Strategy Inc ($MSTR)

Hi, everyone, and welcome. I'm Natalie Brunell, host of Coin Stories and author of Bitcoin is for Everyone, and I'm so glad you're all with us here tonight. Whether you're a long-time MSTR shareholder, a brand-new Stretch holder, or you're just trying to understand what strategy is actually building, you're in the right place, tonight is for you. The questions that drive this conversation are coming directly from this audience, from retail investors who submitted them on X and through the QR code that we shared a few weeks ago, and we're putting them in front of the 2 people best positioned to answer them. We'll also be folding in questions coming in live in the comments during the stream tonight. My colleague, [ Alexander Devani ] is behind the scenes, ready to filter those in real-time, and we'll share the sharpest ones to me as we go. We will try to get through as many of them as we can in about an hour that we have. Before we jump in, we have an important disclaimer. This Q&A webinar is for informational purposes only. It is not an offer to sell or a solicitation of an offer to buy any securities, and it is not investment, financial, legal, or tax advice. Any offering of securities will be made only by means of a prospectus, excuse me. For additional information about strategy and the key performance indicators, visit strategy.com/notes. So without further ado, let me bring in our featured speakers. Michael Saylor is the Executive Chairman of Strategy and one of the most influential voices in Bitcoin in the world. Under his leadership, Strategy has become the largest corporate holder of Bitcoin and the company has reshaped what's possible when you build a capital structure on digital sound money. And Phong Le is the President and CEO of Strategy. He runs the company day-to-day operations, leads the capital market strategy, and has been central to executing the products that have opened Bitcoin exposure up to an entirely new class of investors. Michael, Phong, thank you so much. Welcome, and thank you for being here.

Thanks.

Yes. I'm excited about this.

Well, we're doing this directly for and with the people who invest in this company. There's been so much news just the last couple of weeks, a vote on the table around shifting some of the preferred dividends to semi-monthly, the announcement that strategy could eventually sell some Bitcoin, and a lot of buzz in general about where the company goes from here. The retail audience watching tonight has real questions about all of it. We've got about an hour or an hour and 15 to dig in. So the topic we'll begin with is questions about the potential of strategy selling Bitcoin. The first question is from [ Keigan ]. Michael, since your May 5 earnings call comments, odds that strategy sells some Bitcoin by year-end have spiked from around 30% to 84% and odds of the sell by June 30 are at 66%. Critics say Stretch dividends and a narrowed mNAV premium are forcing your hand. How wrong is the market?

I think we enjoy keeping everybody guessing. It definitely makes X a lot more interesting. Our view is business as usual here. We're a kind of matter-of-fact about this. The goal of the company is to drive Bitcoin per share and to increase its Bitcoin and increase the enterprise value continuously forever. We'll make decisions about how we fund our liabilities week by week, day by day. Sometimes we make them minute by minute to tell you the truth. We set algorithms where we're looking at what is most long-term advantageous to the company? Are we managing our credit risk? Are we creating Bitcoin per share? And are we best off to pay a liability with cash or to pay a liability by issuing equity or to pay a liability by issuing credit or to pay a liability by selling Bitcoin? We've done a lot of multi-variate models. And in all the models, what we find over the long term is that, by far, the best thing for the company is to engage in a mixture of those 4 instruments. Any model that we put together that's limited only to equity or only to credit or only to Bitcoin always underperforms. So ultimately, the way to think of it is 7 years out, we would like to have maximized our Bitcoin per share. And what is it that we should be doing now that's going to maximize and optimize the company's performance so that we've maxed out Bitcoin per share 7 years from now? And I think it's not unlikely that we'll sell some Bitcoin between now and the end of the year. I don't know how much. We still consider these things. But it's also likely that we'll sell a mixture of equity, a mixture of credit. We'll manage our USD, our cash positions. And we do it in a very thoughtful, programmatic fashion where we're running our multi-variate models, and we're literally running them. We're making trading decisions. To say every minute might be an understatement. We oftentimes make trading decisions every second, and we'll continue to do that.

All right. This next question comes from [ Jerry ]. If strategy sells Bitcoin to fund Stretch distributions, does that shift the tax treatment from return of capital to ordinary income since the gains would be realized?

The short answer on that is no. We've stated that we're going to be able to have rock dividends for Stretch and for all of our preferreds for this, the foreseeable future, likely the next 10 years. The reason, selling Bitcoin doesn't result in a threat to that or it is primarily because we have cost basis of Bitcoin everywhere from $10,000 to $125,000. So we're able to sell Bitcoin at a high cost basis and take a tax loss, which we can keep on our balance sheet for a while, that's positive, and it doesn't affect our rock dividends.

Well, since I know decisions could be made second to second, you probably want to pay dividends as quickly as possible. And a couple of folks asked if you could react to Strive's announcement of the daily dividends. And then can you walk us through what shareholders are being asked to vote on specifically with strategy and why semi-monthly is the right move right now? Why can't it be daily?

I'm really excited and impressed by what Strive has accomplished. I'm thrilled to see them bringing a daily dividend digital credit instrument to market. I'm also impressed with how rapidly they did it. I think it's quite an extraordinary thing for the space. I believe it's actually great for them. It's great for the digital credit space. It's great for Bitcoin. It's great for us that they're able to bring that instrument to market. It's obviously working very, very well right now. They've been sitting around par for the last week or so. And so it's working in the market. I don't feel like we need to steal their thunder. I actually wouldn't mind seeing them get 10x bigger than they are right now as they actually use SATA as the engine to drive growth at Strive. And I think we're all in a cooperative relationship there. We, we're a Delaware company. They're a Nevada company. We have different corporate governance requirements than they have. We're also 100x bigger in terms of scale. And so I think it behooves us to move forward deliberately. And right now, for us, going from monthly to semi-monthly is a bold and I thought -- think a very progressive step. I think that, that will play out over the course of the next 4 weeks. We have a shareholder vote coming up in early June. I think that will dramatically improve the performance of STRC. Once we've gotten to semi-monthly, then I think the market will have a daily credit instrument from Strive and a semi-monthly credit instrument from Strategy. I think it's quite possible that the market will benefit by having the 2 different frequencies. I'm humble enough to know what I don't know. And I'm looking forward to seeing how the market trades STRC, how it trades SATA. If both of them reach their full potential, that's great. We'll watch that performance. And over time, if it turns out that there's overwhelming demand from our own shareholders to go to daily, then that's something we'll consider. But I don't really think that we need to copy what they've done. I almost would rather have them be the only instrument in the world doing that because that's insanely good publicity for them, insanely good publicity for digital credit. And for those people that absolutely need that, that's going to be a great market expanding innovation. Phong, you might have comments of your own on this topic?

I agree with that. I think Matt Cole and Jeff Walton and all the guys over at Strive have proven that they can innovate extremely rapidly. And Michael said we're humble enough to realize we're not going to come up with every great idea, right? And so we hope other Bitcoin treasury companies and other folks in the market are going to come up with great ideas, too. That's how we have a great marketplace for Bitcoin, Bitcoin treasury companies, digital credit. So it's actually pretty exciting, and it will be very interesting to see how this all plays out. I don't think we know exactly what will happen. But it's great for everybody to see Strive innovating.

Well, staying on the topic of dividends, [ Eric ] asks, as Stretch matures over the next 1 to 2 years, where do you see the dividend rate eventually settling? And would you expect it lower in a full Bitcoin bull market?

I think that we like where it is right now, 11.5% is -- seems to be working very, very well in the marketplace. We're not -- we think of this as we're kind of piloting an aircraft carrier or a cruise liner, and it takes a while to change direction. Once you get it up and running and there's a certain amount of momentum, you prefer to just leave it that way. So we're not anxious to over control the vehicle one way or the other. And I think we think over 20 years, that the dividend will gradually be lower. But we're thinking in terms of 20 years, not 20 months. And ultimately, the dividend rate for STRC will be driven by the health and the growth of the crypto economy and, specifically, the Bitcoin economy. So we will manage this in order to create our goal, we want to minimize volatility. We want to minimize uncertainty. We want to maximize the growth in the credit instruments so that we can maximize our acquisition of Bitcoin, so we can maximize Bitcoin per share. And all things being considered, we would rather do something which is low volatility, stable, enthusiastically embraced, and pay 11.5% than save a few basis points and pay a little bit less, but create uncertainty, anxiety, or instability in the marketplace. And so I don't think we presently expect a change in that dividend policy, but we have to look at the performance of the credit, the 1-month VWAP, the strength of the credit, the strength of the underlying Bitcoin economy, the volatility of Bitcoin, and people's views toward digital credit, digital capital, et cetera, and make the responsible adjustment from time to time if we needed to. Phong?

Yes. What I would add is we're 10 months into a product. I think, yes, the -- Eric's question was as the product matures in 1 to 2 years, I don't think it's going to mature in 1 to 2 years. I think it's going to take, as Mike said, 20 years, maybe 10 years, maybe 5 years until we reach a point of true maturity of digital credit. Right now, the objective is to create the best product possible. And so reducing a dividend rate really is dependent on what is the market telling us. And every month, we learn new things, right? The behavior, prior to the record date this month in May, was extremely different than the behavior in the month of April, which was extremely different than the behavior in the month of March. So we just have to look at what's happening in the Stretch every single day, every single week, every single month. And that's what's going to drive, ultimately, the decision on the dividend rate is the market.

The question that came in live a couple of moments ago is, at what point will strategy slow down purchasing Bitcoin? Is that price only or a certain percentage of all the Bitcoin?

Well, I can start and Mike can add. I mean, we'd mentioned earlier, ultimately, our goal is to accrete Bitcoin per share and do it in a thoughtful way to our credit and to our equity and to Bitcoin. And so ultimately, it's not about how much Bitcoin we buy or how fast or how slow, it's are we accreting Bitcoin per share? So the number of Bitcoin, although it's a nice vanity metric, it's not -- even Satoshis is nice, but it's ultimately how do we increase Bitcoin yields? And whatever that results in, in terms of how much Bitcoin and the acceleration changes, right? Like our low point of Bitcoin yield was in 2022, right? Our high point was in 2024. And that was because of the market, not because of any decisions that we are making to accrete more or less.

Yes. We view ourselves as powering the Bitcoin economy. And so powering the Bitcoin economy sometimes means buying Bitcoin and raising capital via equity or credit issuance to buy Bitcoin. But the best thing is a very healthy digital equity. So MSTR, mNAV expanding and then very healthy digital credit, low volatility, high liquidity, high performance, stable credit. And so we're always thinking about those things. I expect that Bitcoin price will go up forever. And a Bitcoin price goes up forever, you could buy it forever, getting exponentially less as the price goes exponentially higher, right? And that would be good for the entire economy, I mean, for the entire crypto ecosystem. But we don't have any hard target one way or the other, and it all comes down to the equity capital markets and the credit markets.

Yes. Someday in the future, it might take years to get a whole Bitcoin. [ Joel ] from Mississippi asks, is the $100 peg something strategy is legally obligated to defend? Or is it more of an aspirational target?

We don't have a legal obligation per the security itself, but it is the company's #1 business objective. So the way to understand it is we have about an $80 billion enterprise. And if you were to ask what is the #1 thing that we want to ensure month by month, quarter-by-quarter, it's -- we want to ensure the stability of STRC around $100. If STRC doesn't hit the $100 peg each month, then the company is going to take action in order to strengthen it. And we've shown ourselves want to do it. We raised the dividend, was it 6 months -- 6 times in a row or how many time, Phong?

I think it was...

Many times. We raised the dividend multiple times. We raised billions of dollars of capital and bought Bitcoin with it. We raised billions of dollars of capital, and we put in a U.S. dollar reserve. We have just bought back $1.5 billion of debt, which is senior to STRC. So we will restructure the capital structure. We will raise capital. We will adjust the dividend. We went and put a presentation or proposal in front of our shareholders to double the frequency of the dividend. So all of those things I just named are all in pursuit of stability about -- around the $100 target. So you can think of it as a business objective, and it's almost -- you could almost view it as that's the reason that the company is here. Like that is the primary KPI for strategy, is to stabilize and make the digital credit successful. And I would contrast that to we're not terribly concerned about the price of a convertible bond trading in the OTC market. And if you were to ask how do we feel about the price of STRD, STRF, STRK, STRE, Well, we'd like them all to be higher, but we don't get up every week and every morning and obsess over what we need to do in order to deal with those securities' performance in the market or in the near-term, MSTR is going to move around. The primary flagship security of the company is STRC and the primary objective is to strip the volatility and stabilize the instrument at par.

We got a question from [ Tyler, Matt, and John ], so this is a popular one. We're now seeing DeFi vaults and leveraged products built on top of Stretch. If one of those products were to fail or a large, levered pool unwinds, what's the playbook for defending the $100 peg from selling pressure that originates outside of Strategy's control?

When you design a structure to be anti-fragile, whether it's a skyscraper in Manhattan or whether it's an aircraft wing, it's important that it flex. If you try to take the flex or the motion out of the building or out of the wing, it will be rigid and then it will snap. And so we're not really defending the peg of $100 in the same way to say, a stablecoin issuer would. If you were a bank or a money market or stablecoin issuer, you have deposits and they're daily deposits. They're almost debt like 1-day loans and you literally have to defend them down to the $0.01 or to a subfraction of $0.01. That's not the design of STRC. STRC is designed so that it will trade at par for some portion of the month, and then it will trade down 50 or 100 basis points. And that's all part of the engineering. The -- if you look at those DeFi protocols, let's say there's one with $300 million in it. We have $10 billion of AUM in STRC. How does the instrument perform when someone wants to sell $300 million or $500 million or $1 billion of STRC in a single day? Well, we already know the answer. It will trade down 50 to 100 basis points. Maybe in the extreme, it will trade down 150 basis points and someone in our ecosystem, not us, a hedge fund, right, a large hedge fund that has $50 billion or $100 billion will step in and they will buy it. And that's why it is so anti-fragile. So I think that -- and I think you can see it, it seems like we have about $1 billion to $2 billion of support when the instrument trades down 75 to 100 basis points that will just walk into the market very quickly. But if someone were to dump $2 billion of STRC on the market in an hour, right? Let's just take an extreme amount. There's -- you'll see the support for STRC will exponentially increase as the price falls. So below 99, there's a lot more support. Hedge funds will walk in and buy it because they get a quick 150 basis point gain in a couple of days. Below 98, you will see even more support, below 97, even more support. This is -- if you study the way ships are designed, where they have a center of gravity and the whole point of nautical stability is there's a force -- as you push the ship down, there's more force pushing it up. And as the ship sways left or right, there's more force bringing it back. It's basically stability theory. And so I think what -- we're not concerned about the fact that someone may decide to sell some large amount of STRC. The instrument is literally designed so that it's insanely profitable for the hedge funds and the other credit investors to buy it that they would -- if I were to talk to them, there's a lot -- they will buy it at $97 or $98 if they had the opportunity, they'll sell it at par, right? They exist to actually support it back up to par. And when it's trading at $99.98, they don't have much incentive to step into the market. The incentive for all of the third-parties that support our ecosystem increases exponentially as it trades further away from par. So you could think about the entire thing as a very elegantly designed servomechanism where it's much better than us stepping in to defend the peg. We have, I think, an entire cohort of investors, and they have hundreds of billions of dollars of capital, and they will step in to defend STRC because they trust us and they know over the long-term, it's a very good investment. So we can't know that a corporation won't get up and decide to dump $200 million of this tomorrow. And we already know that once a month, someone buys $1 billion and they sell it the next day. So we already know that happens. In fact, it's part of the design of the instrument for that to happen. And that's why we're comfortable that the entire digital credit layer is anti-fragile because it's designed to flex and not to fail.

Well said. Someone in the live comments is asking, why is Bitcoin not going up with the broader equity market right now? Do you expect a catch-up to happen at some point?

Bitcoin is its own asset, and it's driven by geopolitical capital flows. So for example, Chinese crypto investors, Asians, South Americans, Africans, Europeans, they all have their own capital flow dynamics. And so an edict coming out of India, Pakistan, China, Iran, Russia, or Ukraine could drive Bitcoin flows having nothing to do with the U.S. equity capital markets. It's -- right now, the headwinds that it faces are rising interest rates on the high end of the yield curve everywhere in the world, and that is drawing capital out of this ecosystem. It's also facing the headwinds of AI. There's a lot of capital flowing into the AI trade right now, and that has drawn capital a lot of Bitcoin from -- on the investor side. And also if you're watching the miners, a lot of the Bitcoin miners have been diversifying or transitioning into doing AI high-powered computes and they're selling Bitcoin and/or they're not holding Bitcoin in order to fund their transition. So that's a bit of a headwind. I think that the trade wars are a headwind. I think the hot wars are a headwind. And I think the lack of the rollout of bank credit networks, which is evolving, but it still has not taken place yet. Those are all headwinds. And if you look at the equity capital markets, the equity markets aren't influenced by the lack of credit from JPMorgan. They have a lot of it. The equity markets are being driven by the AI trade. They're benefiting from it. The equity markets, they're not -- they don't have the drag of China crypto policy, which has an impact on Bitcoin, but not on equity capital markets. And so equity capital has got its own dynamic. Metallic capital gold has its own dynamic. Digital capital has its own dynamic. And you just kind of have to humbly make your piece with them. They're different asset classes. They're not always going to correlate in lockstep, and you don't want them to correlate. They're different things for different investors with different degrees of utility.

Phong, I'm going to throw this one to you. By far, the most repeated question across all audience submissions was, would strategy consider shifting Strike, Strife, and Stride from quarterly to monthly dividends?

What's interesting is when we sat and thought about what proposals we wanted to take to our common and preferred shareholders in our June shareholder meeting, we had considered modifying all of our preferreds, Stretch, Stride, Strife, and Strike to more frequent dividends, whether that be semi-monthly or monthly. And we ultimately made the decision that we wanted to focus on Stretch first because it's the primary and making changes to the other, although beneficial to the other, could be distracting, and we might not be clear enough to get the vote for Stretch. And with that as the backdrop, we want to improve Stretch first and foremost, because it's the most innovative and has the largest product. It doesn't mean that we don't care about the other ones, right? They are our other children, but we want to get Stretch working as well as possible and then turn to the other ones. What I'd also say is there's a significant opportunity in the other ones because they're made to perform, I would say, more in a Bitcoin bull market, which we've yet to see. And so where they're trading right now is likely below, right, the real value of those assets. And we'll turn to those and look at them as Stretch starts to grow and mature over time.

Let's talk a little bit more about those other children because with Stretch of success, we're getting questions from investors about what is Strategy's commitment to Strike, Stride and Strife? And are any of them at risk of being retired?

I think they represent very important optionality and complementary products to STRC. So we don't think it's in the best interest of the company to retire them. By the way, we do think it's in the best interest of the company to retire the 6 convertible bonds. So -- and of course, the point is the bonds are debt and there is no shelf registration on them. So they're not really sources of future Bitcoin yield or Bitcoin per share accretion, and they're senior to the other credit instruments. So our view on this is the bonds are liabilities, and we will retire them. The 4 perpetual preferreds, Strife, Stride, Stream, and Strike, they're opportunities. To Phong's point, they're undervalued. That's why if you look at our weekly filings, we haven't been selling any of those instruments pursuant to those shelf registrations. We think they're undervalued. And so the #1 thing we're doing to help if you own any of those 4 is we're removing liabilities senior to you. So we're improving the credit of them by retiring the debt. And the second thing we're doing is we're not selling them. So we're keeping the supply very scarce. So I would think probably the single most important thing that I could say on this call, if you were an STRF holder or STRD or STRK or STRE is, we think they're undervalued, we're not selling them, right? And so if you're an investor, you know that the company's view is that over time, they should trade up. And so our view, I agree with Phong, they're -- I'll make the other point. They're institutional products right now. They're long duration. They're more complicated. They have more delta. So they have more delta, more volatility, more duration. And so for the classic retail investor, the retail investor just kind of wants pure synthetic yield. They don't want duration and delta and volatility. They want all that to go away. And so STRC is the flagship for that reason. But there are institutional investors that do want a perpetual senior credit instrument or perpetual junior credit instrument or a convertible credit instrument. And so that's why we leave them outstanding. And we will continue to take actions to improve their credit, to improve -- that should be credit positive for them. They should result in the price improving over time, at least theoretically, right? The market will decide what happens and the market is kind of above-our-pay-grade in a way. But the strategy of the company is to nurture those 4 instruments to the benefit of the company and the investors over the long term.

All right. [ Orion ] asks, have you considered a fixed rate Stretch variant, say, a clean 10% return of capital to make budgeting easier for retirees and fixed income investors who find variable payouts hard to plan around?

That's an easy one. We've already done it. I mean STRF is a fixed 10% dividend yield at par that's senior. An STRD is a fixed 10% dividend yield at par, which is junior. So I would direct -- Ryan, you said?

Orion.

Orion. I would direct Orion to go check out Stride and Strife because those are exactly what those 2 instruments are. They guarantee you that 10% dividend yield forever.

Great. Well, one question came in from [ Luis ] about just scaling Stretch. He says, most people watching are working hard for their paycheck. It's not going as far as it used to. With Stretch paying north of 11%, do you see it eventually becoming the most practical way for everyday people to protect the purchasing power of their labor and not just grow capital?

I think one of the biggest opportunities of Stretch, beyond what it does for Bitcoin and what it does for digital credit, is to equalize opportunity for people regardless of how much income they have or how much wealth they have. And I know this is important to you, too, Natalie, if you have a low income level and you're making $50,000 or $100,000 a year and you don't have much money in your checking account and no money in your savings account, you pay a bank for your account. And if you have a little more, you get 0%, and a little bit more, you get 0.5%. And at some point, if you're lucky, you can get a 3.5% money market. So I think there's a huge opportunity with a product like Stretch and digital credit to provide yield generation. What will it take to get there? I think maturity of the product and people understanding digital credit and perpetual preferreds and Stretch. I think why we work a lot with traditional finance is they are the gateway to those types of folks, right, who can't get into institutional offerings that provide 8%, 10%, 12%. And I think things like the Clarity Act, our integration into traditional finance, launching these products through wealth management, will start to legitimize digital credit. And you say Bitcoin is for Everyone. We say Stretch is for everyone.

All right. That might be a new book I've got to work on. This question comes from at BTC Strategist. It's along the same lines. What's the biggest challenge for strategy to reach those who are still very skeptical on Bitcoin in general?

I think that's just a never-ending communications mission. So we're going to keep communicating. We do it with hope.com. We do it with strategy.com. I do it on my personal website, Phong and I do it every day on X. I've been going on podcasts that are non-Bitcoin, non-crypto podcasts, podcasts targeting millennials and Gen Zs, we're reaching out to dividend and retiree information channels. Obviously, we go on television. You might have noticed that it used to be, a year ago, it was just me on television, and then we went to 2 engines became Michael and Phong, and we started tag teaming. And now it's not like I stopped going on television. We're just going twice as often. And we're at conferences, every type of conference. We're also I think building an entire cohort of other business partners, whether it's -- Bitcoin treasury companies are on podcast everywhere, right? And now you've got companies like Strive and digital credit companies that are out there. And if you look at all the people that are tokenizing STRC in the DeFi space in the crypto space, they're going on all the crypto podcast. And their story is, "Hey, we've just found -- we created a yield coin backed by digital credit and it's only possible because of Bitcoin. Let me remind you why Bitcoin is good again." So I think tomorrow, I'll go on the Schwab Network in the evening, in the morning, I'll go on Squawk Box. Today, I'm at a credit investor conference, right? And so we will basically go to all 4 corners of the earth talking to every type of audience imaginable to spread the gospel of Bitcoin. It's the #1 question when you offer even digital credit is, "Well, it seems too good to be true. How do you pay 11.5%?" And the next thing is, "Well, let me tell you about this thing called Bitcoin." And so I think that digital credit, digital equity, digital capital, it's a story to be told over and over again through all channels. But my friend, Matt says, "Mike, what we learned in politics is after you've told somebody something 42 times, they just barely remember what you said."

Right? Repetition is key. I know a lot of investors are very appreciative of how transparent the company is and how available the executive team makes themselves. I was actually interviewing Ben Honeywell the other day, and I said that I think Strategy is like a Trojan horse in the capital markets. And he's like, well, then it would be a very see-through Trojan horse. We're letting everyone know what we're bringing. All right. This question is from [ Eric ]. You guys detailed on the earnings call that the mNAV breakeven for accretive MSTR issuance is roughly 1.22x. Can you walk us through that math in plain terms?

Yes. I'll start with the math, and then I'll talk more generally about the concept. MNAV can be calculated in many ways. We detail how we calculate it on our website and try to make it as simple as possible, right? So the Bitcoin net asset value is very simple. It's our amount of Bitcoin times the price of Bitcoin, right? And then the numerator of mNAV is the enterprise value of the company, which you take the stock price, you multiply it by the total shares outstanding, right? And then we add in our debt, we add in our preferred, and we subtract our cash. Now someone would say, "Well, that calculation, why wouldn't the breakeven for Bitcoin per share be 1.0?" And the slight complication is when you have convertible debt, you have to assume dilution and then that creates an assumed diluted shares outstanding, which is different than basic shares outstanding. And then you might say, "Well, why don't you use that?" And the challenge of using assumed diluted shares outstanding is that calculation changes every second based on the price of the converts. So we try to use the simple method. And ultimately, the question is, when we make capital markets decisions, we don't just look at the mNAV and say, "Is it the level of 1.00?" We're making capital markets decisions based on are we increasing Bitcoin per share, right? And adding preferreds and adding converts and removing converts complicates the capital structure. So it makes the math a little bit harder. My advice is anybody who really wants to understand fully sort of what the math is, go to our website because we show all of the calculations for mNAV. We also show the calculations for assumed diluted shares outstanding.

Michael, this one is for you. [ Frederic ] asks, you've said that you'd like to get mNAV back to 3x to 4x. How do you intend to rip the wings off the shorts?

I think the first thing that we do is make sure that we illustrate to the equity holders, to the common shareholders that we can increase Bitcoin per share. So Bitcoin BTC yield last year was 20% plus. BTC yield this year so far is 12% plus. So I think putting a healthy BTC yield or an increase in Bitcoin per share this year, last year, and show them how we're going to do it going forward, I think that's the first thing. You're demonstrating that the business model can generate more Bitcoin per share. Once you've done that, then it's an education process to go and educate the equity capital markets. If the company hypothetically can generate 10% BTC yield a year, you could double Bitcoin per share over 7 years, and that's worth a premium to NAV. But if the company can generate 20% BTC yield, you can double Bitcoin per share in 3 years. That's a much faster growth rate. That's worth a higher premium to NAV. When the market sees BTC yield, right, that's sort of the dividend yield for someone on the Bitcoin Standard. So if you're Bitcoin Maxi on the Bitcoin standard, you're saying, "Okay, well, 20% would be a 20% dividend yield." And then the question becomes, okay, have you embraced the Bitcoin Standard? If not, you don't recognize that as being valuable at all, right? But if yes, then yes, that's 20%. Now the second question is, how durable is the business model? So if I thought that would last for 10 years, I might put a PDE of 10 on it, and I might say, "I'm going to multiply 10x 20," and give you a 200% premium to your Bitcoin holdings. That works out to an mNAV of 3x. If on the other hand, I thought that was going on for 20 years, right, if I was really very confident the PDE might Stretch out further, you could say, when you see a business model that the equity capital markets are hyper enthusiastic about, I'll give you an example. Apple, when people thought the iPhone was going to get commoditized, I got a PDE of 8. And then when people thought everybody is going to use the iPhone and it's the best thing ever, the PDE went to 30. And so when the market embraces the business model, the PDE expands. And right now, we're an embryonic state. I mean the business model is dynamically evolving. It was convertible bonds about a year ago, 1.5 years ago, and now it's digital credit and digital credit is 10 months old and for the last 3 months, the digital credit business last month was a $24 billion annualized run rate. And 12 months ago, it was a $0 annualized run rate. So we have to go out and we have to communicate the power of Stretch digital credit to create BTC yield. And then the question becomes, explain the Stretch thing again. How much of this can you sell? How does it work with the Bitcoin? How does it work with the capital? And now an equity investor, they have to consider the business model to consider how durable it is. And based upon that, they'll put a multiple on the key metrics. So our plan to drive mNAV to 3, 4, 5, or 6 is kind of simple. First, make sure that the business can generate Bitcoin per share, the more the better, right? The faster we generate Bitcoin per share, the higher the BTC yield, the higher the premium that is warranted. But seconds, we need to build the machine so that we can keep doing this consistently over the next decade. So it can't be a one and done. And so first, you build a machine, then you make the machine capable of running the marathon and running hard for the next decade. And then third, you have to go communicate that to the marketplace and explain it to them. They're rational investors when they understand how you create shareholder value, and then when they understand the risks associated and the unique capabilities the company has, then they will decide, "Yes, I'm going to put a PDE of 5 on that at a 5," then they give you a 100% premium. Maybe I'll give you a 10%, maybe that's a 200% premium. Maybe I'll give you a 20%, right? And that's a 400% premium. And then, of course, we got to perform. And so I think we're simultaneously doing things, make the credit better, sell the credit, manage the balance sheet, strip the credit risk, and then we're communicating things. And the market is digesting and absorbing a revolutionary new business model. Digital capital is a new asset class. Digital credit is a new asset class. Digital equity is a new asset class supported by the digital treasury model. And a treasury company is like a reserve asset bank, like the Bank of England was founded to buy a bunch of gold and issue credit against the gold 300, 400 years ago, whatever, 300 years ago. And so here we are, we're creating a Bitcoin reserve bank of sorts, and we're buying Bitcoin, issuing credit against it. You can't blame an equity investor for looking at it and saying, "Gosh, this looks new and different and strange, and I've never seen this before." And there's a concept that Nicholas Taleb popularized, he called it the Lindy Effect. And he said that if a restaurant had been around in New York City for a decade, it's likely to be around for a decade more. And if it's been around for 50 years, it will be around for 50 years more. So when you've seen a business do its thing for a year, then a skeptical investor is like, "Well, maybe if it's been around a year, we're just going to assume it will go on for 1 more year, and we'll be kind of skeptical." And once you understand the Lindy Effect that products get exponentially more valuable as they get lengthier, as they get longer lived, then what you just see is a bunch of rational actors in the capital market absorbing information, taking risk, and allocating assets based upon all of the information and the durability of the business model over time.

Well, stay on this topic of a strategic horizon. We have a question from [ Howard and Reinhardt ]. Stretch is the result of a quest to design the best vehicle for digital credit. How do you see making it even better? And what's the next big leap forward after Stretch?

Phong, do you have any comments?

Well, I think Stretch is the best product, right? And it took us 5 iterations of preferreds, and it took us about 15 iterations of debt and capital creativity to get to stretch. And so we've been working this for 10 months. I don't sit here and think to myself, and maybe Mike does but I don't, what is the next product? The focus right now is making Stretch the best product possible. And I think we're going to focus on that for the next 3 to 5 years. Does it mean we won't come up with something else in 2 or 3 years? Not necessarily. But I think it would be very premature to jump on to what is the next product and the next big leap forward. In fact, a lot of the next product leap forward is being built on top of Stretch. Mike mentioned what Saturn and Apyx and others and the DeFi protocols are doing. People are building ETF products off the Stretch. Traditional banks are starting to build products that they'll distribute to wealth management. Will somebody build a product that can service people across all income levels, right? Would somebody ever get to a point where they sweep somebody's money like they do into a money market into Stretch? I think that's where the innovation is going to come is through partners in the ecosystem because we've not just built a product, I think Stretch is a platform for people to build products on top of. And that's -- you know you have a really good product when it becomes a platform that people can innovate on top of. And we're starting to see that. Even in the last 3 months, we've seen it. Like did I think somebody was going to build Apyx and it was going to become a $500 million product in about 3 months, right, using a DeFi protocol? No. And is someone going to build something we've never thought of 5 months from now? Yes. And I think that's where the innovation will come.

Yes. I think it's such an important question. I would add, Taleb has a concept called via negativa, which is when you make something better by taking away as opposed to by adding the -- in experience, tech thinks I got to add 100 new features to something to make it better. But if you've lived long enough, you realize that sometimes you can make it better by the not doing of things or by removing distractions that are nothing to do with it. So for example, the best way to make Stretch better is to eliminate the bonds that are senior to Stretch in the capital structure such that Stretch's DTC rating increases its credit risk decreases. It's nothing to do with Stretch. It has to do with the rest of the capital structure. Another way to make Stretch better is simply for the company to illustrate that we're responsible custodians of STRC and we're going to responsibly manage it and not change it. In fact -- so cultivating it, curating it, improving the credit around it and allowing it to season is what makes it better. Stretch, if it had been operating consistently for 3 years, would be 100x better product than Stretch operating next month will be. So to a certain degree, you have the Hippocratic Oath, do no harm, Don't be distracted. Don't burden it with a bunch of new ideas. Let it breathe. And then I echo Phong's point, which is -- by the way, I said this about Bitcoin, too. Bitcoin is an incredibly good protocol. The technocrats want to add 100 features to it to make it better. And I've always been of the opinion that it's already good enough to be a $100 trillion network. And so all of the innovation ought to be at the layer 2 at lightning or the layer 3 in the application built by a company. And so when we think about Stretch, we think, well, Stretch really is a nice layer 2 on Bitcoin, but how do you make it better? It's already pretty good. There's no reason why it can't be $100 billion or $1 trillion asset class simply by focusing on it. And then if -- both Phong and I, we could sit down and we can come up with 1,000 ideas of things you could do with Stretch and the humble thing to do is to let somebody else have the fun and make the money. I actually believe there will be $100 billion companies that will be created based on Stretch. And there'll be 100 billionaires spawned or incredible amounts of wealth created by people doing all these cool things that we can conceptualize because, number one, it's better for them to do them. Number two, they will actually execute better, and then they'll come up with 100 ideas of their own we've never come up with. So do I want to see 8% digital money in yen or Swiss francs or euros? Yes, I do. Will we do it? No, we won't. Can I -- we're looking at all these tokenized trenching protocols in the DeFi space. They're -- should we do it? No? Some people will. Will other people lose money? Likely, right? And so our view on this is just like with Bitcoin, do no harm to Bitcoin, protect Bitcoin. Bitcoin is going to be successful as long as we don't engage in some iatrogenic campaign to corrupt it. And then our view with Stretch is do no harm to Stretch, be very careful, make it the best, deepest, lowest volatility, most liquid instrument we can possibly make it, and don't be afraid to not come up with -- yes, we don't need to come up with a new product idea every quarter or every year, right? When you're throwing out ideas as fast as you can, that's because you keep iterating until you find the one that's the slam dunk, home run. When you find the iPhone -- by the way, Apple's biggest product right now is the iPhone. It's not every single product they came up with after the iPhone. In fact, you could almost argue that most of the things Apple did after the iPhone have been dilutive to the iPhone. In fact, you could even argue that a lot of the upgrades that they made to the iPhone are diluted to the iPhone. There's how many people have pocket dialed from the iPhone because they make it so easy and you find and activates 13 features that you didn't need that you didn't know you wanted because some software engineer wanted to like create a shortcut? And so doing something insanely great, it requires humility. And this is not a complicated idea. This is digital credit, and it doesn't have to do much more than stay stable to become 100x bigger than it is right now.

Well, I feel like that response sort of answers this question, but maybe, Phong, you want to add to this. At Ponder with me asks, what does strategy look like when Bitcoin is trading at $10 million a coin, which power Law says will happen in 20 years?

I think it will be a great day. I don't really give myself the opportunity to think often 20 years out or even 10 years out. The focus is the next 2 to 5 years. Whether Bitcoin is $1 million or $10 million or $20 million, that's really not what drives the company day-to-day. It's how do we drive the equity up by increasing Bitcoin per share, and we do that by buying Bitcoin accretively, by issuing digital credit. It's good to be a dreamer, but it's also good to sit in the reality of the day-to-day. So will Bitcoin get to $20 million? I hope so. What will happen at that point in time? It's probably really not that important to what we do tomorrow or the next month or the next year.

For someone watching tonight who's a long-term MSTR or Stretch holder, what's the one metric beyond the Bitcoin price you'd tell them to focus on? I'm assuming you're going to say BTC yield.

Yes. I think it's Bitcoin per share or the rate of change of Bitcoin per share, which is BTC yield. You kind of -- you're asking the question at what rate is the company compounding my Bitcoin holdings? We had 50,000 Satoshis per share 5 years ago. And now we have more than 200,000 Satoshis per share. So that's the focus I would have if I'm a Bitcoin Standard person and a Bitcoin Maximalist, the company exists to increase Bitcoin per share for every shareholder.

We had a few investors ask about custody and proof of reserves. Without revealing sensitive operational details, can you shed more light on strategies custody and is publishing proof of reserves on the road map?

I can start on this one. We're a $60 billion public company, and we have shareholders all around the world. And as a public company, we hold ourselves to an extremely high standard. We're audited by KPMG. We have internal audit done by another big 4 company. We have our taxes done by another big 4 company. Mike has been a public company officer for 28 years, I have for 11 years. And that's a pretty high standard for an investor to invest in a company of this size. We're overseen by the SEC. We have since disclosed our custodians and how much Bitcoin we hold with them. And so we'll start with, as a public company, there's a very, very high bar that we have to overcome. And when we offer securities into the market, all the banks we work with make sure the Bitcoin is there. They rely on a set of attorneys and law firms to make sure the Bitcoin is there. We have a team inside looking every single day, running reports and audits to make sure the Bitcoin is there. So that's the standard with which we hold ourselves. Would it be good to also provide proof of reserves if we could do it in a secure way without, as an example, doxing our wallet addresses. I think it's something that's worthwhile to look at. But for those who invest in MSTR, they're first investing in the equity in the public company. And second, Bitcoin is quite important, but we wouldn't want to do anything to be able to have true proof of reserves that would put us at risk.

All right. We have about 10 more minutes. We're going to take a few more questions. A few may be personal ones towards the end. But [ Chris ] asks a geopolitical question. The U.S. government has taken equity stakes recently in companies like Intel and MP Materials and set precedent with Executive Order 6102 in the gold era. As Bitcoin becomes more geopolitically important, what are the risks of a similar action involving strategy? And how would management approach it?

We're flattered by any attention from a sovereign. I think we've already got investors that represent the government of Norway, the government of Switzerland, governments in Korea, other nation states. And many of our institutional investors represent the citizens of the United States or other nations. If someone wants to buy the company or buy into the equity, we welcome them. We're literally a public company. We exist so the public entities, whether they're pension funds, or endowments, or sovereign wealth funds would like to buy the equity. So it's not really a concern. I think the best thing that could happen for the United States is for the people of the United States to be invested in Bitcoin. And we are a gateway for their pensions, their endowments, their institutions, their institutional investors, their annuity funds, whatever it might be, we're a gateway for them to take an interest in Bitcoin or make an investment in Bitcoin either through the equity or through the credit. We feel that we have a trusted responsibility. We're basically holding the Bitcoin and trust for all of them. Every entity will do what it will do. Sovereigns are already investing in us. Hopefully, more sovereigns will if everything ends the way we expect. I don't know why every rational nation wouldn't want to have its citizens invested, to a certain degree, in digital capital and digital equity or digital credit.

Well, staying on the bigger picture, this question is interesting. Strategy now holds Bitcoin indirectly for millions of retail investors who will pass those holdings to children and grandchildren. So what role does Strategy see itself playing in educating the next generation about what they're inheriting?

I think it's quite important, the role that we're playing and the role that you're playing and everybody in the Bitcoin community is playing. What I love about talking to, we'll call it, the next generation, about Bitcoin is you open their eyes to a conversation about economics and global macroeconomics, about security, about self- sovereignty, about investing, about the power of money. And so it's a conversation that you seldom are able to have otherwise. And it tends to lead to people then going down, not just an Bitcoin rabbit hole, but an educational rabbit hole. And why wouldn't you want to do that? And why isn't that a great opportunity? And then it's no longer just about strategy or about Bitcoin, but it's about people becoming curious, people getting excited, and people understanding a little bit better how the world works around them. So it's a responsibility, but it's an opportunity, right? Because what's your alternative? You can talk about what was the Netflix show you saw and season 8 of this. That doesn't really lead to creativity or productivity. In fact, it's the opposite. So that's why I like talking to people about Bitcoin. And the best is sometimes I talk to folks and they don't -- they listen for about 5 minutes and they change the subject to the 50th season of Survivor. And then 3 months later, they come back and they say, "Hey, you know the thing that you're talking about, can we talk more about it?"

Watch out, someone might ask you your favorite Netflix show. Well, let's do a little bit of a lightning round with some lighter questions. This one seems to be for you, Michael. You often referenced history. So what's the one historical moment that best explains Bitcoin? Or what is your favorite historical era to study?

That's a tall tale, a hard tell. I think the historical moment that best explains Bitcoin is great financial crisis and Satoshis posting of the white paper, Halloween 2008, and of course, the subsequent genesis of the network, the following January. I think there's something to be learned from every single historic era. And my advice to anybody is with all of your copious free time, I would find your favorite historian and I would just start reading and I would read the history of the Greek, Asian histories, Middle East histories, Roman histories, Medieval histories. I would read the histories of the Europeans in South America. I'd read the history of the U.S. before the Revolutionary War, after the Revolutionary War. I'd read the history of Europe in the 19th century, then the 20th century. And I think that there's something to be learned. It's humbling, it's invigorating, it's inspirational, it's empowering. I don't think you'll ever regret having gone down the path of reading the story of someone who is as bright as you, trying to do their best in the world, struggling through the circumstances in their time period. And when you see how they behaved and how they rose to the occasion, that will inspire you to be a better person, and it may very well brighten your day and give you the solution to a challenge in your own life.

And don't make the excuse that there's no time. You can read 10 pages a day, you end up reading several books a year. So this could be for either of you, both of you, what's the habit you've developed that has had the biggest impact on your life?

I wake up at 5:00 a.m. every morning. I work out and I listen to a Natalie Brunell podcast or a Michael Saylor podcast or I listen to a book on audible, and I do that for about an hour and then I sit and I think for another 20 minutes. And it's the most productive 1.5 hours of my entire day. And if I didn't do it then, I would never do it. And then I try to go to bed at 11:00, if I can. And I tell my kids who are up till 1 in the morning, nothing great happens after 11:00 p.m. They'll probably figure it out when they're 40 or 35 like I did. But it's extremely productive time to be by yourself, exercising your body and your mind at the same time, and it helps me get prepared for an intense day ahead.

My answer is just one word, Natalie, reading.

I love that. And Phong, your answer makes me smile because I did the same thing when I was working full time as a reporter. It was really kind of like a 9 to 6 or 9 to 7 job, but I would get up at 5, and I would watch Bitcoin podcasts and read Bitcoin books, and it ended up in me working in this space. So you never know what can happen in those early hours. Well, I just want to say thank you to everyone for joining us, for submitting your questions. Thank you so much to Alexander Devani behind the scenes filtering them. Thank you to our featured speakers, Michael Saylor and Phong Le. I want to give both of you just a few moments to share your takeaways. I know that there's a big vote coming up. You probably want to talk a little bit about that. So Phong, we'll start with you.

What's extraordinary and that was surprising about Stretch was when we saw that 80% of our shareholders are retail, and the number is 40% for MSTR. And often, we go to conferences and we do our quarterly earnings call, and we talk to institutions. But the retail audience is humbling and it also is grounding to see people take their hard-earned money and put it into our securities and ultimately invest in our company. So I appreciate everybody for that, and we'll continue every bit of outreach we can. And we do have a vote coming up June 8 for Stretch to move from monthly to semi-monthly dividends. We think it's a very obvious vote. It will increase the liquidity and decrease the volatility of the instrument, but get out there and vote if you haven't.

All right. Michael, the floor is yours.

I want to thank everybody for your time. I think this is just the most exciting year in the history of the industry so far. What we're seeing is Bitcoin and crypto becoming integrated, TradFi and DeFi becoming integrated, equity capital markets, credit capital markets, and crypto capital or digital capital markets, all becoming integrated. We're seeing the entire world rethink a lot of things. It's rethinking banking, banking, the banks are entering the space. We never thought that we'd see that. We're going to see tokenized securities, and they're going to be rippling throughout the entire space, and they're already having an impact. And some of these new ideas, as Phong pointed out, they can go from $0 to $500 million in a few weeks. There are going to be ideas that they go from $0 to $1 billion or $0 to billions of dollars in a year. So I would encourage everyone to, first of all, focus upon digital credit, think very hard about STRC because people's knee-jerk reaction is just to sort of say it's sort of like something else I know that either didn't work or something else I know and I think I know how to put it in the right container. But it really is a new thing, and it has new implications for everybody, every business. And what we're seeing is the literal digital transformation of a $300 trillion credit market, a $100 trillion equity market, a multi-hundred trillion dollar capital market -- and this is the most exciting time to be alive in this space. So to Phong's point, if you don't get up at 5:00 a.m. and think real hard about it, when you do get up, think real hard about it. The AIs make it easy to think real hard about it. You can literally take every idea people throw out and put it in the AI and say, what do you think? Think harder. And so I think this is the year where if you have epiphanies and new ideas and you're inspired and excited, then you're doing it right. And if you think this is just like every other year, you're missing it. You're missing the opportunity, and that's a tragedy. So anybody who's on this call, obviously, they're interested. You put in the effort. Thank you for putting in the time. We appreciate your support. We're delighted and we're humbled to be on the journey with you. And I look forward to doing this again sometime soon.

Absolutely. Thank you so much for joining us and the Strategy. It was an honor to host this Q&A webinar. Hopefully, we'll have more in the future. I want to emphasize again just how much we appreciate how transparent and available the executive team at Strategy has been. So thank you so much, Michael Saylor and Phong Le. Thank you to all of you watching and listening around the world. Again, this is not financial advice, and you can learn more at strategy.com. See you next time.