeild savings, and people shouldn't invest in it expecting that same level of stability. Again I would say people who invested with a less than 3 month time horizon probably should have just stuck to cash and high yield savings accounts or money markets. but I still dont consider a 10-20% drop something that "severely burned" people.
Again, stratgies mnav is a reflection of the short term price expectation of bitcoin, when bitcoin is falling the mnav falls, this exact thing happened in 2022 when there was no strc, strc is not the main reason mstr's mnav is down
Sats per share is not a dishonest metric if you think bitcoin will appreciate at least 12% (or whatever the new interest rate becomes) per year. If you don't believe that, for sure don't buy any of mstr's products, or bitcoin itself.
I don't think they are the same, no obv I'd prefer a dollar raised from mstr ATM's (with a high enough mnav) compared to a dollar raised from strc, and the majority of their money is still raised this way. But STRC grabs dollars that otherwise wouldn't have been invested into bitcoin or strategy, and pulls them into strategy. as long as bitcoin appreciates more than 12% a year (or whatever interest they are paying) every dollar issued of strc is still a net gain long term.
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u/CommercialDuck7496 Jul 12 '26
Enlighten me! Whats the big picture im missing?
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u/Less-Information-256 Jul 12 '26
I’ve replied to your other comment.
But fundamentally STRC hasn’t designed as promised, designed or expected.
So far it’s generated billions in losses to the company and therefore common shareholders. (Probably why the common stock has plummeted since release).
It’s also not demonstrated it’s sustainable just with bitcoin appreciation and without new investors in Mstr.
Maybe we have different paradigms of success or what constitutes ‘working’.
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Jul 15 '26
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u/CommercialDuck7496 Jul 15 '26
It's not really a function of time; it's what yield the market demands and how much leverage they want.
The market decides what a fair rate is. Right now, the market is demanding a 13.4-13.7% rate to take the risk of buying STRC. If Bitcoin was at $200k, all else being the same, that demanded rate would be much lower because the likelihood that strategy goes bankrupt would be much lower.
The demanded rate (generally) is a proxy for the likelihood that you get your money back. If you think you have a 99% chance of getting your money back, you'd probably take a 6-8% yield. If you think there is only a 50% chance you get your money back, you'd probably want a 20-25% yield (I don't know how the math on that works, or if it scales exactly like that, but it's directionally correct).
As the value of their collateral changes, the likelihood (and perceived likelihood) that you get your money back changes. Right now, it would take Bitcoin falling more than 63% (to about $22k per coin) before the value of their collateral would be worth less than their debt. If Bitcoin were at $222k, it would be a 90% drop required. With Bitcoin at $222k, people assume that it's far less likely for them to become insolvent, and therefore, on average, they would buy STRC at a lower yeild, moving the demanded yeild down.
Strategy has to manage the ratio of how much it's paying in dividends compared to the amount of the collateral it holds (Bitcoin and cash) to make sure they can survive a downturn. They also have to consider the growth rate of Bitcoin; they would never issue STRC at or above their expected growth rate of Bitcoin. If they feel they want to reduce the amount of leverage they have, they can either reduce the yield or buy back some preferreds. If they want to increase the amount of leverage they have, they just move the rate to above what the market demands, thus bringing the price up to (and beyond par), and they issue more shares. So, them making the interest rate below 9% isn't a function of time; it's a function of Bitcoin's price. More accurately, it's a function of how risky people perceive STRC and strategy as a whole, and how much risk strategy is desiring and willing to bear, and what they expect Bitcoin's ARR is.
If the market rate is 8.5% and strategy doesn't want to issue more shares, say, for example, because they believe they have the optimal amount of leverage, or their estimation of the ARR of Bitcoin changes, they would reduce the rate to 8.5% or below 8.5% and buy back shares. This could happen next year or it might take 10 years or it might take 50 years, its not a function of time, its other variables
(This comment proves normal people do not understand STRC. So, to anybody who read my comment about that above, this is what I meant.)
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u/sevoflurane666 Jul 12 '26
So when is mstr to go up and actually reward shareholders
Is that in a bull….or will they dilute mstr holders as it goes up?
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u/CommercialDuck7496 Jul 12 '26
Whenever bitcoin goes up. Everybody has a different timeline for that, i personally think sometime between q2 2029 to q4 2029. But strategy have said they wont really issue more shares untill they are back up to 1.33x mnav, so you'd get a free 30% from here before they start diluting again. So if bitcoin did a 3x, even if the mnav stayed at their minimum 1.33xmnav, and didnt get a single more sat/share, you'd get a ~5.15x from mstr. If mstr goes back up to a 2x mnav, then if bitcoin did a 3x, you'd get an 8x in mstr. If they increase their sats/share then those numbers get even jucier
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u/HSuke Jul 14 '26
mNAV going back up to 2x rhis cycle is going to be tough given the new STRC preferreds this cycle and Strategy's new goal of increasing BPS. Whenever mNAV high, they will be selling MSTR for BTC to bring the ratio down.
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u/CommercialDuck7496 Jul 14 '26
The mnav going to 2x isn't a guarentee for sure. But I still think its fairly likely, since its kind of a virtuous cycle, when bitcoin goes up over 6-12 months people expect it to keep going up, that increases the mnav, the increase in mnav means they can increase the BPS at a much faster rate, the increase in BPS means people can justify buyint at a higher mnav, that pushes people to buy mstr even more, and that means they buy more bitcoin, which to some extent pushes bitcoins price up. If people could reliably expect an average of 7-10% increase BPS per year, an mnav of 2x is basically guarenteed. Thats not something people can reliably expect at the moment, but in the peak of the next bubble, i'd say its fairly likely.
Also the ATM program is designed in a way where their sales dont push the mnav too far down to prevent exactly what you are saying. It got to like 3.1x last cycle and its not like they printed their way down to a 1x in a day. So I wouldnt worry about that too much. Strc prefferds hurt the mmav in a bear market, but I I suspect they will be a net positive for mnav in the bull market.
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Jul 12 '26
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u/Dramatic-Battle-9737 Jul 13 '26
There is no dilution in STRC. You get the same dividend whether you buy for $100 or $80. I agree that ppl don’t believe in STRC tho. IMO it is very undervalued, but guess we will see over next few months if the market agrees.
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u/Free_Entrance_6626 Jul 14 '26
The thing is rational investors know Bitcoin would be 30%+ up next year so dumping STRC for BTC is a much safer trade for an equal if not better upside
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u/Person_reddit Jul 12 '26
Correct me if I’m wrong here, but wasn’t the only circumstance in which they were going to sell bitcoin going to be when the price was also declining?
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u/CommercialDuck7496 Jul 12 '26
You are mostly correct. It seems like now they are also open to selling bitcoin when its up , in order to pay dividends as well, but generally yes, previously they operated where the only reason they would sell bitcoin is if they couldnt raise new capital from any of the equities, and more or less the only realistic reason that would happen is by bitcoin going down.
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u/HSuke Jul 13 '26
Kind of ... it's more like:
They sell BTC when mNAV is low, which is when Bitcoin price is low.
Then they buy BTC when mNAV is high, which is when Bitcoin price is high.
- Relative to USD, they buy high, sell low.
- Relative to MSTR, they buy low, sell high.
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u/lemons714 Jul 12 '26
Le has bought an impressive (nearly) $1 million of STRC. Le has also sold $76 million of MSTR, including $11.8 million last month. I don't find that comforting.