How MSTR Can Go To Zero

How can a company with soon no debt that ever comes due, face a forced liquidation scenario? If dividends can be suspended at any time on the preferreds with no real consequences, it is as if the digital credit can temporarily disappear until the price of bitcoin recovers. MSTR is actually much more valuable, not less.

You're assuming the conclusion with "divs can be suspended with no real consequences." You ever seen what happens to a stock that even cuts its dividend a little bit?

Yes many times. The preferred stocks whose investors rely on the dividend will sell and they will get hammered. MSTR may inversely go up after an initial drop as investors realize the company is more valuable now that it dropped the need to sell or monetize the bitcoin to pay the dividend.

No, what would actually happen would be that the market would no longer trust preferreds from that company again, and so it would never again be able to use them for financing new BTC purchases. What do you think that would do to the common? Is there any reason then for it to ever again trade at a premium to NAV?

If MSTR pauses dividends on the preferred’s, they have many other options. They can still borrow money with term debt, convertible debt, create off balance sheet partnerships like the Mag 7 is doing now with AI, issue warrants for capital infusion, etc. to buy bitcoin really cheap. They can also use the MSTR ATM. With no dividend payments and no convertible debt, that big stack of bitcoin is unencumbered. So many options. Oh and by the way, the next halving is in less than 2 years. More scarcity is arriving very soon.

And you think mNAV would be above 1.0 in this scenario allowing for accretive issuance??!

It doesn’t matter what they trade at anymore. They don’t need the MSTR ATM. They can sell small amounts of bitcoin to pay dividends and take a tax loss. They can use STRC and soon a daily dividend product to raise much more capital for Bitcoin than they sell. The eventual end of day parking of funds to get a daily dividend 4x a money market return will be huge. What matters is that most think MSTR can be liquidated like you did in your video. It can’t be “margin called” because it doesn’t use margin. It can’t be liquidated because after the convertible debts are easily paid off, they will debt free. If they don’t pay the pref dividends the pref holders have no recourse over MSTR. If they suspend the dividends they can still borrow money on their unencumbered bitcoin stack. MSTR is the most misunderstood company because most don’t understand Bitcoin and then the rest don’t understand the true structures of their products.

If they ever suspend the STRC dividend, they'll never be able to raise capital again at 11.50% or at all. It's unclear what would happen if they even cut the STRC dividend by 1%. In the video, I talked about liquidation just to demonstrate how the capital structure waterfall works. You don't understand how a liquidation works-- even with zero debt, you could still have a liquidation in a wind down where the remaining BTC is sold off and distributed to the STRC and other preferred holders. If there's not enough to go around, MSTR holders get zero

This video has the distinction of being the first MicroStrategy explainer that I could understand and follow through. Thank you Matt!

@PunterJeff Could you and Matt do a podcast about whether or not $MSTR could be liquidated? Likely scenarios Or do a reaction video?

This is gonna age bad. The business model is simple. Debt is fixed, assets compound but you don’t seem to point this out… Credit to @AdamBLiv for the photo.

@comic In 2022 Strategy had more debt than assets and the stock did not went to zero. Like you say, this math is about a liquidation event, but if there is none, it is useless.

Position in the capital stack in a liquidation event I think matters less than most people give it credit for. It's a fairly binary event for all holders.

Totally deficient comprehension. Your stubborn insistence to argue a (wrong) point that has already been thoroughly refuted is like the neophyte chess player, whose understanding of the game is so limited that he remains at the board after the master has walked away -- gloating over the narcissistic delusion of victory; not grasping the fact that he has been checkmated by the master.

You don't need a stupid 30 min video. If Bitcoin is successful, MSTR will be too. If Bitcoin fails, MSTR fails too. 30 min video?? Lmao gtfo

I don't need a stupid 30 min video, but you clearly do because you have a preschooler's level understanding of scenario analysis

We'll come back to this post in 1-3 years and see who was right. Saved.

You're just making my point for me: scenario analysis is forward looking and probabilistic

Saylor aimed his various products, not at Wall Street, but at Bitcoiners. He wanted Bitcoiners to buy his products and touted them as "enhanced" Bitcoin. Many gullible Fiat minded morons sold their Bitcoin to grab these scams and will end up with no Bitcoin and no Fiat!

“You might want to go read the fine print as to where you sit in the capital stack. I haven’t because I don’t even care about these preferreds” … solid analysis matt

"They've raised the dividend rate 7 times!" No mention that it has been stable for months Disingenuous, retarded bullshit. It's getting pretty tiresome tbh

If, if, if… Now do NVDA.

Last time I checked, NVDA had a real business that didn't just involve issuing securities and doing financial engineering

💯 but how would they fail?

I’ve been a long time supporter of your content and I credit you in part of being a diamond hand. It was you before Saylor that I learned about sound money and bitcoin. However, see this post from you saddens me the amount of hate towards Saylor and MSTR. Saylor has done more for BTC and BTC adoption IMHO. If not for Saylor I doubt we be at the level of adoption and education of about Bitcoin. The hate should be at FIAT systems and its derivatives NOT BTCTC! Why is it so hard for Bitcoin maxis to learn about FIAT to BTC conversion like STRC is doing?!?

Thanks for your support over the years. Hopefully this followup video will clear up some misunderstandings:

People are overdramatizing the worst-case MSTR/Strategy bear scenario. Assume BTC stays at $26k for 3 years, Strategy has to pay preferred dividends by selling BTC, and BTC later only recovers to $73k. Yes, that hurts. Rough math: Strategy starts with ~844k BTC and ~221k sats/share. If annual preferred dividends are around $1.6–1.7B and BTC is sold at $26k, that means roughly 60k–65k BTC sold per year. Over 3 years, that is around 190k BTC gone. So the stack falls to roughly 650k BTC, and BTC/share falls toward ~170k sats/share. But here is the key point: That is not an extinction scenario. 650k BTC is roughly where Strategy already was around late 2025. And ~170k sats/share is roughly early-2025 territory. So the stress case is not “Saylor has no BTC left.” It is more like: Strategy loses 1–1.5 years of BTC/share compounding. That is painful, but not catastrophic. The real damage is opportunity cost: BTC sold at $26k would be worth much more again at $73k. Common shareholders lose per-share BTC exposure. The preferred stack becomes a fixed fiat drain during a BTC bear market. The compounding engine goes into reverse. But principal impairment is not the same as liquidation. Even after that stress case, Strategy would still hold hundreds of thousands of BTC and remain one of the largest BTC holders on earth. Bearish? Yes. A permanent hit to BTC/share? Yes. A death spiral? Not necessarily. The correct framing is not “Strategy is doomed if BTC crashes.” The correct framing is: A prolonged deep bear market would convert Strategy from a BTC/share compounding machine into a BTC/share preservation problem. Bad scenario — but far from the apocalypse

Great video & good job on the math and financial context!

@mattkratter my whitepaper The Productive Bitcoin Treasury is out in June. All treasuries should deploy their BTC on Lightning and Ark ⚡️ 🚢

How MSTR Can Go To Zero

If you want to save 25 minutes...

So many red flags - above market "yields" and instead of road showing new products to institutional investors they are shilling it to retail via podcasts.. No real underlying business apart from issue more securities to pay dividends on existing stuff

Hey Matt. Check DM please .

The supply shock will trigger the God candle. After that, Saylor will sell some BTC to buy back preferred stock and debt. He is betting on the arrival of that special candle, which imo will happen if the trend of companies buying BTC continues to accelerate @mattkratter #bitcoin

Yes

Great video, thanks Matthew. MSTR is feeling a whole lot more shaky than it did a few years ago! I cannot be alone in thinking the risk is getting way to high to hold it.

@ConsumingCrypto

Cool that you come up with the conclusion that they will have to be liquidated. Explain what would have to happen for that, with actual numbers, and not just „Bitcoin crashes“.

Good information although giving a little pushback, the entire Financial system can be turned, turned upside down by these big institutions so there’s really no safe place unless you keep your money in your Matress so there has to be some exposure or risk if you’re gonna play in the game and you don’t want to just hold bitcoin

Saying that all DeFi activity on Ethereum or other EVM chains is "scammy" is disingenuous. People build things. They try things. See what works. Just like every other tech innovation since the beginning of time (same could be said for Satoshi and bitcoin).

Ethereum is the biggest shitcoin scam of all time. And it's been such a disaster

Bitcoin has structural limitations. Lightening is a good attempt to solve that but has failed to drive meaningful adoption. Ethereum was another attempt to build something that could scale with smart contracts but execution has been abysmal. I dont fault people for trying

@mattkratter Hi, learn moar

@mattkratter Been in the space since 2016. Still waiting for lightning to drive meaningful adoption.

Is not new that mstr is more risky than Bitcoin itself. I would like a more conservative approach but so far he have been right. Mstr had a lot more leverage last cycle though.

Is it typical to use enterprise value when calculating mNAV or is this unique to Strategy?

EV/BTC holdings is now the standard way to do this across all of these companies. Would be interesting to see if this has changed over the past year, and whether true mNAV going below 1.0 is a reason for changing the metric

Hey Matt at (22:10) you say something that no one wants to address — paper Bitcoin. Why is it that you nor any of the many BTC evangelists never address the elephant in the room — price manipulation via paper Bitcoin. Here’s a show topic for you “Can Bitcoin Survive if Paper Bitcoin Thrives?” You know it, we all (should) know it, there’s rampant price manipulation going on everyday. The same that’s gone on for decades with gold. Remember that JPM paid a $920M CFTC fine in 2020 for manipulating gold. What makes you think that this isn’t happening today with more advanced tools & technology? No one has answered this question. Why don’t you talk about it? Can Bitcoin still win if the price is controlled by rogue actors?

I really appreciate you providing this content. I’ve been listening to your recent interviews as well, cementing why it’s Bitcoin only and to run your own node. 🫡

@ryQuant @_Adrian @hillery_dan would be interested in your take/response/discussion about this at some point.