Great post by Matt here explaining why Bitcoin amplification can matter dramatically more than cost of capital. A lot of people like to obsess over the dividend rates, but what actually hits the common stock? It is cost × scale × amplification. Here’s an actual sensitivity test with two... mathematical examples. I ran the exact same Bitcoin treasury model twice. They have the same BTC purchases, same preferred issuance, same capital structure, and same BTC path. The only thing I changed was the dividend rate on new preferred capital: 13% vs. 15%. If Bitcoin ends at $150K: 13% prefs → 26,662 sats/share 15% prefs → 26,466 sats/share Difference: 0.74% If Bitcoin ends at $250K: 13% prefs → 32,225 sats/share 15% prefs → 32,062 sats/share Difference: 0.50% Obviously, cheaper capital is better when everything else is equal. But that's the point. A 200 bps difference in preferred cost moved the modeled common-equity outcome by less than 1%. Matt's math is right. Now take the thought experiment one step further. Assume two companies each begin with $100M of common equity, Bitcoin rises 50%, and both can invest their preferred proceeds into Bitcoin. Company A can raise $50M of preferred capital at 13%. $150M of Bitcoin appreciates to $225M. Subtract $50M of preferred principal and $6.5M of dividends. Ending common equity: $168.5M Common equity return: +68.5% Company B has to pay 15%, but its investor base and liquidity allow it to raise twice as much: $100M. $200M of Bitcoin appreciates to $300M. Subtract $100M of preferred principal and $15M of dividends. Ending common equity: $185M Common equity return: +85.0% So the company paying the higher cost of capital produces the higher common-equity return: 13% financing → +68.5% 15% financing → +85.0% That is a 16.5 percentage point advantage despite paying 200 bps more for capital. Assuming an unchanged valuation multiple and no common-share dilution (could be accretive economically), those are also approximately the stock returns. This is why obsessing over the lowest possible preferred coupon can miss the bigger variable. Cost of capital matters, but how much accretive capital can you raise and deploy is a lot more important. Amplification overwhelmingly drives shareholder returns:show more

Adam Livingston

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