Michael Saylor says Bitcoin backing alone could not keep Strategy’s 12% yield preferred stock at its $100 target. Instead, credit investors wanted a cash cushion before they returned.
The Strategy executive chairman made the admission at ParaFi Investor Day. Yet in the same talk, he called digital credit the strongest credit in the world.
Why Bitcoin Collateral Was Not Enough for Credit Buyers
Stretch (STRC) is Strategy’s perpetual preferred stock. It pays a 12% annual dividend and targets a $100 share price.
However, STRC slipped below par early in the summer and later fell to roughly $75. Strategy responded with a US dollar dividend reserve and a share buyback program.
According to Saylor, the company repurchased about $1.5 billion of STRC, pushing it back to within a few cents of par.
The episode changed how he thinks about collateral. Credit buyers would rather see three years of dollars than 30 years of Bitcoin, Saylor said.
What Michael Saylor’s Bitcoin Lesson Means for Digital Credit
Saylor now describes digital credit as an alloy of capital and cash.
“If you created it as 98% Bitcoin and 2% cash, it tends to buckle. If you make it 70% Bitcoin and 30% cash, think of stainless steel.”
Michael Saylor, YouTube
As a result, Strategy now holds about three and a half years of dividends in cash, according to Saylor. The company also wants to pay STRC dividends daily if shareholders approve the change.
Saylor also expects STRC to eventually trade 400 to 500 basis points above the risk-free rate. That would be roughly 200 to 300 basis points tighter than today, he said.
Meanwhile, the cash focus has a cost. In recent weeks, Strategy has spent more on buybacks than on new Bitcoin.
Critics such as gold advocate Peter Schiff argue the company has lost its Bitcoin-buying power. Saylor sees it differently. He noted that credit investors typically want a three-year track record, while digital credit is only in its second year.
Ultimately, Michael Saylor’s Bitcoin credit model now leans on dollars to win over income investors. Before digital credit gains wider acceptance, Saylor said, it must prove it can survive bear markets.
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