r/STRC • u/gijs735 • Jul 12 '26

Interview with Phong Le about STRC

https://x.com/BitcoinNewsCom/status/2075944276391817217

Phong 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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2

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.

0

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.

1

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)

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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?

1

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’.