Strategy Inc (MSTR) Earnings Call Transcript & Summary

Welcome back, everyone. Welcome back. I hope you are all ready for what I believe will be one of the best presentations at this year's conference. But I must admit as a Bitcoiner and the covering analyst on Strategy stock, I'm a bit biased. I'm Michael Colonnese, Managing Director and crypto analyst here at H.C. Wainwright, and I am very excited and honored to introduce our special keynote speaker for today. He is the Founder and Chairman of the world's first and largest Bitcoin treasury company, Strategy. A company that has accumulated nearly 640,000 Bitcoin worth over $70 billion in just 5 years. And he probably purchased another 5,000 this morning before the event. Since launching its Bitcoin strategy in August of 2020, this company has generated significant shareholder value with MSTR outperforming Bitcoin and every stock in the S&P 500 over the period. Our speaker was a true visionary recognizing and harnessing Bitcoin's value as a treasury reserve asset long before it was popular to hold on your balance sheet. And without further ado, ladies and gentlemen, please join me in welcoming the pioneer behind the Bitcoin treasury strategy, the Bitcoin Maxi of Bitcoin Maxis, a man who needs no introduction, Michael Saylor.

I'll forgive if you've not worn an orange tie. We got extras on our company store. Thank you for joining me today. I'm going to speak a bit about commodities. I'm going to speak about equity. I'm going to speak about credit. I'm going to talk about how to create a huge amount of shareholder value and what I find to be most exciting in the coming 4 years. Well, let's start with the commodity, Bitcoin. Bitcoin is digital capital. And in the years 2020 to 2024, those were the crazy years where a few people would have agreed with me, most people didn't agree and even more people didn't understand what that phrase meant. I think that from 2025 to 2029, these are going to be the years of rapid institutional adoption, acceleration and if you had to put your finger on one catalyst for it, it's that man right there. The red sweep in November catapulted the entire crypto economy into the mainstream. The headwinds that were blowing in the face of Bitcoin and crypto in general became tailwinds. We had a President that said never sell your Bitcoin. I'm going to make America the Bitcoin superpower of the world. I want us to be the crypto capital of the world. I would say that the world view toward Bitcoin was grudging acceptance before November. I'm going to let -- Gary Gensler would have said, I'll let it live. I don't like it. I can't kill it. I acknowledge that it's not a Ponzi. I hate everything else. And after November and after these sweeps, the view became, ah, Bitcoin is a crypto commodity. We like a lot of things going on in the economy. We like 24/7, 365. We like stable coins. We like crypto exchanges. We like money moving at the speed of light. We like self-custody. We like property rights. We like digital, we like global, we like the future. This is the force of progress, right? The entire attitude switched from one of grudging acceptance to one of enthusiastic embrace. We had one cabinet member a year ago that would have acknowledged Bitcoin exists as a thing. And every other cabinet member would have been ignorant, skeptical or cynical. Now we have 12 cabinet members who are enthusiasts. They like it. The head of the FBI likes it. Think about the fact that Tulsi Gabbard is a Bitcoin fan or Kelly Laufer or Robert F. Kennedy or the Vice President and the President. This is an extraordinary sea change. Maybe the -- I don't know when in the history of the capital markets, you went from people not acknowledging the legitimacy of an asset class to the entire cabinet enthusiastically embracing an asset class, right? That's happening, and we're not even 12 months into this. The White House is embracing crypto and it's embracing Bitcoin and it's driving positive policy all throughout the government. The ETFs that Wall Street launched not even 2 years ago, are the most successful ETFs in the history of Wall Street. We've got 1.5 million Bitcoin held on those ETFs, that's exploding BlackRock's IBIT is just an explosive phenomena right now. I think it's like the #4 ETF. In 4 to 8 years, it could be the #1 ETF. That's how fast it came out of nowhere. Our company was the first public company to buy Bitcoin in August of 2020. We bought $250 million. People fell off their chair, thought we'd gone insane that was the most amount of money had ever been invested in the crypto network in the history of the world. I didn't know that. It just seemed to me like it was a good idea for us. And so we moved, but then it was 2 and then 4 and then 20 and then 40. We had about 60 about a year ago. And we're up to 180 publicly listed companies. So the last 12 months has been explosive. Even the past 6 months has been explosive in terms of public company adoption. This morning, we announced we bought $217 million worth of Bitcoin. I didn't feel like it was a lot, last week was a 4-day week, 4-day week. But keep in mind that we spent -- it took us 30 years to buy $250 million in August. And so it gives you a sense of scale on how things are moving. This chart gives you another view of this. What's the significance of this? Okay. Well, here's the significance. When your best friend decides they want to buy Bitcoin, they sweep 10% of their cash flows into it. When a private company wants to buy Bitcoin, they sweep half their cash flows into it. When a public company decides to buy Bitcoin, they become a viral super spreader. Metaplanet was a $10 million bankrupt hotel chain in Japan a year ago, and they have found a way to buy $2 billion worth of Bitcoin in like 12 months. They may be the largest hotel company in the world in another 24 to 48 months. They may be the largest company in Japan in 4 to 8 years. What you've got with a public company is public companies aren't limited to, oh, I only spend $100 million a year. I can spend $100 million a month and double it every month, right? Once -- it's more like I start a fire, and I throw it into a gasoline warehouse and the thing becomes self-feeding and it just takes off. So every single public company could become a $1 billion, $10 billion or $100 billion amplifier, right? They're all amplifiers of this movement. And that's the part that is so incredibly powerful. There's probably nothing more powerful than putting a commodity, capitalizing a public company with a commodity and then having it public and then plugging into the capital markets because at that point, the company begins to issue securities, whether they're equity or credit instruments. And that's a rinse and repeat trade, right? How much equity capital can you raise? Well, our company had -- we started with a $250 million buy and we raised $47 billion in 5 years. So what is that? Well, I mean, at this point, we raised more capital in a day than we could have generated in earnings in a year, right? You're accelerating by a factor of 100 or 1,000. Which one of these companies will do that? Well, there's no telling, but the point is they're popping up in the U.K., in France, in Sweden, in Brazil, in Japan, in Canada, everywhere, and each one is a different capital market and each one of these is a super spreader of the Bitcoin virus. There's a Bitcoin 100 now, companies are racing to get into it. They just -- we just crossed 1 million Bitcoin in that group, and that's going to probably accelerate. A lot of the companies on the left side of the screen, XXI, Bitcoin Standard Treasury company, they're -- Nakamoto. They're all coming out of de-SPACing processes, and they've been in registration and kind of dormant. Once they get through that process, they go active, and at that point, they can start to issue effectively unlimited securities of equity or credit instruments and they become amplifiers. Now if it turns out, there's 180 companies holding Bitcoin, then you got to imagine all the equity analysts start to have an opinion on Bitcoin. And so this is a roundabout way of getting Bitcoin coverage in the traditional equity capital markets. And every one of these analysts is covering our stock and putting a price target on Bitcoin. They're all above $150,000 for the end of the year. Thomas Lee declared $200,000 for the end of the year this morning. Tech investors. Philippe Laffont has designated Bitcoin, like the #3 interesting tech idea in the world. It used to be before 2020, people thought, well, Bitcoin, it's a crazy crypto speculative asset. And as long as people think of it as a crypto casino speculation, it's never going to get respect of the mainstream. When you start to look at it as digital capital, I took $1 billion block of gold, I dematerialized that, I moved at the speed of light. I've vibrated 1 million times a second, and I distributed it through 1 billion microprocessors. That becomes very interesting to people that made billions of dollars investing in Google and Apple and Amazon and Facebook, and of course, where is all the money in the world. A lot of the money in the world is people that bought the Mag 7 at the right time. So Bitcoin as a technology, is much more compelling than Bitcoin as a speculation or even as an ideology. Financial regulators have now embraced it. It wasn't 2, 3 years ago that the regulators summarily assassinated Silvergate and Signature Bank, they murdered those two banks, right? There's nothing wrong with those banks other than they were actually too crypto forward or too innovative and they got shot in the head. That chilled the entire banking establishment, the credit establishment, the insurance establishment. When my company bought Bitcoin, our insurance carriers dropped coverage. I had to provide D&O coverage for my company because we were deemed too risky. It took us -- when we had a $50 billion of hard collateral, they still thought we were risky, and it took about 5 years before that turned again. So -- it's pretty important. I can't overstate how important it is. That now you have the head of the FDIC, the OCC Treasury, the Federal Reserve, all articulating pro crypto, pro Bitcoin guidance. This opens the door for the traditional finance establishment to bank the asset class and to support the asset class. And you can see from the guidance coming out of the SEC, this is a 180-degree switch. You've got the CFTC and the SEC both pro innovation, pro Bitcoin, pro digital assets, and we've gone from an environment where people were mortified to do anything to an environment where they're enthusiastically charging forward. Bill Pulte, director of Fannie Mae and Freddie Mac to accept Bitcoin or figure out how to accept Bitcoin as collateral for conforming loan, okay? This is tremendous, right? Bitcoin makes its way into the mortgage credit industry. The mortgage industry, then what follows next is it finds its way as good collateral in the consumer banking and the commercial banking industry. And people all -- they asked the question like what's keeping Bitcoin from flying to 500,000. The answer is there's $2 trillion worth of Bitcoin capital gains and people with that money can't get a loan for a nickel, okay? So that entire asset class is unbanked. It's like your employees on a startup made $2 trillion and no one will give them a loan. So they have to sell some of their stock. So what you have is a lot of crypto OG selling Bitcoin right now because the asset is not really financeable. That's changing. And it will probably take, I guess, 4 years. Big banks are bureaucratic, risk-averse institutions and they're large institutions. And look, I don't blame them for being risk-averse. If the regulator literally murdered Silvergate and Signature, I can see why you as the CEO of a bank might be just a little bit conservative about touching that thing, right? The tone at the top was chilling a few years ago. And this administration has gone out of its way to actually reverse the polarity on that. We've got three bills to move through Congress. I mean the GENIUS Act is passed, the CLARITY Act is this fall and a BITCOIN Act. The real key here is this is a very pro crypto, pro digital assets, pro Bitcoin political environment. There's no reason to think that will change in the next 4 years. And what's 4 years mean? Well, we've added about $2 trillion to the crypto economy in a few months. From November, we went from $2 trillion to $4 trillion or something. I would think that we're staring at a $10 trillion to $20 trillion industry by 2028. The genie is not going to go back in the bottle. There's no way you put a $20 trillion industry. You've got 40 million, 50 million Americans that own this right now, give it 4 years with the flow into 401(k)s and retirement. Substantially every -- I will go out on a limb and say, substantially every American with assets is going to own some amount of crypto exposure, and they're going to own some decent piece of Bitcoin by 2028. I find it hard to imagine where the -- it will be hard for them not to. The CEO of Vanguard became very famous for saying he didn't think Bitcoin was an asset. It didn't generate cash flows, and they wouldn't let their clients buy it. Do you know who the largest shareholder is of my company? Vanguard. Okay. So you think about that a little bit, right? Kind of hard to stop an idea whose time has come. States are embracing it and governments are embracing it. This is just going to get louder. And the crypto industry in general, it went from a lot of infighting to being largely aligned at this point, and I think there's an appreciation amongst the crypto networks, the token, the DeFi, the crypto exchanges, the Bitcoin advocates that the entire industry is better cooperating with each other than they are fighting with each other. And following November, I saw a remarkable alignment of interest and a coalescence of a -- a formation of a coalition. This coalition, the entire crypto industry is probably the most powerful political actor in the space right now because they can marshal something like 50 million voters and they're just so distributed and diffuse in their influence and also very aggressive, very aggressive in driving this forward. So the entire industry has become very politically active. Now that's the backdrop, right? As you can imagine, I'm bullish on Bitcoin. I'm bullish on the entire crypto industry. I'm bullish on digital assets. And I think that there is a surge globally, worldwide. And there really isn't -- I don't see any organized resistance at this point, right? There are just various degrees of bullishness at this point. People that don't have anything good to say generally just say nothing at all. They've learned not to walk in front of this truck. There's no upside and standing against this. So I think it's just about the most positive environment that we have seen in the history of the industry. Now what is our company? We are a new class of company, a treasury company. Now what's challenging for people is wrapping their head around a Bitcoin treasury company, and that's because Bitcoin is a new asset class and treasury company is a new corporate type. Now why is it -- what is Bitcoin? Bitcoin is the first digital capital. It's the first perfect money. Well, we never had perfect money in 10,000 years of economic history, the Austrians never saw, the libertarians never saw, the political scientists never saw it. You can't blame them for not factoring into their thinking. They just never saw it because it was impossible to create the semiconductors, public, private key cryptography and the Internet. So Satoshi, like Galileo, Galileo came up with Telescope. We have a telescope and all of a sudden, the Copernican revolution is a foot. Well, we needed Bitcoin for there to be that monetary or capital revolution, and that's what Bitcoin is. And most of the world still doesn't get it, but that's good because the way that you make 10 to 100x your money is to figure something out, while the majority of the world doesn't agree with you or doesn't get it. When they all agree with you, it will be a not good investment. It will be a mainstream investment. You need to be right but you need to be just early enough that 95% of the people think you're wrong. That's how you make obscene amounts of money. So I mean that's Bitcoin. But we put together two novel ideas, treasury company. What is a treasury company. It's a company that accumulates capital and then issue securities against the capital, especially issuing credit, right? What do we do? We're selling credit, right? What does a bank do? A bank buys credit. Our bank is basically buying your mortgage. We are reversing it. We are creating securitized Bitcoin. We're selling an annuity. When you buy Stretch, which is like a 10% annuity, we're selling you the annuity or you buy Strife. We'll give you 10% at par forever, and you're buying it from us. Now how are we promising to give you a dividend for 100 years. That's a long duration liability. We need a long duration asset. So Bitcoin is a long-duration asset, right? You would want to hold it for a decade. It's high volatility. It's -- call it, 120-month duration, 50 vol, 50 ARR. It's a very powerful financial asset, but most of the world doesn't want 120 months of duration, and they don't want 50 vol, and they don't want years where they get nothing and years where they -- this year, we got 100%. They don't want that. So a treasury company sits between that uncertain long duration, highly volatile, high energy future crypto economy and they strip it down, and they give you a 1-month duration, 10% yield, low-vol, low-risk financial instrument at the other end, you're securitizing digital capital or securitizing digital property. Why is it -- that's never happened before. Why isn't there a Magnificent 7 treasury company? Why can't you do this with Apple and Tesla? It's because the SEC 40 Act made any company holding more than 40% of its liquid assets on its balance sheet of an investment company, you cannot lever 100% or 150% the balance sheet of a publicly-traded company in the United States with securities. There is no S&P treasury company. There is no Mag 7 treasury company. There is no Tesla treasury company. Would there be a market for it? If it was legal, absolutely. What I'm doing, what we've done, you could do with the S&P, but the challenge is not in the current regulatory environment. So public companies for the -- since 1940, call it, for the last 85 years, they have had to either surrender their capital, they can give it back as a dividend. There's only one security that Apple can buy. One security, it's called Apple. They can buy their own security. They can buy back their stock. They can dividend out their stock, they can hold short-dated treasuries, money markets or 1-month treasuries or sovereign debt. They could buy real estate or gold, but that's illiquid or they can do some acquisition. But you see what makes treasury companies possible is the creation of a commodity because you can hold 150% in commodities or 100%, a commodity that outperforms the S&P, that is the magic trick. Like I can create a digital commodity that's garbage. If I were to inflate Bitcoin 27% a year, every year ad infinitum. It would be a commodity, but it wouldn't be a good investment. The world is full of commodities that are bad investments. In fact, arguably, every commodity other than gold has been a bad investment over the long term over 10 years. So you need a commodity. It needs to outperform the S&P and then you need to be able to lever a public company, okay? So when did you know for sure that, that was going to work? Well, arguably, after November 5, right? So the reason this is exploding is because you had to be a believer in August of 2020, but all you have to do is be a reader, you just need to read the press and listen to what people are saying in the last 9 months to know that you can actually do this and a public company levered on a commodity can arbitrage the return of the commodity versus the cost of credit or the cost of equity and you can do it in almost -- I'm not going to say risk-free, a very low-risk way, the most intelligent way to generate leverage on a good idea is a public company issuing instruments like preferred shares or some kind of long-dated public debt. It's a much better idea than, say, a margin loan from your local crypto exchange. So we've raised $47 billion of capital over that time frame. Most of it equity, a little bit convertible bonds and about $6 billion is preferred equity. And you can see it's every single quarter, we're building up. We have a little bit more than 3% of all the Bitcoin in existence. Clearly, we believe in the network. We're basically ratcheting the network up. And as we buy Bitcoin, we take it out of circulation and then the price has got to move up so that people can find a willing seller at a much higher price. Now these are all the greatest companies in the world. We have come out of nowhere in 5 years to be the fifth largest treasury in the entire S&P. Why? Because we are positively polarized to capital. They are negatively polarized to capital. If you talk to the CFO of any of those companies with the exception of one, Berkshire Hathaway, the only company on this chart where the guy that runs it would say, I'm going to keep my capital and invest it for the good of my shareholders is Warren Buffett at Berkshire. Everybody else would say, we're going to return the capital to shareholders. We have a capital return program. We're raising the dividend. We're raising the buyback. And they call about it like it's some achievement. But I hear them say it and what I think in my mind is they're saying, we have no freaking clue what to do with the money. We don't have any idea. And so we're just going to give it back to you, you figure it out. I'm like really, you have no idea. Okay. Well, it's okay to surrender the capital unless you're Intel and you need it. It turns out that companies like Intel and DuPont, they return the capital to shareholders. They're worth less than the dividends. Do you really want to run a company where you basically cash out and you eventually dwindle to nothingness while you leave a stream of dividends and buybacks in your wake. And it's like ashes-to-ashes, dust-to-dust. Why do companies die? Why do you have a 10- to 15-year life expectancy for a corporation? It's because of their financial practice. It's because they're surrendering their capital as fast as they can. If I bled you to death, you would die quicker. Like if I showed up at family Thanksgiving dinner and I said, I have a great idea for the family. Let's give away all of our money so that our balance sheet isn't volatile. I mean that's kind of what's happening here. And you'd be like, okay, well, great. I guess someone else will figure out what to do with all of our money. But what if our family needs the money? Don't worry, we'll just work harder, raise our prices and cut our salaries to our employees if we need the money because that's what they do. So that's not a good idea. And the real revolution here is what if we actually replace share buybacks with Bitcoin buys, what if we actually stopped the dividend out the cash flows, what if we reinvested the cash flows? They're like, well, I can't do it in money markets. You're right, you can't. What can you do it in? You need something that outperforms cost of capital. If you find that, if I can return more than the cost of capital, I can, in theory, raise infinite money. If I return less than the cost of capital, I can, in theory, raise no money, right? I'm either beating the cost, I'll give you infinite or I'm underperforming, I'll give you nothing. All these companies have chosen a balance sheet strategy to underperform, and therefore, they deserve nothing. They have to give it all away, right? They're just levering themselves until they're $20, $30, $40 of enterprise value for $1 tangible assets. What happens if we have a bad quarter? Well, you know what happens, stock crashes. We raised $22 billion last year, $19 billion this year. We are doing it with a variety of different instruments. It's not lost upon me the irony that every great company in the world is in the business of getting rid of their capital as fast as they can, and we're in the business of collecting it. What if the collective geniuses running all those other companies reverse the polarity and started collecting it instead of throwing it away. My job would be a little bit harder, right? But right now, we're literally siphoning up the capital that's being pushed into the economy by them. We did four IPOs this year, and we did the biggest IPO, which was Stretch a few weeks ago. And well-run companies only do one IPO. My first IPO was like $35 million, $40 million, right? And it was pretty hard. This one was really easy, right? And of course, the irony is what would happen if a Tesla or what would happen if an Apple or a Microsoft did an IPO today, right? It would be massive, but they're not doing that, right? Again, they're not in the business of issuing securities. They're in the business of buying them back. We are building markets for our securities. So one market is institutional active investors, another is passive investors. The third is retail investors. So the retail channels for retail demand for our securities really dramatically increased with the last IPO. I think we had really about $600 million of retail demand in 2 days. And so we're building that retail business. This chart probably is the most important chart I'm going to show you today, if you just bear in and bear down on it, the cost of capital for the past 5 years is 14%. That's the S&P. Long-dated bonds are minus 4%. That's why every bank was in trouble financially when the Fed raised interest rates. If you had short-dated money like money markets, you're probably getting 2%. If the cost of capital is 14% and all the capital you hold is minus 12% real yield, you're destroying 12% of your treasury a year. That means in 5 years, right, cut it in half. Bitcoin is 55%. And the Mag 7 is double the S&P. Bitcoin is double that, and our company is about 80% more. But what's the opportunity here? Well, the opportunity is you fund your company with the cost of credit down here or with the cost of equity and then you invest it into the digital ecosystem, into Bitcoin and you just grab the spread. And you can do that effectively risk-free. For example, we have a product STRD, we pay 12%. It's a noncumulative preferred. We'll give you 12% ad infinitum. We buy Bitcoin. It's a perpetual swap. We're going to get everything more than 12%. We'll compound it. You'll get to 12%. We could sell $100 billion of that. We could sell $1 trillion of that. Why? Because it's noncumulative and we could suspend the dividend and we never repay the principal. So you've created as a public company, a risk-free unlimited scalable swap but to the extent that Bitcoin performs at the S&P or better, it's a screaming winner. Bitcoin could underperform to 12%. And by selling the volatility and utilizing the float, we would still make money on it. But if Bitcoin performs more than that 12%, then we start to compound at an extreme rate. And that's the kind of instrument that you can't make unless you're a publicly-traded company and you can issue securities. So our business is let's outperform Bitcoin and then let's find a way to tap into the right side of this chart. You can -- by the way, you can see why there are no gold treasury companies or -- real estate and gold are hard because they don't outperform the S&P. It's a little bit challenging. But to the extent that you make money in real estate, you can see -- the way you do it is you lever it 4:1, right? When you look at that chart, if you can lever real estate 2:1, 3:1, 4:1, 5:1, 10:1, right, then you can probably make money. Nobody's figured out how to lever gold. This is the last year. And you can see Bitcoin is up 100%. How do we measure success? Well, our business is to generate additional Bitcoin per share every year. So if you're buying Strategy stock, you own a certain amount of Bitcoin and then we add more. Last year, we added 67,000 Satoshis per share. And then this year, we've added 41,000 Satoshis per share. So you're making money by increasing the Bitcoin per share and then the Bitcoin price is going up. But ultimately, the difference between a Bitcoin treasury company and a Bitcoin ETF is an ETF like BlackRock is going to have a certain amount of Bitcoin and you'll lose 20 basis points a year. That's the fee. You're never going to have any more. But an operating company, you'll have a certain amount of Bitcoin, and then you'll have more each period thereafter. And we call that increased BTC yield, Bitcoin yield. And so this year-to-date, we've had 25.8% increase in Bitcoin per share, right? Our target was 25% for the year. So if a company said, well, we're going to increase the share of -- the amount of Bitcoin you have per share by 25%, then you would think, well, it's worth a premium to the underlying asset. So you're valuing the company at a premium to the reserve because it is accreting Bitcoin through its operation. For the longest time, ExxonMobil was valued at a premium to its oil reserves on a similar logical basis. Here's a snapshot of our business model. On the left side is the crypto economy. We start with Bitcoin. It trades $60 billion to $70 billion a day. It's this long duration, volatile, high energy, high performance, very scary asset, and it's global, and it doesn't stop. And the traditional finance economy doesn't want it, can't buy it. What they want is they want an equity or an option or a credit instrument in a wrapper that they can deal with. So if you buy just wrapped Bitcoin, you're buying IBIT, which is BlackRock's big ETF, and that's been very successful. But what you'll get is the volatility of the duration and the performance of Bitcoin. What we've done is create credit instruments that strip the vol, strip the duration, strip the risk, strip the performance off of it, and we sell that as convertible bond or a convertible preferred or a fixed long duration preferred or this Stride instrument, which is a noncumulative preferred or the latest thing we did, which is Stretch, which is a money market. What's the idea? Well, Strike is structured Bitcoin. I'm going to give you the upside, downside protection and a guaranteed dividend while you're waiting. right? So think of it for more conservative investors. They don't want the roller coaster ride. What they want is like a guaranteed 8.4% yield, and they want to be senior overcollateralized in the capital structure. And they want like a 35-40 delta instrument. They'll get 40% of the upside of MSTR stock, but they won't be getting the downside, and they give up that performance for that principal protection. What are we competing against? We're not competing against the company. We're actually selling this to people that would otherwise buy the S&P index or they buy commercial real estate or they buy into a hedge fund. So Strike is that hedged upside with an 8.4% effective yield, and you could buy that instead of buying real estate. And then -- and you can see the performance and the size of the market. It's a $90 trillion market. I mean people just kind of want -- they want some hedged upside and a guarantee. What's interesting about this -- what's interesting is we can create billions and billions of dollars of this instrument, right? We're not just selling it, we're originating it. We're backward integrated. So when you buy into a real estate fund, they have to go and develop the property. When you buy this instrument, we create it in seconds, right? So we can create it 1,000x faster. It's all homogeneous. So digital credit, right? What's Strife? It's long duration credit. It's like a perpetual bond. And so if you want a certain yield -- you want 9% yield for the next 100 years, that's what you want. That's -- it's effectively 12-, 14-year duration, which means that if SOFR dives, you're going to want to hone this because this thing is going to be yielding 9% when SOFR is 2% or 1%. So it's like 100-year bond, way overcollateralized, 7.6x overcollateralized in BTC. A mortgage-backed security is 1.3 -- 1.5, right? So the perception is these things are risky, but the reality is they're not -- they're the most overcollateralized credit instruments in the market. Who are you aiming that at? Well, we're aiming that at long-dated investors, most of whom are looking at a 4 handle, 4%, 5%, 3%, and we give them 9% if you're that long-dated credit investor. Stride, it's high-yield credit. So we're aiming that at the junk market. It has a 12.7% effective yield, but it's nearly 5x over-collateralized. So loan-to-value would be like 20%. You've got $5 of Bitcoin for every dollar of this asset that's issued. If Bitcoin were to crash 80%, you're still collateralized. If you think Bitcoin is going to go to zero, you don't want to buy any of this stuff. But if you actually think Bitcoin is just volatile and it may go up and down, then all this stuff is within your wheelhouse. What's the universe of comparable assets? Well, there's $2 trillion of money invested in closed-end fund, high-yield corporate bonds, preferred stock ETFs. And you can see for the most part, the liquid things you can buy are 6 or 7 handle, we're offering 12. And what is Stretch? Stretch is the most aggressive piece of financial engineering we've done because with Stretch, what we did is we took that 120 months of duration to 1 month. And we took -- the idea was, I don't want volatility, I don't want principal risk. All I just want is something that pays 400 basis points or 500 basis points more than my bank account, and I want the money back when I ask for it, high-yield bank account, high-yield money market. So we target price stability 100%. And of course, if you walk down the street, you say to 100 people, do you want a 30-year Bitcoin bond that yields 9%, you get like 1, 2, 3 out of 100. But if you say, would you like a high-yield bank account that pays you 10%, that's like 95 out of 100. Everybody wants their bank to pay them 10% instead of 4%. So this is a much simpler idea. To do it, we had to create a completely variable monthly rate. And this, for the most part, is like the first time anybody has done this on a crypto asset. There might have been one company that created a variable rate in the last 30 years. But this is fairly innovative to create a preferred stock where the dividend rate changes every month. No one else had a reason to. In essence, we're creating -- we're becoming like the central bankers of the crypto economy. We're creating a currency. We're setting the rate for the currency, and we're pegging it to the dollar, right? And that's what's going on here. So if we trade below parity, we'll raise the rate. If we trade above parity, we'll lower the rate or -- above par. And what are we aiming at? Well, we're aiming at $30 trillion of money market type instruments, right? Your bank accounts, your money market funds, your short-term treasuries, your commercial paper. And what are they yielding? 4% in the U.S. right now, but probably not 4% for much longer. They'll probably be with a 3 handle shortly. So this pays 2 to 3x as much. You just have to believe the Bitcoin is not going to zero tomorrow. This picture shows you the engineering we've done. What you can see here is that MSTR has got a 56% trailing vol. That's the high vol equity. That's the highest performance security. That's the roller coaster. That's Bitcoin with rocket fuel. Strike is 37 vol, Strife is 27, Stride is 20, Stretch is 14. They're still in the first 6 months. It's the first year. So we're seasoning them. But our goal is to season them and then move Stretch down to below 5, right? We want to get all of these to like fall into the right price performance volatility category. And over the long term, we've laid the framework so that we can build out the entire yield curve and the entire risk curve. So if you studied the insurance business and thought about -- or the mortgage-backed security business, you're tranching risk and you're tranching duration. We could create a preferred that would give you the yield with a trailing 12-month delay, and it becomes a perfect 12-month instrument perpetually rolling forward. And we create a perfect 36-month instrument just rolling forward perpetually each month, right? And so if you want to create a perfect 1-year, 3-year, 5-year, 7-year, 9-year, 10-year instrument, you can do it on this framework. And the beauty is they're very precise, and the credit risk is substantially. I don't know if I want to say an order of magnitude less, but it's some large factor less than using a bond because bonds come due, but perpetual preferreds never come due. And you can see the effect of these. We take them public. We put a shelf registration on them. This is our preferreds versus the liquidity of all the others. You can see most preferred stocks are illiquid, right? They're illiquid, under-collateralized, opaque, heterogeneous credit. Why would you want to buy it? The answer is you wouldn't, and so people don't. But what if they did, right? What if we created one that was not defective, right? What if we created a $50 billion preferred that traded $2 billion, $3 billion a day, and it actually offered 400 basis points more yield. Well, why wouldn't you want that, right? And this is the collateralization of preferreds. And you can see here, most stuff is undercollateralized, and we can overcollateralize because of Bitcoin. If you look at the ETF environment, you see handles of 6 or 7. Now it's very difficult to pay much more than that when the source of your credit is real estate or corporate junk or unrated corporations. But the source of our credit is digital capital and my long-term forecast is about 29% a year for 20 years. My bear case is better than the S&P. So we actually can offer much higher rates without concern. Let's look at the universe of comparable assets. So you see you look at treasuries or agencies or investment-grade bonds, you can see collateral coverage, 1, 2, 1, 1, 4, right? They're all undercollateralized. The durations -- if you want long duration, they're not long enough. If you want short, they're not short enough. If you want liquidity, you can almost never get enough. It's very difficult to get the right combination of duration and liquidity and yield. But you put all those things together and all of the volatility and the performance we strip off the credit instruments accrues right to the equity, so that's how we create amplified Bitcoin. And the results speak for themselves. We've got a 92% a year return for the last 5 years running. And that's allowed us to create the most vibrant options market. That's what allows us to generate the overall return. And so what allows us to attract capital. And what's the target for the equity? Well, we target the S&P 500, the Mag 7, people that might -- that love Bitcoin, well, what's more better than Bitcoin, more Bitcoin, right? So you're like maybe you buy the Bitcoin spot. And what's the result? Well, we're up 16% year-to-date, 181% in a year, 92% every year for 5 years. How does the amplification work? Okay. So I have 200,000 Satoshis a share. If I did nothing, if the company stopped, if we all went on vacation, we've got a $72 billion business growing 55% a year. That's what the business is. We'd keep that Satoshi per share. But if we issue credit to lever it up 10%, if we basically issue $7 billion worth of credit on $70 billion of Bitcoin, you can see the Satoshi per share start to accrete. When you crank that up to 20%, you go to $15 billion, then it accretes much faster. And if you get to 30% leverage, and you could do 30% leverage pretty easily with preferreds even without risk because the preferreds never come due. So you're actually on the hook for the dividend, but not for the principal. So you can see here, you get an amplification factor of 2.8. So you're getting on the back end of this 2.8x more Bitcoin than you started with. If you put these on the tables, what you can see is that when you run with 30x leverage, if Bitcoin grows 30% a year, you're going to actually get 3x as much as if you held the underlying ETF. So what's the source of the premium? It's the credit amplification. Where does the amplification kick in? Well, this is kind of -- you all recognize this from the banking model, if you understand banks and how they use preferreds or any kind of levered finance model. The amplification kicks in as you get more leverage. It kicks in if the underlying Bitcoin grows faster because you're compounding that. It kicks in if the dividend rate falls or the cost of capital falls, right? If you're a Metaplanet and you go to Japan and you issue a preferred stock in Japanese yen at 5%, you're going to get a lot more leverage and you're going to get -- and you'll get more amplification. You can see it here, right? You go from 10% to 5%, you go from 1.9 to 2.3. And so what you can see here is that by using intelligent leverage, you can find a way to generate 2, 3, 4x the normal Bitcoin performance. And that just leads you to the question of credit risk, like what is the risk? So this is a credit model. This is actually the capital structure of our company. And what we've done is created a model. We put it on our website. You can run it, just go to the credit tab of strategy.com. You plug in the price of Bitcoin -- it updates every 15 seconds by the way, and you can overwrite it. You can plug in your expected volatility and your expected Bitcoin growth. And if you're a skeptic, you think Bitcoin is going nowhere for 100 years, then you would plug in 0%, and what you would see here is that all the convertible bonds are investment grade in terms of their risk and then half the preferreds are mezzanine, the other half preferreds are high yield. But when the volatility falls from 40 to 35, you can see they all start to get upgraded. And if the vol falls to 30 and Bitcoin trailing 30-day vol was 30 just a few days ago. If the volatility of Bitcoin falls to 30, you see that the credit starts to improve on all these, even if you're skeptic about the future of the asset. So the inputs are the price, the vol and then the outlook. Now if you're not a skeptic, if you're a trader, if you think Bitcoin is as good as the S&P, but a bit more volatile, you can see most of the stuff starts to look investment grade. All you have to believe is that Bitcoin is as good as the S&P for you to engineer all of these things and find what are extraordinary spread premiums, right? Like just extraordinary. If Bitcoin goes up 20% a year, you see all the risk gets stripped off of this and the fair credit spreads fall to a few basis points. And that's what the market doesn't quite appreciate yet, but that's the opportunity. As credit rating agencies get involved, as people start to look at this, this is a digital credit. Think about the difference between digital credit and real credit. If I show you $100 billion of mortgage-backed securities and it's like 100,000 different homes and there's all these tranches, it's all heterogeneous. But when I show you Bitcoin, you're getting a quote everywhere in the world every second, 24/7, 365, it's all transparent. So in the digital credit world, there's no reason to wait for a year for a credit rating agency to write a report and deliver it to you. You can literally plug in your own outlook and generate your own risk profile and make your own decision. And so this is -- to say it's an order of magnitude more transparent might be an understatement. Now if you're a maximalist, if you believe in Bitcoin, i.e., someone that holds our equity. When you plug those numbers in, even in a volatile environment, what you see is the risk drops away and every single thing on this table becomes investment grade. Now you might say, well, yes, Mike, but if I believe in Bitcoin, I'd only buy Bitcoin. Well, not quite because there are a lot of Bitcoin believers that need money for the next 12 months. They have a treasury, they have working capital needs. They have families. They have to pay their kids' tuition in the fall. So they believe in Bitcoin, but they still need instruments that are more stable than Bitcoin. And there's a lot of Bitcoin maximalists believe it or not, they run credit funds. They run equity funds, they run fixed income funds, they run credit funds. They work for a living. And in their case, they'd like to buy something with this kind of exposure. And when they look at this, what do they see? You see Stride showing 868 basis point spread premium. That's mispriced risk. That means you're getting paid 8.6% for no risk. If you had a fund and could invest in that and you believed in Bitcoin, then that's easy money for you. So from our point of view, it's not complicated where we head. What we do is we gradually just park the preferreds above a hard capital layer of Bitcoin and then we build the equity out. We equitize the convertible bonds over time. So the converts, half of them are in the money. So we'll just let them become equity because they don't trade in the public market, and we build up the stack of preferred instruments, and we grow those instruments. We become the leading issuer of Bitcoin-backed credit, right? And just as an interesting thought experiment, what happens if we equitize all the convertible bonds, and this is a skeptic looking on our preferred stack after the bonds disappear. And you see the top 2 preferreds look investment grade. What happens when you're a trader and you think Bitcoin has gone up 10% a year, they're all investment grade. And then what happens next? Well, then you can go to 30% leverage or even 50% leverage. So you see how do you get to 50% leverage? You have $100 billion of Bitcoin, you issue $50 billion of preferreds. The $50 billion never comes due. You got to come up with $3 billion, $4 billion worth of dividends. The company trades up to $250 billion, $300 billion, you dilute 0.5% or 1% a year and you roll the thing forward, the equity holders get 2 to 4x Bitcoin return. What's the risk? Bitcoin crashes. There's no credit incident. There's no credit risk in it. This becomes an extremely robust or anti-fragile balance sheet. So I'll end just with a few thoughts. Why do we trade at a premium? Why do we exist? What is the logic of a Bitcoin treasury company? Well, it starts with credit amplification. You need an operating company to sell credit. The world wants credit, right? The credit amplification gives the equity 2 to 4x the underlying -- the performance of the underlying asset. That creates the options advantage. You end up with a much deeper, more vibrant options market. Then you're able to tap into passive flows and institutions. Now how important is that? These are the global credit markets. Take a look at that, $75 trillion, $90 trillion, you get 4% yield in the U.S., you get 2% in Europe, you get 1.5% in Japan, you get 55 basis points in Switzerland. The credit markets are sick, like they're not healthy. These people are yield starved. It's getting worse, right? So selling the credit is like, well, how much are you going to sell? Well, take 1% of that, is $800 billion worth of credit instruments. So the market is massive there, and they all want to be paid 400 basis points more than that number. How important is passive index money? There's $17 trillion of capital in passive funds. 85% of it is equity indexes, 15% is credit indexes. Nobody thinks that long-term capital is investing in a commodity index. The commodity index funds are 0.1%, 10 basis points. That is to say every commodity other than gold or silver is a dog. And anybody in gold or silver is not in an index fund, they're in gold or they're in silver. So what's the significance of this? The indexes -- the credit index need to buy credit. The equity indexes need to buy equity, there's $17 trillion. This is my shareholder space. Look at the top 100 shareholders. 57% of the shares are held by passive indexes. So Vanguard, BlackRock, 2 of my 5 biggest investors, they're passive. They're not active. Only 43% of those shares are held by active managers. Now that's just a sample of the top 100, but the top 100 cover 46% of the company's shares. What that's telling you is there's going to be a substantial flow of credit and equity capital to Bitcoin treasury companies because this is not going to unwind itself. People aren't going to wake up and say, "Oops, I think, I should just like not allocate to the S&P or the NASDAQ 100. So this is structural. And this is structural. If you look at managed capital, $60 trillion is credit, $35 trillion is equity, only $3 trillion is commodities, but the commodities are mostly gold held by central banks. They're not selling. So ultimately, you have maybe $700 billion of capital that might find its way into a commodity like Bitcoin. The world wants equity and credit. And the only way to create equity and credit is to take an operating company public, build a huge capital base, a big equity base and then start to tranche off BTC 10-rated, 5-rated, 3-rated instruments. And when we -- if you've ever seen like a big block of lucite and a computer-generated milling machine, you put your image into the computer and it mills it out of the lucite, you get this beautiful sculpture. That's what I think when I think about what we're doing. We take a block of digital capital, Bitcoin. We take digital intelligence and we design a preferred security, you tell me what yield, what duration, what kind of risk, what collateralization, what do you want it to look like? And we generate the digital credit from the digital capital. We sell it to the market, and we can sell it as much as the market wants to buy. You want to buy $500 million right now, I sell you $500 million right now. I will create it on the fly. You want to buy $5 billion, you want to buy $50 billion, right? We have certain rails like at some point, we'd be undercollateralized. So I can't just slam it to a BTC rating of 2 overnight if it's supposed to be a senior instrument. But to a much greater degree than any issuer of credit in the modern world, Bitcoin treasury companies, especially a well-capitalized one, can create the most compelling high-performance credit instruments and do it fastest and quickest. And that's what the market wants. So I'll just end with this slide. Our principles are simple. We buy Bitcoin. We hold Bitcoin. We're exclusive. We want to be homogeneous credit risk. We want to be homogeneous in our capital strategy. We prioritize long-term value creation for the equity. So everything we're doing, think I hold the equity, look out 10 years. Is this a good idea for 10 years from now if I'm an equity investor. We asked that question. We treat all of our investors with respect. If we told you we're going to do something, we do that thing. And we structure the equity to outperform Bitcoin. If we can do 2x, we'll do it. If we can do 3x, we'll do it. If we can do 1.5x, that's what we'll do. And then we continually acquire Bitcoin as long as it's accretive, right? There's -- none of these transactions are ever dilutive. We're always generating yield. We're always selling securities at a premium to the underlying asset NAV. And then otherwise, week-by-week, day-by-day, we react to the market. The credit markets, the macro markets are changing all the time. They can change from the morning to the afternoon. I've seen them change from the point that Jerome Powell starts a press conference to when he finishes answering questions. They'll go this way and that way twice. We're reacting to that all the time in all of our capital programs. And ultimately, we don't have to do anything. We have the option to just do nothing for 3 months or 6 months. And if we did nothing, we have a $72 billion company growing 50% a year, which is just about better than anything else I've seen in this market. So our default is not bad. So do no harm. When we see an opportunity to do something good, we do it. And in the meantime, we promote global adoption of Bitcoin as a treasury reserve asset. And why? Because I think all the companies in the world are type 1 diabetics. I think they can't retain their economic capital or energy. And if you want your company to live forever or you want to live healthier or happier, then you want a capital asset that allows you to retain your cash flows and grow your shareholder value without surrendering capital. It's a very simple idea, but it's a powerful idea that will work for a private company or a public company. And if you've ever seen a great company brought to its knees and torn to pieces because it was undercapitalized or you are on the receiving end of that situation as an investor or an employee or a customer or a constituent, then you understand what I mean. And so with that, I want to thank everybody for your time and your attention. Appreciate it.