Strategy (MSTR) Q1 2026 Earnings Transcript

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DATE

Tuesday, May 5, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Financial Officer — Andrew Kang
• President and Chief Executive Officer — Phong Le
• Executive Chairman — Michael Saylor
• Head of Investor Relations — CJ Jain

TAKEAWAYS

• Bitcoin Holdings -- 818,334 Bitcoin were held at quarter-end, representing 3.9% of total Bitcoin supply, confirming Strategy Inc’s position as the largest corporate holder globally.
• Market Capitalization -- The company’s market cap reached $62 billion according to remarks during the call.
• STRC Growth -- STRC outstanding climbed to $8.5 billion; quarterly STRC notional value rose rapidly, with $375 million daily trading volume and 25x liquidity versus the second-largest preferred stock.
• Capital Raised -- $11.7 billion of capital was raised year-to-date, split roughly equally between common equity and preferred (primarily STRC); no convertible debt issued in this period.
• Operating and Net Loss -- Operating loss was $14.5 billion, and net loss was $12.8 billion, both primarily driven by non-cash declines in Bitcoin's fair value.
• Bitcoin Per Share -- Increased 18% year over year, from 181,030 sats per share to 213,371 sats per share as of May 2026.
• BTC Yield -- Year-to-date BTC yield of 9.4%, compared to 22.8% for full-year 2025; management cited acceleration relative to the same period last year.
• BTC Gains -- 63,110 Bitcoin in gains achieved year-to-date, or about 62% of the previous year’s full amount of 101,873 Bitcoin.
• Dollar Value of BTC Gains -- Approximately $5 billion of dollar gain YTD versus $8.9 billion in 2025.
• Total Bitcoin Acquisition -- 89,599 Bitcoin purchased in Q1 at an average price of $80,900, totaling $7.3 billion.
• Digital Assets -- Digital assets on balance sheet ended at $51.6 billion, reflecting Bitcoin's price decline from $67,800 (end-Q1) versus $87,500 (end-Q4 2025).
• Cash and Equivalents -- $2.2 billion held in USD cash reserve.
• Tax Position -- Quarter-end’s unrealized Bitcoin loss turned a $1.9 billion deferred tax liability into a deferred tax asset, with a full valuation allowance reducing the net balance sheet tax position to zero.
• Long-term Debt and Equity -- Long-term debt held flat at $8.2 billion; equity increased to $9 billion, mainly from STRC issuance.
• Fair Value Change -- $14.5 billion unrealized fair value loss recognized in Q1, offset in early Q2 by $8.3 billion of unrealized fair value gain as of May 1.
• Bitcoin Purchases in Q2-to-date -- 56,235 Bitcoin purchased for $4.1 billion at an average price of $73,400, contributing $300 million in positive fair value as prices rebounded.
• MNAV Ratio -- MNAV (Market Net Asset Value) reached 1.27, expanding since the start of the year.
• Preferred Equity Amplification -- Preferred equity stood at $13.5 billion, providing 34% amplification; net leverage is 9%, from $8.2 billion convertible debt.
• Net Debt to Reserve -- Net debt was $6 billion, equal to 9.3% net leverage on Bitcoin reserve, or a 10.8x BTC rating; stress case modeling indicates full debt coverage even with a 91% drop in Bitcoin price to $7,300.
• Dividend Coverage -- With current reserves, the company reports 43 years of dividend coverage if Bitcoin appreciates 0% per year; the breakeven BTC appreciation required for perpetual dividend coverage is 2.3% annually.
• STRC Dividend Policy Proposal -- Management proposed shifting STRC dividends from monthly (12 times/year) to semi-monthly (24 times/year), with the first record date on June 30 and first semimonthly payment on July 15, keeping economics unchanged.
• Common and Preferred Issuance Share -- STRC accounted for 83% of equity issuance by April, compared with 20% in January, signaling a strategic shift towards digital credit and away from dilutive common issuance.
• STRC Dividend Yield -- Dividend yield for STRC rose from 9% to 11.5% and has remained flat for the last two months; current Sharpe ratio for STRC is 2.53.
• STRC Market Impact -- STRC now nearly twice the size of Wells Fargo’s largest preferred, is the world’s largest tradable preferred, and has 4.4% turnover, 10x sector peers.
• STRC Demand -- April saw STRC net inflows of $1 billion in one week and $2.2 billion in the next; trading price has remained in the $99–$101 range for three months.
• Credit Risk and Leverage Framework -- Company targets amplification of 10%-20% of reserves via digital credit, with 34% current amplification (10% from convertibles), and models potential growth to 50%-60% in future while maintaining high credit quality.
• Shareholder Reach -- Common and STRC products reach 1,400 institutions, 927,000 retail accounts, 1,300 ETFs/funds, and about 100 million beneficiaries; retail holdings represent 80% of STRC shareholders.
• Sales of Bitcoin -- Executive Chairman Saylor said, "We will probably sell some Bitcoin to fund a dividend just to inoculate the market — just to send the message that we did it."
• Analytics and KPIs -- Strategic focus is on Bitcoin per share accretion, BTC yield, BTC gain, BTC rating (over-collateralization measure), MNAV threshold (currently 1.22x for accretive equity/Bitcoin trades), and U.S. dollar reserve adequacy.
• STRC as Credit Instrument -- Management cited STRC as "the deepest, most liquid, most stable, least volatile, highest Sharpe ratio credit instrument in the world."
• Forward Modeling -- If Bitcoin grows at the 2.3% breakeven rate, dividends can be funded in perpetuity without new equity issued, per management.

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RISKS

• Executive Chairman Saylor stated, "all of the credit instruments are undervalued. I think the equity is trading weak — it is undervalued. I think all the bond instruments are way undervalued. I would say the market is much more skeptical and biased pessimistically than we are," highlighting persistent market skepticism toward the company’s capital structure and financial instruments.
• Volatility in Bitcoin price led to a $14.5 billion unrealized fair value loss in Q1, directly causing the reported operating and net losses.
• STRC’s variable cost of capital remains subject to SOFR plus a credit spread, which, while variable and potentially compressible over time, introduces stochastic uncertainty versus fixed obligations.
• Management noted, "Adding to the U.S. dollar reserve reduces Bitcoin per share but improves the credit quality," presenting a tradeoff that could dilute equity gains to enhance credit standing.

SUMMARY

Strategy Inc (NASDAQ:MSTR) reported a significant $14.5 billion quarterly operating loss driven by the fair value decline in Bitcoin, despite continuing to expand its balance sheet through aggressive Bitcoin accumulation and capital raises. The rapid growth of the STRC digital credit product, now $8.5 billion outstanding and commanding dominant global liquidity among preferred instruments, underpins both increased capital flexibility and a strategic pivot away from dilutive equity issuance towards credit-based funding. Management emphasized its ability and willingness to actively manage the capital stack, including the potential sale of Bitcoin for dividends or liability reduction, applying sophisticated real-time modeling to optimize between equity accretion, credit metrics, and value creation. Near-term, a shareholder proposal seeks to increase STRC dividend frequency from monthly to semi-monthly, potentially further improving liquidity and market efficiency for investors. Forward guidance and scenarios presented by management reinforce that with a minimum compounded BTC appreciation of 2.3% annually, the company can perpetually fund dividends from its current reserve, underscoring confidence in both the sustainability and scalability of the digital credit model.

• The company asserts it is structurally "highly liquid and extremely well capitalized," with net leverage and risk metrics consistently benchmarked against S&P investment-grade standards in detail throughout the call.
• Scenario analyses reveal that swaps of MSTR equity for Bitcoin are only accretive to shareholders above a 1.22x MNAV threshold, below which direct Bitcoin sales or liability management are more favorable for accretion and credit risk reduction.
• Management described ongoing daily (and sometimes minute-by-minute) assessment of accretive trades, stating, "We have a sophisticated model — we can plug in any possible trade in any size on any day of the week. Rest assured, we are continuing — we are considering these every single day, and we are programming trading algorithms to trade all these instruments sometimes every single second."
• The STRC issuance and related credit growth are explicitly benchmarked as second only to IBIT in capital inflows, with adoption spanning 1,400 institutions, major ETF indexes, and millions of retail accounts globally.
• Legislation and regulatory trends such as the CLARITY Act are viewed as accelerants for industry growth but not prerequisites for continued scaling, with the company describing its current legal and compliance footing as a "safe harbor."
• Long-term capital strategy centers on retiring convertible debt, maintaining a focused two-instrument capital stack (MSTR equity and STRC credit), and expanding amplification while flexibly adjusting USD reserves to balance equity dilution with credit risk enhancement.
• The management team highlighted increasing traction for STRC within DeFi and TradFi, with $270 million of layer-two tokenized STRC in use outside the U.S. as of the call, and ongoing product innovation by partners.
• Retail investor participation remains dominant for STRC, accounting for 80% of shareholders and representing an estimated 3 million households just eight months after launch.

INDUSTRY GLOSSARY

• STRC: Strategy Inc’s variable-rate, perpetual preferred digital credit instrument, backed by Bitcoin and designed to offer institutional and retail investors tradable, high-liquidity exposure.
• MNAV: Market Net Asset Value, a key internal metric denoting the ratio of market value of assets to book, used to determine accretive actions such as equity-for-Bitcoin swaps.
• Amplification: The effective leverage or magnification of returns achieved through preferred equity and credit issuance relative to underlying Bitcoin reserves.
• BTC Rating: Ratio measuring the degree to which corporate debt is over-collateralized by Bitcoin holdings, often expressed as a multiple (e.g., 10.8x BTC rating).
• Sharpe Ratio: A financial metric expressing return in excess of the risk-free rate per unit of volatility, actively monitored for STRC against peer instruments and asset classes.
• Digital Credit: Novel, Bitcoin-backed credit products exemplified by STRC, positioned as successors to traditional preferred capital and structured for high global tradeability and liquidity.
• BTC Breakeven ARR: The minimum annualized Bitcoin appreciation rate required for Strategy Inc to indefinitely fund its dividends without additional equity or credit issuance.

Full Conference Call Transcript

Andrew Kang: Thank you, CJ. First off, I would like to officially welcome CJ Jain to his new role as Strategy Inc's head of investor relations. I also want to take a moment to thank Shirish Jajodia, our corporate treasurer, for helping establish and lead our IR function for the last 20 quarters. As our team grows, I know we will strive to continue to provide transparent and relevant information to all of our shareholders and stakeholders. So welcome, CJ. Now turning to the quarter's results. We are off to a very strong start in 2026. We now hold 818,334 Bitcoin, which is about 3.9% of all Bitcoin that will ever exist.

That keeps Strategy Inc in a clear leadership position as the largest corporate Bitcoin holder in the world. Our market cap is now $62 billion and STRC has grown to $8.5 billion outstanding, showing strong market fit and investor demand and filling a gap that has existed for investors seeking stable price and attractive yields backed by Bitcoin. So far in 2026, we raised about $11.7 billion of capital, giving us more flexibility to keep our Bitcoin position and creating long-term value for our shareholders. Turning to Q1 financial results. We reported an operating loss of $14.5 billion and a net loss of $12.8 billion.

As you would expect, these results were primarily driven by the decline in Bitcoin's fair value during the quarter, and as these are largely noncash, market-driven impacts tied to Bitcoin's quarter-end price. Our underlying strategy remains unchanged: raise capital responsibly, buy and hold Bitcoin over the long term, and grow Bitcoin per share for our shareholders. On slide eight here, Bitcoin per share increased from 181,030 sats per share in May 2025 to 213,371 sats per share in May 2026 — roughly an 18% year-over-year increase. Year to date, we have delivered 9.4% BTC yield compared to 22.8% for the full year 2025, showing acceleration year to date compared to the same point last year.

We have also generated 63,110 BTC gains so far in 2026 compared with 101,873 BTC for all of 2025, having already achieved about 62% of last year's full BTC gain in just the first four months of the year. In dollar terms, that represents approximately $5 billion of dollar gain year to date versus $8.9 billion for the full year 2025. Since 2020, Bitcoin per share has grown to 213,371 sats per share as of May 2026, which is nearly a 4x increase since the beginning, delivering positive BTC yield every year across multiple market environments. In 2025, we delivered 22.8% BTC yield, and so far in 2026, we have already added another 9.4%.

We remain focused on consistently increasing Bitcoin per share over time through our disciplined treasury operations and long-term conviction in Bitcoin. Here on slide 11, our track record remains constant, having acquired additional Bitcoin in every quarter since 2020 across 108 separate acquisitions. As of May 4, we held over 818,000 Bitcoin for a total value of approximately $64 billion and a total acquisition cost of about $62 billion. Our average purchase price is approximately $70,000 per Bitcoin, and our holdings now represent, as I mentioned, 3.9% of all the Bitcoin that will ever exist. Turning here to the balance sheet. Digital assets ended the quarter at $51.6 billion compared to $58.9 billion at year end.

Having acquired 89,599 Bitcoin in Q1, the change reflects the lower price of Bitcoin at the end of the quarter versus at the end of last year. Cash and cash equivalents were $2.2 billion, which largely reflects our USD cash reserve. Regarding taxes, the change this quarter was driven by the quarter-end mark-to-market movement in Bitcoin, and as Bitcoin moved from an unrealized gain at year end with a deferred tax liability of $1.9 billion to an unrealized loss at the end of Q1, to a deferred tax asset.

A full valuation allowance against that tax asset brought the net balance sheet tax position to zero, which also resulted in a noncash tax benefit on the income statement which partially offset the pretax loss for Q1. Long-term debt remained unchanged at $8.2 billion while equity increased to $9 billion, driven by strong STRC issuance in the quarter. Overall, the balance sheet remains highly liquid and extremely well capitalized. At the end of Q4, the market value of our Bitcoin was approximately $59 billion, which is based on a Bitcoin price of about $87,500.

During Q1, we recognized that unrealized fair value loss of $14.5 billion, and despite Bitcoin price volatility, we continued to buy, having purchased an additional 89,599 Bitcoin in the quarter — approximately $7.3 billion at an average price of about $80,900. We ended the quarter with a digital asset value of $51.6 billion, based on a Q1 ending Bitcoin price of about $67,800. In Q2 so far, we are illustrating an unrealized fair value gain of approximately $8.3 billion as of May 1. We purchased an additional 56,235 Bitcoin quarter to date for approximately $4.1 billion at an average price of roughly $73,400 for that period.

Those purchases, benefiting from the increase in Bitcoin price, add approximately $300 million of positive fair value, and as of May 1, our Bitcoin held a market value of approximately $64 billion based on a Bitcoin price of $78,035. In dollar Bitcoin reserve, implying an MNAV of 1.27, which has expanded since the beginning of the year. We have $13.5 billion preferred equity, representing 34% amplification, and net leverage of 9%, made up of the $8.2 billion of convertible debt. Strategy Inc is building around Bitcoin as digital capital. We have approximately $58 billion of equity. You can see here large traditional banks operate with liabilities-to-asset ratios above 90%. Our ratio is a mere 9%.

That gives us a very different foundation made up of a very large equity base, substantial Bitcoin reserves, and structurally lower balance sheet risk. We can issue Bitcoin-backed credit products to support investors with strong collateral and continue accumulating Bitcoin over the long term from a position of strength and durability. We have approximately $6 billion of net debt, which represents just 9.3% net leverage against our Bitcoin reserve, which is effectively a 10.8x BTC rating. Our strategy is based on a disciplined balance sheet construction, modest leverage, strong collateral, and permanent capital to grow our Bitcoin over time.

Our net leverage is lower than the average of the investment-grade S&P universe, and lower than every major industry sector across most S&P 500 companies. At the current Bitcoin price, our reserve is valued at approximately $64 billion compared to $6 billion of net debt, which translates to the 10.8x BTC rating. The stress case on the right shows that even after a 91% Bitcoin price decline to roughly about $7,300 per Bitcoin, our Bitcoin reserve would still be sufficient to cover our net debt at a 1x BTC rating.

Our USD cash reserve has remained at $2.25 billion and while the years of coverage has shifted down with the growth of STRC this year, we believe the stable cash along with our Bitcoin reserves and ability to raise additional capital continues to provide us with flexibility to continue supporting our dividends for the foreseeable future. On the next slide, the $64 billion of BTC reserves adds an additional 43 years of coverage. Another way to look at this: at today's reserve size, Bitcoin would need to grow by only 2.3% annually for the reserve growth to cover our current obligations.

If Bitcoin grows at or faster than the breakeven ARR here, the BTC reserve alone can support our dividends without requiring any additional capital. Before I turn it over to Phong for his remarks, I would like to highlight the amendment to STRC that we have asked for your vote on. We are proposing to move STRC dividends from monthly to semimonthly with payments twice per month on the fifteenth and the last day of the month, while keeping the economics unchanged. Our goal is to make STRC work better for investors by reducing reinvestment lag, improving liquidity, dampening the impact of a single monthly record date, and helping STRC trade more efficiently around the target price.

Today, STRC pays out 12 times per year with one payment at month end. Under the proposed amendment, STRC would pay 24 times a year with payments around the fifteenth and the last day of the month. Again, total dividend economics are unchanged, and payments would simply be about half the size and paid twice as often. Under the proposed change, there would be two record dates, one on the fifteenth and one at the end of the month, with the related payment dates made on the next scheduled record date. If the vote is approved, the first record date would be June 30, and the first payment date would be July 15.

The mechanics are pretty straightforward: same dividend economics, more frequent payments, and a clear transition timeline. We believe this change creates the highest frequency credit instrument in the world and makes a great product twice as better, and we look forward to your support. With that, I will turn it over to Phong. Thank you, Andrew. Thank you, everyone, for joining us on this evening's earnings call.

Phong Le: I have a few updates to make on our capital markets: on our equity, on our digital credit, and then I will conclude with updates on our capital market strategy overall. If you had asked us at the beginning of the year what was our target for the year in terms of capital markets raises, we would have said it was uncertain, and it really depended on the success of the STRC product. And I think four months in, we can say that STRC has been more successful than we had expected at the beginning of the year.

One representation of that is the amount of capital that we have been able to raise for the company and ultimately for Bitcoin. You will see here year to date 2026, we have raised $11.7 billion, as Andrew had mentioned, notably about half from issuances of our common equity, half from issuances of our preferred — primarily STRC — and no longer are we issuing convertible debt to raise capital. How does that compare to the rest of the U.S. equity capital markets? You will see last year, we represented about 8% of the equity capital markets in the full year 2025.

We were the largest issuer, and we are, again this year, the largest issuer in the equity capital markets — about 10% total: 6% of common equity, 60% notably of preferred equity. We are doing what we said we would do and what we were trying to do, which was to shift our ATM more towards credit. And you see this even more pronounced as we look at each month of the year 2026. We started in January with 20% of our equity issuances using digital credit, 80% using MSTR, and we have largely flipped that number in April with 17% using MSTR and 83% using digital credit, which, of course, is also less dilutive to our overall shareholders.

Research analysts have been consistently supportive. As we look to exit the Bitcoin bear cycle that we are in, the average price target of all of the analysts covering Strategy Inc for Bitcoin is $138,000, which is about a 70% increase. The average MSTR price target is about $323, which is an 80% increase from current levels. So let us talk about digital equity and MSTR overall. We show this chart every quarter. You can find it on our website, strategy.com. This is our annualized asset performance since we adopted the Bitcoin standard. 08/10/2020 is when we look back to. We have outperformed Bitcoin by about 50%. Bitcoin has outperformed the Mag Seven by about 50%.

And the Mag Seven has outperformed the S&P 500. Our ultimate objective is for our common to outperform Bitcoin by accreting Bitcoin per share, and based on this chart, we continue to deliver on that performance. As Andrew mentioned, our Bitcoin per share is also accreting. That is our business objective ultimately, and we are at 9.4% Bitcoin per share increase so far this year. You will see that has also accelerated in the last month. We started off a little bit slow in January and February — 0.4%, 0.1% — the increase in the month of March was 3%, and really increased double in the month of April with 6%.

Last quarter on this call, we said our objective is to double Bitcoin per share in seven years. Doubling Bitcoin per share in seven years implies about a 10% annualized BTC yield, and as I mentioned, so far this year, we have increased 9% our BTC yield. So we are well onto our annual target, and we have been happy with the success of STRC so far this year.

Ultimately, MSTR continues to be one of the most widely held equities around the world and the most widely held Bitcoin proxy in the world, and we are able to reach 1,400 institutions, 927,000 retail accounts, 1,300 ETFs and funds — over 100 million beneficiaries — that share nearly 4% of the Bitcoin in the world. I do not think about this as concentrated amongst one company or a set of leaders, but really amongst 100 million people that we are sharing Bitcoin with per share around the world. So let us talk about digital credit, our favorite topic so far this year. The idea of preferred capital and preferred credit is not a new idea.

In fact, the industrial revolution was built on the railroads, which was built on analog credit through preferred capital. At that point in time during the late 1800s and early 1900s, 20% to 40% of the capital structure around the world was preferred capital. What happened in the mid-1900s and the early 2000s is the rise of liquid debt markets and increased regulation pushed preferred capital into what I would call niche use. Now, as people are waking up to preferred capital and digital credit especially, we are seeing a reemergence.

My analogy here is where preferred capital helped build the railroads, which helped drive the industrial revolution, now digital credit will help drive the digital railroads or the digital rails. It will drive the digital revolution, including the AI revolution. So we are excited about bringing this back to the forefront of the world. If you look at an overview here, we have five preferreds. We have mostly been focused on STRC so far this year. I think there is an opportunity for the remaining preferreds to start to perform as Bitcoin starts to perform. But STRC is clearly the tip of the arrow as far as digital credit, and so that is what I will talk about primarily.

We are up to an 11.5% dividend yield. Notably, we have kept this flat for the last two months. We increased the dividend yield from 9% to 11.5%, and now we are flat for the last two months because what we have seen is the volatility has started to decrease, the price has started to remain stable, and we have seen an increase in Sharpe ratio to 2.53. The notional value is up to $8.5 billion, and we are trading $375 million a day. I will share how that compares to other preferred equities and also common equities in general. The first thing I will note is the rapid growth of STRC.

In just nine months, we have raised $8.5 billion of capital. We had a running start with $2.8 billion, it slowed down, and it has really accelerated over the last couple of months. Comparatively, this is one of the most successful financial instruments ever created. In terms of capital inflows, it is second only to IBIT. Compared to other products, it has seen faster growth in terms of capital inflows than famous products like the iPhone or Google AdWords. So we are very proud of the acceleration of the product, and it means that we built something that is resonating with people in the U.S. and people around the world.

STRC is by far the largest tradable preferred in the world. We are nearly two times the size of Wells Fargo's preferred. Almost all of these other preferreds, save us and another one, are bank preferreds. So this has gone from being an industrialized product that built the industrial revolution to a niche financial product, and we are excited to bring it back to being a major product in the world. The liquidity of STRC — this is the 30-day average trading volume — is 25x the second largest preferred. Where Wells Fargo is about half our size, it is trading one-twenty-fifth of what we are trading, at $15 million versus our $375 million.

With that liquidity, the turnover versus the next best preferred — we are at 4.4%, 10x of what Wells Fargo is and some of these other products like Bank of America products. We think we have really found a new product category — digital credit — based on an old product category — preferred capital — and we are excited about where this is going. Interestingly, and as we pointed out before, STRC is performing not just as one would expect in a bull market, but performing in a Bitcoin bear market.

While Bitcoin has gone down 37% since October — now it is starting to rise again — we are seeing STRC trade essentially near par and paying dividends that are increasing monthly. We have increased the dividend, as I mentioned, from 9% to 11.5% and kept it steady at 11.5% for two months, now going on three months, while Bitcoin has been decreasing. With that, we have also seen the ATM velocity of STRC accelerate, and the ATM velocity is really the net inflows into the product. This is the demand of the product overall.

Notably in April, we had a week where we raised $1 billion, and then the subsequent week, we raised $2.2 billion, and so we have seen tremendous demand coming into STRC. At the same time, we are seeing the volatility decrease. Our target price range for STRC is $99 to $101. We have actually seen it trading in a much tighter range, and for the last three months — March, April, May — it sat in that price range for 100% of the time. I mentioned here the daily liquidity is pretty significant, but it is also growing — from $54 million to $120 million in January, to $250 million in March, to $300 million in April.

For those who are interested in getting into the product in size — if you are a corporate or if you are a large institution and you need to have confidence that when you need to trade in and out, you need liquidity — our product is showing that level of liquidity. I will go through a series of analyses of Sharpe ratio because Sharpe ratio ultimately is a measure of the returns above the risk-free rate given the volatility of the instrument, and ultimately, if you are an investor, people are looking for high Sharpe ratios. Compared to traditional credit — junk bonds and investment-grade bonds, bank preferreds — we outperform pretty notably.

Compared to traditional asset classes — the S&P 500, even NASDAQ, etc. — we also outperform very notably. And then, obviously, if you are looking for Sharpe ratio, a lot of folks go to the Mag Seven equities. NVIDIA is on a hot tear because of the AI trade. Google runs essentially a digital monopoly and it has been a very, very solid equity over the course of the last 20 years. STRC has outperformed all of those, and all of the Mag Seven. Another place people typically go to find a high Sharpe ratio are hedge funds.

Hedge funds are built with different strategies, different analyses, different quant strategies, and typically, they are built to outperform the S&P 500 and with lower volatility. Looking at different hedge fund strategies, STRC to date — notably and understandably early in its maturity — is already outperforming these different hedge fund strategies, whether you are a multistrat, macro, equity arbitrage, etc. We see a lot of benefits to this emerging category of digital credit when compared to hedge funds, private credit, private equity. One, it is extremely liquid.

To get these levels of returns and these levels of Sharpe ratios, sometimes people subject themselves to 90-day lockups for hedge funds, three to seven years for private credit, seven to 10 years for private equity. We charge no fee. These other strategies often charge a management fee of 1% to 2% and a 10% to 20% carry — a “two and twenty,” if you will. Digital credit is homogeneous — you know exactly what is behind it, it is Bitcoin. These other strategies are sometimes heterogeneous with many different assets grouped together, making it very hard to ultimately assess the risk.

Ours is scalable through an ATM mechanism that allows people to buy the product, and hedge funds and other strategies are discrete. We are accessible — traded via a four-letter ticker on the Nasdaq — and now, interestingly, trading on many tokenized exchanges and tokenized products. Other ones are typically restricted to those who are accredited institutional investors or high net worth individuals, and we are transparent — we disclose our performance and our holdings through weekly 8-Ks and websites that update every 15 seconds. One of the big questions as we have seen STRC perform over the last four months — essentially the year 2026 — is what does this mean for our capital market strategy?

I will introduce this topic, and Mike will talk about it a lot more. We said our objective is to double Bitcoin per share in seven years through the success of digital credit. So what does that mean? We sell digital credit, and we have said that we target about 10% to 20% of Bitcoin reserves annually in digital credit volume. Of course, we will analyze that and assess that to see if that target makes sense. That will generate amplification to our common stock, which should increase the Bitcoin per share in our common stock, which is ultimately our goal.

As we increase Bitcoin per share, that allows MSTR to outperform Bitcoin, which is what you have seen happen over the last six years. What allows us to flex these levers even better? If our cost of credit goes down — if we are able to decrease the yield from 11.5% to lower for a variety of factors. If we are able to sell more STRC, that increases amplification. If our MNAV goes higher — and I will talk a little bit about our MNAV — that also creates benefits, for example, our cost of paying our dividend. What has happened in the last four months is we have increased optionality for Strategy Inc the company.

We have more sources of capital, and we have more uses of capital than we ever had before. The success of STRC gives us options to do different things from a capital markets and a treasury operations perspective to benefit our common shareholders. Our traditional sources of capital: sell MSTR, sell STRC. We could sell our USD reserve to pay dividends — which we added in November. We also have Bitcoin that we have the opportunity and the option of selling. We can see our other prefs start to perform and sell those into the market, and we have talked in the past about also being able to potentially sell BTC or Bitcoin derivatives.

Our uses of capital: primarily today, we buy Bitcoin. We use capital to pay our USD dividends, and we use capital to build up a USD reserve. We have used capital in the past to pay down our convertible debt, our secured loans, our Bitcoin-backed loans. We may continue to do that in the future. We could also use capital, if we want to in the right time, to retire any of our other preferreds. So what does this really mean? This means we had three trades that we have executed — and, really, before 2025, two trades: we sold MSTR, we bought Bitcoin; we sold MSTR, we bought U.S. dollars.

Last year, we added STRC and preferreds, and we sold STRC and bought Bitcoin. Now we are really seriously thinking about and contemplating that we want to introduce a few more trades. Selling MSTR, at the right MNAV, where it is Bitcoin-per-share accretive, to buy back debt. What does that mean? Considering retiring, potentially early, some of our convertible notes using our common stock. Selling STRC to buy U.S. dollars — we have not done that much to date, but perhaps reserving part of our STRC proceeds to build up our U.S. dollar reserve.

Selling STRC to buy back debt — you can see how that would be an accretive trade to Bitcoin per share because STRC inherently on sale is not dilutive, and buying back future dilutive convertible shares is beneficial. The third set of interesting trades I previewed on that last slide: selling Bitcoin. This is a big statement, but our ability to sell Bitcoin either to buy U.S. dollars or sell Bitcoin to buy debt, if it is accretive to Bitcoin per share, is something that we would consider doing going forward. How do we make these decisions? Ultimately, there are two sides of the same coin, if you will.

One side is our equity performance, and to our common shareholders, the most important thing is to accrete Bitcoin per share, which results in higher BTC yield, which ultimately together result in a higher BTC gain. Adding more Bitcoin and BTC gain on a dollar basis is the closest proxy to earnings per share. Those are the three KPIs we look to assess equity performance. On the risk side — the other side of the coin — we have a BTC rating, which is the amount that our debt and our leverage is over-collateralized by Bitcoin. We have an MSTR duration, which is the average duration of all of our instruments.

If you look at our perpetual preferreds, they have the longest duration based on a Macaulay duration basis — 10 to 15 years out — and then we have our convertible debt, which has a shorter duration. Swapping longer duration for shorter duration is a good trade for us. Then we have MSTR risk. The BTC rating and the MSTR rating together influence the total risk profile to the company, and we will talk through a little bit more about this framework later. A couple of things I want to note before I hand it off to Mike. One is Bitcoin per share accretion is our primary goal. MNAV is an input.

The threshold for Bitcoin per share accretion when selling our equity and buying Bitcoin is increasing over time. Where it used to be a 1.0x MNAV, as we add debt and as we add preferreds — primarily to our structure — the breakeven increases. Right now, it is about 1.22x. That means at 1.22x or higher MNAV, it is accretive for us to sell MSTR and buy Bitcoin. Below 1.22x MNAV, it is actually more accretive for us to sell Bitcoin and pay off our dividends than it is above 1.22x MNAV. We will talk more about this and explain it further, but it is important because I think there is a misconception that the breakeven point is 1.0x.

Next thing I will note: there are benefits to the way we bought Bitcoin and the holdings of Bitcoin that we have by cost basis tier. You have this here taking $20,000 tranches — $0 to $20k, $20k to $40k, $40k to $60k, $60k to $80k, and beyond. We bought Bitcoin at every price level. Below current prices — about $80k — we have an unrealized gain from a tax basis on that Bitcoin. Above $80k, we have unrealized losses.

If we were to sell Bitcoin, our objective would be to sell high-cost-basis Bitcoin to capture some of those unrealized losses and to take some of those unrealized tax benefits, of which, on our balance sheet, there is about $2.2 billion of estimated tax benefits. So there is a tax benefit if we were to sell high-cost-basis Bitcoin, as an example, to pay down some of our dividends over time. Amplification: we are currently at about 34% amplification. A portion of that — about 10% — is driven by our convertible debt. The ability for us to increase amplification to the company is higher when we have long-duration digital credit than it is when we have short-duration convertible debt.

As the company starts to cycle over time from convertible debt to digital credit, we can take on more amplification with lower risk levels. We could see ourselves getting to 50% to 60% amplification levels over time and still feel like we have high credit quality and a high risk quality to the company. The last thing I will share here before I get to some of our principles is the U.S. dollar reserve. We have built up a $2.25 billion U.S. dollar reserve, which at that point represented over two years of dividends and interest payments, and now with the same exact U.S. dollar reserve, we are at about one and a half years.

Adding to the U.S. dollar reserve reduces Bitcoin per share but improves the credit quality of the company, and so it is something that we will continue to evaluate over time — what the right level of U.S. dollar reserve is. We feel like at a minimum it should be $2.25 billion, but likely as we grow our digital credit and STRC, we will want to add to this at a certain level. I will summarize what I shared here because, hopefully, it addresses a lot of questions from our shareholders. How do we think about managing capital markets and our balance sheet? One, our objective is to create long-term value for MSTR.

We want to increase Bitcoin per share, which will increase the price of the common equity and ultimately be better for our common shareholders. Two, we are going to continue to grow demand for STRC. We have seen it to be a very popular product in the market and very beneficial to our balance sheet. We will continue to improve the features as we can, for example, moving to semimonthly dividends. Three, we are going to proactively reduce convertible debt based on market conditions, and that could mean actively purchasing back, through whatever means we think appropriate, some of the convertible debt before it comes due. Right?

Fourth, we are going to look at the STRC demand and credit risk to determine the size of the U.S. dollar reserve. There is a natural market mechanism that as the U.S. dollar reserve in months to cover or years to cover decreases, the credit risk of STRC goes up nominally and could decrease the demand, and so we will monitor that to decide what is the right U.S. dollar reserve size. Fifth, similarly, the appropriate amplification for the company will also be based on market conditions.

Mike and I and Andrew and the entire team are looking literally every day at what are the trades that are accretive to Bitcoin per share, what are the trades that create the right equity accretion, and what are the right trades that manage the credit risk at the right levels. Six — not necessarily most importantly, but maybe most notable — we will sell Bitcoin when it is advantageous to the company. We are not going to sit back and just say we will never sell the Bitcoin.

We want to be net aggregators of Bitcoin, increasing our total Bitcoin, but more importantly, increasing our Bitcoin per share because we think that is what is going to be most accretive long term for MSTR and for the common. With that, I will hand it over to Michael Saylor to complete the presentation.

Michael Saylor: Thank you, Phong. I thought I would elaborate on some of the things set up till now and just give you an overview of the BTC market and then our capital market strategy. Everything is based on digital capital, and Bitcoin is digital capital. That means global legitimate collateral — global property. We keep track of Bitcoin as digital capital and the consensus in the market, and what you can see here is the U.S. government has embraced it.

All of our key financial regulators — the head of Treasury, the head of the SEC, the head of the CFTC, and now the incoming head of the Fed — are all digital assets enthusiasts, innovators, and Bitcoin believers, as is the President of the United States, Donald Trump, and the Vice President, J. D. Vance, along with many, many other cabinet members. I think that is a very important fact. There are a lot of bills still working their way through Congress. The most notable one right now is CLARITY.

The real key here is that Bitcoin is a priority in the House and the Senate on the Hill, at the White House, and there is bipartisan support and bipartisan agreement for Bitcoin as digital capital and for legislation that supports the status of Bitcoin as digital capital in the world. Really exciting — a few months ago at our Bitcoin for Corporations conference, we saw major announcements by systemically important banks — Morgan Stanley, Citi, TD — all with intent to integrate into their operations. This is something we only hoped for three or four years ago, and now it is reality.

At the point that Bitcoin is integrated into the banking system, then it is digital capital here to stay. You can just see the announcements across your ticker everywhere in the world — this is a global phenomenon. It turns out whatever happens in the U.S. and with U.S. banks is spreading to Europe, to the UAE, to Hong Kong, to South America, etc. You are going to see these announcements accelerate, but we have crossed the event horizon. It is pretty clear that you cannot put the genie back in the bottle. Bitcoin has arrived. We try to be systemic, so we track it.

We track the 15 largest or most systemically visible banks in the world, and we look at their embrace of Bitcoin — as a creditworthy instrument — will they trade it, will they offer credit against it, will they custody it, will they handle the derivatives, etc.? What you can see here is that adoption has actually advanced since even last quarter, and everywhere in the world across all of these banks, there are active efforts to improve Bitcoin support.

If you track the number of accounts that support Bitcoin access, you can see we are marching up into the high hundreds of millions — 840 million crypto exchange accounts, nearly a billion neobank accounts, nearly a billion brokerage accounts — that all have access to some sort of Bitcoin derivative. ETFs, of course, continue to expand. There have now been 125 ETFs with about $126 billion of capital. The capital flowing into these ETFs continues to accelerate. As you can see, we were the first company to embrace, and now we are up to 194 public companies. We anticipate this will continue to grow.

Lots and lots of IPOs — the public markets have embraced Bitcoin — and this is just an example of some of the notable companies that have come public just recently that have substantial Bitcoin exposure. The digital credit ecosystem has been a very pleasant surprise. It has grown very rapidly, and it has become very diverse. The way that we know digital credit is working is that companies and economic actors everywhere in the world that we have never met face to face are discovering this and they are building products and businesses around it.

Right now, what we see is very enthusiastic support with retail investors, with corporate treasurers, with institutional investors, with crypto-native innovators, and with TradFi innovators. Five different groups of capitalists, but they are all getting very heavily involved — enthusiastically and rapidly. If we drill into retail, 80% of all STRC shares are held by retail as of our last check. This is an extraordinary fact. Normally, it is very difficult to get broad, deep retail support for a common stock or a public stock. Yet we have been very pleasantly surprised. We are able to trace about 120,000 individual retail accounts. Word of mouth is spreading this — it is spreading virally.

Based upon our studies, we see that anybody that buys STRC is generally telling their friends, their family, their parents, their working associates about it, and it continues to spread word of mouth. You can also see Schwab is a big distribution channel — 23% of STRC is held in Schwab accounts. Fidelity is a channel. Robinhood is a channel. Morgan Stanley and E*TRADE are channels. BlackRock is a channel. Interestingly enough, Vanguard, that will not let their investors buy Bitcoin natively, actually is a channel for STRC.

It is pretty exciting that we have wrapped Bitcoin into a credit instrument that is being distributed through all sorts of traditional finance channels to types of investors that otherwise would never be able to buy Bitcoin itself or would never want to. We actually have traced STRC exposure and we estimate that there are about 3 million households that are benefiting from STRC right now. Think of it as powering a savings account for 3 million households. Phong mentioned about 100 million beneficiaries of MSTR. Well, 3 million beneficiaries of STRC in eight months is a pretty good start to the race. Our ambition is to spread this to tens of millions and then hundreds of millions of people.

We are off to a good start, and we are just very enthusiastic about the retail support. We are also very enthusiastic about corporate support. Corporations, unprompted by us — we did not go and sell this to them — just figured out that it was a good idea for them. Corporate treasurers and corporate CFOs with working capital have been allocating some of their treasury capital to STRC. This is a really pleasant development, and we are starting to think that there might be thousands of companies that might allocate some amount of their treasury capital to STRC. I have had a lot of experience selling BTC to corporations.

What I found is that tends to be a board-level decision. It goes all the way to the board of directors. The CEO has to be way behind it, and if one director on the board has concerns, the cycle slows down. With STRC, it is not a board-level decision. It is more like a CFO-level decision. If the treasurer is enthusiastic, the CFO can greenlight it. They might or might not give the CEO a heads up. But this is a very different value proposition — it is maybe a five-minute with the CEO instead of a two-hour conversation with the entire board. For that reason, we think that STRC really is Bitcoin for corporations.

It is going to spread very rapidly now. The other thing that is very exciting is that STRC has spread into credit indexes. BlackRock’s is a $14 billion credit ETF and STRC is the number two holding. VanEck’s is another credit ETF, and STRC is also the number two holding. Imagine an instrument coming out of the blue — did not exist 12 months ago — and in less than 12 months, we have gone from nonexistent to number two. Next stop, number one. We are enthusiastic about seeing STRC embedded in lots and lots of institutional credit indexes and lots of institutional credit funds. Third-party ETFs have been finding STRC and they are building innovative ETFs.

Strive is building a digital credit ETF. 21Shares created an ETF with STRC and took it public in Europe. There are a number of ETF providers that are working with us that are in pipeline right now — active discussions with four right now. We think that over time, there will be more ETFs that build STRC into their fund offering. Here, I would like to talk about digital money and digital yield. We start with digital capital — 34 vol on a rolling 30-day average, 39% ARR. The one-year trailing vol of Bitcoin is almost 40. Think of it as a 40 vol, 40 ARR asset — raw economic energy.

We split that asset into STRC, which is 3 vol, 11.5% yield; and then MSTR, which is 71 vol, 59% ARR. One is amplified Bitcoin — we call it digital equity — and the other one is damped — digital credit. Digital credit, we believe, is like the kerosene of finance. It is the monetary fuel, and it is a universal monetary fuel. It is high grade, highly distilled. From here, you can build all manner of products. We see the layer three as digital money and digital yield. Neither of them would really be possible without digital credit. It is just too difficult to distill pure, zero-vol, 8% money from a 40 vol, 40 ARR asset.

You have to crack it. You have to have a crypto reactor, and you have to have tens of billions of dollars of equity capital to do it, and that is what we did to create STRC. Simple definition: digital money in our lexicon is 0% volatility, daily-liquid instruments built on digital credit — like zero-vol, 8% yield coin. Digital yield is nonzero volatility, or it might be illiquid — it might be a three-month lockup — a 5x levered, 35% yielding fund that loops digital money four, five, six times in order to get there. Digital yield is a levered construct and digital money is the stripped-down construct.

We think digital credit is programmable across lots of dimensions — a lot of ways to add value to it. You can tokenize it, put it in a private fund, put it in a public fund, put it in a bank account. You can deploy it on a crypto exchange, on a neobank, you can deploy it on a real bank. You can deploy it on a crypto network. You can program it to a volatility of zero or let it float up to a volatility of 10.

You could program the liquidity to be continuous or daily or monthly, but you could also put in a quarterly lockup or an annual lockup in order to put more leverage on or create a different characteristic. You can program the yield from 5% up to 25% reasonably. Some people might go beyond that, but we think 5% to 25% is reasonable. Then you can convert the currency — you can create Great British pounds or euros or yen or Swiss francs with digital credit starting from STRC. When you think about all these different forms, the question is: do you want to create a yield coin like a digital money coin? Do you want to create a yield fund?

Do you want to create an account? Depending upon what your assets are — if you are the biggest bank in Australia or if you are a Deutsche Bank, you probably would do it one way; but if you are a crypto exchange, you might do it a different way. The math is pretty straightforward. You start with 11.5% performance and like 3 vol right now. If we are lucky, maybe we will be able to get our vol to two or to a one-handle — that is the goal of our proposal to the shareholders — but I doubt seriously we get below a one-and-a-half or a one vol.

One vol is sort of what publicly traded money market funds look like right now. Getting to zero vol takes a bit of work. One approach to add value is to downshift the vol to zero, and maybe instead of 3 vol, 11%, you offer zero vol, 8%. That is digital money. The other approach is step it up — lever it three to one, pay 5% for the capital, and maybe you end up with something that is paying you like 35%, pay 10% on the capital, and you get a 25% yielding levered yield fund. These are all opportunities we are not going to do it ourselves.

Our laser-like focus is make STRC the deepest, most liquid, most stable, least volatile, highest Sharpe ratio credit instrument in the world. That is a mission. We think there are a lot of crypto innovators — and you see right here on this screen a lot of very impressive companies that are moving fast right now. Apex has had enormous success early on. Saturn is doing the same thing. Hermetica, Kraken, RockX, Ondo, Pendle, Spread, Stride — they are all doing very interesting things right now, and they are very innovative. They are moving about 10x faster than the TradFi complex normally moves on these sort of initiatives.

Having said it, there are a lot of interesting TradFi initiatives — things you can do in a traditional finance environment either with a private fund or a public fund — and we see those things happening as well. Eight weeks ago, there was no STRC in the DeFi industry, and in those eight weeks, we have rapidly grown to something like $270 million of exposure. This is just really extraordinary — the rate at which money is flowing. Sometimes money is flowing into this complex a million dollars an hour. A million dollars an hour.

It is starting to feel to me like we may very well see more than a billion dollars of STRC enter the DeFi industry in the near future. It is moving very fast, and it is very dynamic. Let us speak about outlook and our vision. We are a structured finance company, and you can see here, we are taking raw capital — digital capital — 40 vol, 40 ARR, $1.6 trillion market cap of Bitcoin. We are stripping the currency risk. We are reducing the credit risk. We are compressing the duration risk. We are distilling a yield. We are damping volatility in order to create various instruments. Our greatest product and biggest success right now is STRC.

As you can see, it is taking a 71 vol down to a 3 vol — we are targeting a 1 vol. Some important items to be aware: the Bitcoin breakeven ARR — we calculate it all the time. It is very significant for this reason. If Bitcoin grows more than 2.3% a year — that breakeven ARR — we can fund our dividends forever. We can fund our dividends forever without selling a single share of stock. It is a very critical point. If Bitcoin does not grow at all forever, we can fund the dividends for 43 years. We are very clear about this.

You will see we publish it on our website, and we update it every 15 seconds. Let us go to the next slide. Here you see — this is our website. If you go to the credit tab, you are going to see we show you the Bitcoin reserve. We show you the years of dividends — that is the years we have of coverage if Bitcoin appreciates 0% a year. Then we show you the Bitcoin breakeven ARR — 2.27%. It is updated every 15 seconds. For those people that are wondering what is the credit risk in all of these instruments, I encourage you to go to the credit tab. You can type in assumptions.

You can assume the Bitcoin price crashed to $30,000. You can change your vol outlook. You can change your ARR outlook. The model will recalculate all of the risk and credit spreads for every credit instrument and especially for STRC. As I said, we are updating all of these things in real time every 15 seconds. There is a misnomer. Most people think, well, Bitcoin has to appreciate 11% or 11.5% for us to be successful or cover the dividend. Not true — 2.3%. Or they think 30%. No — that is what we think it will do. The number that really matters is 2.27% — the BTC breakeven ARR. It is important for another reason.

The BTC breakeven ARR is also the inflection point where STRC issuance results in more Bitcoin being stacked by our company than the Bitcoin we use to pay dividends if we choose to pay dividends with Bitcoin. This chart here illustrates that we do not have to sell a single share of stock. We could stop selling MSTR common stock right now. We can fund the dividends with Bitcoin sales, and if STRC issuance is greater than that BTC breakeven number, not only will we fund the dividends forever, we will increase the amount of Bitcoin that we hold forever at the same time. How much is that?

If we were to sell $1.5 billion of STRC per year, we can sell Bitcoin, pay the dividends, buy more Bitcoin than we sell, grow our Bitcoin stack, and generate Bitcoin yield. Of course, we sold $1.5 billion of STRC in two days a few weeks ago. I think we can definitely stay above that breakeven point. What you see here on this slide is that if we actually have STRC issuance equal to 20%, that would equate to $12.8 billion of STRC sales this year. We are kind of on the path to that if we look at the first four months of performance. We might exceed it. Who knows — we might be less.

If we run it at a 20% issuance rate, then the first-order model shows we generate a BTC yield of 17.7%. We accumulate an additional 144,000 Bitcoin — and that is after we pay all the dividends by selling Bitcoin. Again, the most important point here: there are occasionally some short narratives — people would say things like, well, if they sell the Bitcoin, that is bad for the business or proves the business does not work or something.

We look at it as if you are a real estate development company — you bought land for $10,000 an acre and you sold it at $100,000 an acre and then you bought more land with the profit — nobody would say that is bad for the price of real estate, and no one would say that proves the business does not work. Real estate development literally exists to buy land cheap and sell it expensively. Like a Bitcoin development company — we buy it cheap, we sell it dear. Where do the dividends come from? Capital gains fund credit dividends. That is the essence of the business. We invest in digital capital — Bitcoin.

The capital gains from the investment fund the credit dividends. They will do it in perpetuity if the capital appreciates at that breakeven rate. Sometimes we will sell a Bitcoin derivative because it is in the best interest of the company, but it is not necessary. This chart really illustrates that you can strip the business down to something very simple: you buy Bitcoin with credit, you let it appreciate, and then you sell Bitcoin to pay the dividend. As long as you are for every single capital markets transaction. That means we are making these decisions not just every day — oftentimes every minute of every day — based upon all the fluctuating prices of the trading pairs.

Right now, our BTC rating corporately is about 3.3. The duration of our liabilities is 10.9. That is the stochastic duration — it is our estimate of the stochastic duration of all the debt and the prefs. The risk that we centered on — we are out to 818 basis points. That works out to a fair credit spread of 61 basis points. 818 basis points of risk means that there is an 8% chance at the end of the duration of the liabilities that you are trading at a BTC rating of 1. 61 basis points is the credit spread a rational investor needs to be paid to offset the risk. What you can see here is two things.

First, the assumptions we plug into the model to estimate that centerline risk is 10% BTC ARR — we assume that Bitcoin will perform about at the level of the S&P 500 over the last 100 years. It is a fairly conservative, realistic view. We plug in 40 vol — we assume that the asset will remain volatile ad infinitum. We see that as two conservative estimates. Even with those estimates, what pops out is a credit spread of 61 basis points. The investment-grade credit spread is like 88. This is investment-grade credit even with very realistic, pragmatic inputs. Let us delve a bit more into this — the risk model.

If you are a Bitcoin maxi, you think Bitcoin is going up 30% a year — there is no risk. The more bullish you are on Bitcoin, the more the risk drops away. If you are a tech investor and you think Bitcoin is as good as a Mag Seven stock and it goes up 20% a year, the risk is fairly de minimis. If you are a trader and you think Bitcoin is no different than the S&P, you are on the 10% ARR line. If you think that the vol stays constant, you have got that 818 basis points.

If you are a skeptic and you think Bitcoin is going up 0% forever, the risk increases, and if you are a pessimist and you just think that Bitcoin is going down ad infinitum, then the risk actually explodes. There is a lot of risk here — and you can see it in the model. We will show you risk numbers here with that view as though you are an agnostic trader — you do not love Bitcoin, you just think it is just as good as any other equity capital asset that is diversified.

You can calculate the risk with various Bitcoin prices, and you will get the answer you would expect: Bitcoin price going up is good; Bitcoin vol going down is good; and, on the next slide, you can slice this with various assumptions about the outlook of Bitcoin as well. Let us look at some trades. If we decide to sell $1 billion of MSTR stock and buy $1 billion of Bitcoin — if you do that at less than 1.2x MNAV — when you do it at 1.0x MNAV — you can see it is dilutive. It is a minus 48 basis point yield. It costs the shareholders $310 million. For that reason, not a very good idea.

What you can see here is that as the MNAV goes to 2.0 or 2.25, it becomes an extremely accretive deal. At 2.0, you make $457 million in gains on the trade. We have broken it down to basis points of yield — that is another 57 basis points of BTC yield — a lot of money. It is worth a third of a billion dollars. It is not complicated to see whether something is accretive or dilutive when you are swapping common for Bitcoin. You can also see here what it does to the credit risk — it improves our BTC rating. It decreases the risk. Whenever we are swapping MSTR for Bitcoin, it is credit-positive.

It is probably equity-positive unless we are trading below that 1.22x breakeven. Now let us consider whether we want to use equity to pay the dividends or whether we want to use Bitcoin to pay the dividends. If we fund the $1 billion of dividends with Bitcoin, it costs us $1 billion. It is a $1 billion cost to the shareholders. Look at the lowest line — you will see it — it is a 12,763 Bitcoin loss — 156 basis points. That is pretty similar to funding the dividends with common equity at 1.22x MNAV. They are pretty much the same. If you fund the dividends with equity below that breakeven, it gets more expensive for the shareholders.

It costs you an extra $190 million to fund at 1.0x MNAV. You would be better off to sell the Bitcoin than to sell the equity on this analysis if the equity is trading weak. On the other hand, if the equity is trading at 2.0x MNAV, then it only costs $535 million — it is an 83 basis point hit instead of a 156 basis point hit. As you can see, we are always considering: do you use MSTR or do you use BTC to fund obligations of the company? What you will notice is if you use equity, it does not change the credit metrics at all because you are expanding the capital base of the company.

With Bitcoin, it may be less dilutive, but it does slightly increase the credit risk. It drives down the BTC rating. The risk goes up 13 basis points — that would equate to like a 1 basis point increase in a credit spread. Now what about funding the U.S. dollar reserve to the tune of $1 billion? It is a lot more efficient for the shareholders to fund it at a high MNAV — like 2.25 or 2.0 — than it is to fund it at a lower MNAV. Of course, it is constant to fund it with BTC.

The negative from the equity point of view — the positive from the credit point of view is it extends our duration dramatically — 160 days of duration — it decreases MSTR risk by 55 basis points and improves the rating. Next, what if we actually buy back one of the converts or some of the converts? If we go and sell $100 million of STRC to buy $500 million of convertible bonds, we actually generate substantial BTC gains. We get a yield of anywhere from 22 basis points on the 2029 convert to 63 basis points of yield on the 2030 convert in the middle. Why?

Because different converts have different equity content in them, and so some converts are more dilutive to the common than others. You can see here all the analytics. You can see the impact on the rating. You can see the impact on the risk. Generally, we will stretch the duration, we will dramatically decrease the leverage, we will slightly increase the risk, and we will, of course, generate massive BTC gains through this trade. You have to evaluate this, of course, every day because the price of all the instruments will be changing every day, and so this is illustrative of the model we use. What if we actually sold Bitcoin to buy the common stock back?

This is not something that we have considered before, but I like to illustrate it. Below 1.22x MNAV, it is actually extremely accretive to the investors to swap BTC for MSTR. If you have an irrational market — let us say some crazy short shorted our stock to 0.5x MNAV — the most profitable trade in the entire model is to swap BTC for common stock at a massive discount to MNAV. You pick up 636 basis points of yield — massive amounts of BTC gain. Of course, the opposite is intuitive — if you are trading at a high MNAV and you swap BTC for the stock, you are generating dilution.

You will not see us swap BTC at a high MNAV, but you might see us swap it at a low MNAV in the future. You can see all of these trades — they have a small impact on risk, but it is fairly de minimis. It is primarily equity dilution or accretion. We can swap BTC for MSTR. Another very powerful tool the company has is we can swap STRC. We can sell credit to buy MSTR. Over time, as the business model becomes more understood, the company has the ability to do its own levered buyout on its own common stock.

We can create amplification — I am not going to use the word leverage because leverage implies that you have got a debt obligation that comes due. Really, it is amplification on the equity. If we wanted to amplify the returns of the equity, we would simply sell the credit and buy back the common equity. We get to take advantage of market mispricing. If the market prices everything perfectly, we do not have great arbitrage opportunities. You can see here, even if the equity was trading at 2.0x MNAV, we can generate 85 basis points of yield by swapping $1 billion of credit for $1 billion of equity.

If the market trades down to 0.5x MNAV, we can generate 800 basis points of yield. It starts to become pretty accretive, and this is an option in the future we have as an operator. We can actually sell dollars to buy common equity — you can see the impact of this. Of course, probably one of the more expensive programs we have is to carry the U.S. dollar reserve. It is dilutive to the equity — it is equity negative — but it is credit positive. You can see we do have the option, if the equity were to trade to a discount, to swap the dollars back for the common.

It would be extremely profitable for the common stock shareholders to do that. We have some scenarios here. We can continue with our conventional strategy at 1.0x MNAV. Even if the stock was trading at a discount to breakeven — if we are selling credit and selling equity, and we use the equity to fund the dividends and we hold the U.S. dollar reserve at one and a half years — we would run a 10.6% BTC yield and we would accrete 263,000 sats per share over the next three years. Even if market conditions are not great, we have a business to deliver 10.6% yield. The duration would stretch out a bit. The risk would increase a bit.

The fair credit spread looks like 94 basis points, but it is still just a shade off of investment grade. That is a conservative case. Should the market continue — if we were at 1.22x MNAV, you can see that the yield expands to 12.2%. The credit metrics do not change, but this is really positive for the equity investors. At 1.5x MNAV, you can see that the BTC yield goes to 13.4%. Market sentiment and confidence in our ability to maintain this business — or belief in digital capital, belief in digital credit — is going to drive an expansion of the MNAV, which is going to drive an increase in the rate of accretion of Bitcoin per share.

It is going to drive the BTC yield up. It is going to drive Bitcoin per share aggressively. At 2.0x MNAV, you see the BTC yield of this strategy gets you to 14.6%. Those are just different scenarios showing how market sentiment drives the business. Negative sentiment — it is a pretty good business — we will double Bitcoin per share over seven years. Positive sentiment means that we will double Bitcoin per share faster. Now the company, as I said before, can fund its dividends without selling any equity. We can fund the dividends by selling Bitcoin and we can still grow Bitcoin holdings continuously.

Here is a scenario where what we do is we fund the dividends, we fund the USD reserve at one and a half years, and we do it by selling Bitcoin. You can see we drive a 12.2% BTC yield. We go from the 670,000 BTC level to 850,000 to 950,000 to a million. We will go through a million Bitcoin held on the balance sheet in the next 36 months, and we will do that while funding all of our obligations with Bitcoin. You can see the impact — measurable as a slight increase in credit risk and a slight increase in credit spread — but I think it would be a second-order effect.

This is interesting to keep in mind. What happens if we fix the U.S. dollar dividend and fund dividends with Bitcoin? Here, what we do is we just hold the USD reserve at $2.25 billion, and we pay all of our obligations by selling Bitcoin. We get to a 14.7% BTC yield — again, a slight increase in credit spreads, a slight increase in risk — but this is without accessing the equity capital markets at all to drive the business. We are looking at first order — we are not really showing the second-order and third-order effects. There are tax credit advantages that are a second-order effect. There is reflexivity in the common stock itself.

It might very well be that if people decided we were not going to sell any common stock, they might actually decide that the rational MNAV should go to 2.0 or 3.0 or 4.0. We cannot really model those. What we can just illustrate here is that even in the first-order model, it is pretty clear that the company has the option to run on the Bitcoin engine or on the Bitcoin-derivative engine — MSTR is a Bitcoin derivative — and either of them are options. Here is a scenario where we just retire all the converts. If we diverted 20% of the STRC issuance to retire debt, we retire all the debt in the next three years.

We will go from $8.2 billion of debt to zero. Net leverage goes to zero. The duration of our instruments goes up to 15 years. There is a 114 basis points of credit spread on the digital credit, but there is zero leverage. We run with a 12.4% yield, and we maintain this constant one and a half year USD reserve. That is kind of interesting as well and an option that is available to us. Here is a table that just shows all the various options. There are a lot of other things. We have a sophisticated model — we can plug in any possible trade in any size on any day of the week.

Rest assured, we are continuing — we are considering these every single day, and we are programming trading algorithms to trade all these instruments sometimes every single second. The key point that Phong made is the optionality is expanding dramatically. You can see on the equity side, our assumptions are 30% BTC ARR, 20% STRC issuance, 11% dividend rate — realistic, could be lower. On the credit side, we are much more conservative or you could call it realistic — 10% BTC ARR, high vol. If Bitcoin vol starts to fall as Bitcoin price appreciation accelerates, we have a lot of other options we can take advantage of, and rest assured, we will jump on top of those.

One last slide of interest: sometimes people have this misnomer — they think that we are borrowing money at 11.5% and it is a fixed obligation. That is not correct. We are not borrowing money. When we sell $1 billion of STRC, we are never paying it back. The first observation is STRC is a perpetual swap — it is not a loan. The second observation is the cost of capital is not 11.5%. There is a stochastic cost of capital. STRC is a perpetual swap where the issuer agrees to pay SOFR plus a credit spread — a variable credit spread adjustable each month — and then the issuer invests that in Bitcoin.

So we are paying SOFR plus a credit spread. We are taking back the Bitcoin return, and the issuer has a couple of very powerful options. One powerful option the company has is over time, to reduce the credit spread. That is an option. The credit spread is probably at a high point when you are early in the industry, when digital credit is not understood. You would think after three years, or after six years, or after nine years, the credit spreads will compress as confidence in Bitcoin grows, as confidence in STRC grows, as AUM grows, as confidence in the business model grows. The credit spread should compress.

The second option is the company has the option to lower the dividend to a floor of SOFR. As SOFR falls, when SOFR is 375 basis points, that is the floor. If SOFR goes to 200 basis points, the company gains 175 basis points of additional optionality. SOFR has gone to zero or 25 basis points in the past. The fact that SOFR generally fluctuates between 500 basis points and 25 or 50 basis points on an eight-year cycle is a very important point. When you consider those two options, the stochastic cost of capital for STRC has to be modeled as something less than 11.5% — maybe more than the long-term risk-free rate.

If you imagine SOFR is 2% or 3% and we have a 300 basis point credit spread 20 years out, that might be 6%. Somewhere between 6% and 11.5% gets you to like a blended rate of 8.75%. When we think about the cost of capital, we think that it is probably 8.75%, and the debt is never coming due. That is an important point to make to the world, and it colors your thinking. With that, I will end with our capital markets principles and reiterate what Phong said. We are here to drive Bitcoin per share up, and we are doing everything we can to drive Bitcoin per share up.

We think the best product and the best tool to do it is STRC, and it is clear the market is telling us that. We will focus, laser-like, on making STRC the best digital credit instrument. We do see a world where we are debt free — and sooner rather than later. We are going to adjust our amplification and our credit metrics and our U.S. dollar reserves and our use of proceeds based upon market feedback — we get market feedback every minute. We are literally staring at all of these signals every minute, and we are talking to every credit and every equity investor continuously.

With Bitcoin, the company has more than $60 billion of assets, and the Bitcoin market has $20 billion or more of daily liquidity. If we were to be boxed in by a troll or a cynic or a skeptic into agreeing that we are never going to sell the Bitcoin and we are never going to tap the liquidity, we would be impairing the asset which accounts for 99% of the future of the company. It is like a real estate developer saying, “I am just never going to sell any real estate ever at any price.” It is kind of a silly thing.

If a wealthy person — if a billionaire — sells a million dollars to make a billion dollars, nobody says they are poor, and nobody would lament that spending a few million dollars is going to crash the U.S. currency either. I do not think that if we sell $100 million of Bitcoin to pay a dividend it is going to negatively impact the Bitcoin network. It is probably good for the Bitcoin network. It definitely does not impair our business model. If anything, it just creates more optionality and second- and third-order effects.

The management team’s practice is to run the company in the best interest of all the stakeholders, and that means there are three that we laser-like focus on. Whenever we are making a decision, we ask the question: is it good for the common equity — MSTR? We ask the second question: is it good for the creditors — especially STRC investors? And the third question we ask is: is it good for the capital investors — BTC investors?

We believe that running our business in such a way as to commercialize digital credit in the most efficient fashion is the best thing we can do for Bitcoin and Bitcoin investors, the best thing we can do for digital credit investors, and the best thing that we can do for our common equity investors. There is no conflict between those three goals. If we sub-optimize to the benefit of one to the detriment of the other two, the entire machine does not work.

When we balance the interest of the three: the more credit we sell, the higher the equity MNAV; the higher the equity MNAV, the more credit we can sell; the less the credit risk, the more Bitcoin we can buy; the better it is for Bitcoin; the better it is for the price of Bitcoin; the less risky credit is; the more profitable the equity is. There really are concentric flywheels here — feedback loop within feedback loop within feedback loop. When we are in harmony, all three of those feedback loops are working really well. You can see that happening in the market.

We monitor it, and the indicia of everything working is when the MNAV is expanding and the equity is healthy and the equity is outperforming Bitcoin, when the volatility of STRC is falling and liquidity is increasing — that is indicia of the success of the credit — and when Bitcoin price is appreciating and Bitcoin support and liquidity in the world is expanding — that is indicia of success of the capital. That is what we have been doing, that is what we will continue to do, and we thank you for your support. Now I think we will open it up for Q&A. Back to you, CJ.

CJ Jain: Before we jump into the Q&A, I would like to share with all our investors that we are organizing a special Q&A for retail investors next week on May 13. You can scan this QR code if you would like to submit questions. We will share the link on X, and we will share more details as well. With that said, let us jump into the Q&A. I would like to invite all our guests to turn on their cameras and get ready to ask some tough questions. Let us get started with Pete Christiansen from Citi. Pete, please go ahead.

Peter Christiansen: Thank you, CJ. I am trying to start the video here. I think it is disabled. Anyway, I will hop right in here. Michael, I was hoping we could take this call and how you have laid out all these scenarios and think about — historically, I guess I am pointing to last year — the end of last year there was a false signal that Strategy Inc was selling Bitcoin, and it was taken negatively in the marketplace.

Today, you outlined a lot of different optionality scenarios that Strategy Inc now has to optimize its capital stack, which may include the sale of Bitcoin — maybe for tax purposes or maybe for other optimization purposes — credit, what have you. Should we take today’s call as a signal to the market that, yes, Strategy Inc is willing to be more proactive with its capital stack, which may include the sale of Bitcoin for optimization?

Michael Saylor: Yeah. You should. I think the company got much healthier when we proactively began to utilize the equity ATM, and we said it — we are going to do it, we are not ashamed of it, we will probably do it again. Then when the company started proactively executing on the STRC — the credit ATM — we said we are going to do it, we are not ashamed of it, we are going to keep doing it, we think it is good, and we have got a plan for it. Now I think at this point to say we are turning on the BTC drive — we are not ashamed of it. We have $65 billion.

We have a $2.2 billion tax credit that is lying on the floor — we ought to go find a way to pick up the $2.2 billion. Just like with everything else — the more optionality we create and the more tools we have at our disposal, I think the better it is for the equity investors. We will probably sell some Bitcoin to fund a dividend just to inoculate the market — just to send the message that we did it. Look — the company is fine, the Bitcoin is fine, the industry is fine, the world did not come to an end.

If you are a short seller and your thesis is the company has to sell equity in order to fund the dividends, I would like nothing better than to rip your wings off.

Peter Christiansen: I like that term, “inoculate.” Very well.

CJ Jain: Thank you. Thank you, Pete. I would like to invite Jeff Bock next. Hello. First off, congrats to the team, particularly on STRC’s accelerated traction. Thanks for having me here. My question focuses on understanding how macro factors may influence the firm’s acquisition strategy, particularly in regards to interest rates.

Analyst: You know, as we all know, we are just about a few weeks away now from Kevin Warsh’s official inauguration, and even though rate-cuts odds are a little lower this year, Strategy Inc now does have an explicit growing interest-rate sensitivity, as we just saw from the stochastic model. If, hypothetically, we see interest rates being lowered, STRC has this momentum that it will likely trade above par more aggressively given the nature of the floating-rate dynamic. The company then has a really interesting fork: you can either, one, issue more STRC and push the price back down to par, or you can actually use that moment to reduce the interest burden itself on what is outstanding.

There is a healthy tension between these two things. Can you help us understand that risk framework a little better to calibrate that particular trade-off — lowering the coupon versus selling STRC? It changes a bit of the Bitcoin acquisition velocity, but it also cuts interest expenses, especially in that lower-rate environment. Any specific input parameters that you might say take priority here in your calculation?

Michael Saylor: I will start, and then Phong or Andrew may have some comments. First of all, when the macro indicators are moving against us, we have got a headwind. Everything slows down. When we go to a restrictive monetary policy, that is bad for Bitcoin — really bad for Bitcoin. It is bad for risk assets. Bitcoin is risk assets squared; MSTR is risk assets cubed. I feel like we are like big tech cubed, and Bitcoin is big tech squared, in a risk-off environment — and you could see that. In a risk-on environment or a more accommodative monetary economy, I expect you will see the opposite.

I think Bitcoin will rally hard as “squared.” Our equity should rally as tech “cubed.” The credit — presumably we have more optionality if SOFR falls. Our bias is to grow the business responsibly but as rapidly as we can, and our bias is to grow Bitcoin. If we have the ability to accelerate our capital raising, and we could raise twice as much capital in a risk-on or a looser, more accommodating monetary policy, we will run the vehicle as hard as we can — but we will not run it so hard that the capital structure does not keep up with it.

The circumstances under which we would slow down or want to throttle the credit would be if we go to risk-on and Bitcoin does not rally and our equity does not rally but the credit rallies. If the demand for the credit triples and somehow Bitcoin does not react to the interest rate macro environment and/or MSTR does not, then we might very well say we are going to adjust the dividend rate down, because we are getting too much demand for the credit. By the way, I do not think that will happen. I think the likelihood that we go to a risk-on environment and Bitcoin does not rally is small.

If Bitcoin rallies, then our capital stack and our collateral base expand, and then we can accommodate more credit. The rate of STRC issuance or credit sales is a function of the BTC growth rate or ARR. If Bitcoin grows 30%, we can expand credit aggressively. If it grows 50%, we could go faster. The second order is really the equity capital markets’ enthusiasm for our business model.

If the equity capital markets look at our business and say, okay, well, you are going to run a BTC yield of 20% a year and I am going to give you a P/E of 10 — I am going to give you a 200% premium — and now you are trading at 3x MNAV, that would be better than where we are right now. If the equity capital markets did that — gave us a P/E of 10 on BTC yield or gain — then, of course, our optionality increases as we grow faster.

The countervailing view is: well, you have only been doing this for a year or two years, and so the Lindy effect says I am only going to put a P/E of two on that. If we get a P/E of two, we could have a Bitcoin rally that gets us a collateral stack, but the equity does not go as fast, and that might govern the rate at which we run the credit engine. Bottom line: if the macro environment turns risk-on and expands, and Bitcoin rallies or equity rallies — it is go time. We are going to go, and we are going to go with the credit.

We are going to use the credit — make no mistake about it. We want to see the MNAV — the equity is undervalued — we want to see the MNAV expand to two, three, four, five, or six. Nothing would make me happier than to rip the faces off of all the skeptics and the shorts and drive the equity to the moon. I think the question you have to ask yourself is: is this company going to sell $10 billion of STRC this year, or $20 billion, or $40 billion, or $80 billion?

The answer to how much we can sell responsibly is a function of where the Bitcoin price is, and to a lesser extent, how the equity capital markets react. If the equity capital markets are accommodating and supportive and Bitcoin rallies, the company has a lot of tools to manage the BTC rating and the collateral coverage. We can add more equity capital — you can see I just showed you we can put equity capital in the market fast. We were the biggest equity issuer last year and this year. We could also take common equity out of the market if we decided to. We are going to look at the interest rate forward yield curve.

We are going to look at how Bitcoin performs — if Bitcoin keeps performing as big tech squared. We are going to look at the forward expectation curve of BTC. We are going to look at the forward vol curve. Bitcoin vol at 40 or 35 is different than vol at 50 or vol at 20. When Bitcoin vol falls to 20 or 25, you can lever these things and still have investment grade. You can lever two, three, four, five times more and still have investment grade. By the way, Bitcoin vol being 30 right now is not the same as institutional credit investors expecting Bitcoin vol to be 30 for a decade.

The forward yield curve, the forward vol curve, the forward price curve, the forward equity curve — all that stuff gets discounted back, and we get up and we ask ourselves the question: what is the rational thing to do? At the end of the day, what we want to do is drive the MNAV to the sky, drive the Bitcoin price to the sky, and build STRC into the biggest credit instrument in the world — because the higher STRC AUM we have, the more liquidity, and if we can get to a billion dollars of liquidity for STRC, the vol will keep coming off, adoption will expand, and we get a network effect.

If you gave me a choice: do I want to sell $500 billion of STRC and pay 11%? Or do I want to sell $50 billion and pay 9%? If you know me and the company, I think you can guess which of the two we want. At the end of the day, our long-term view is Bitcoin is going to go up more than 11% — it is going to go up 30%. If we are wrong, it is 20%. 200 basis points will not make the difference one way or the other.

But I rather think that if we gather an extra $100 billion of capital, the war to determine the future of the credit and the war to determine the future of money is going to be fought and won with money. We are going to get the money if we can do it in a responsible way.

At some point, if you have this perverse, random situation where Bitcoin price is not reacting and MSTR is not reacting, but everybody in the credit market is reacting — I cannot imagine that credit investors are more bullish on Bitcoin credit than equity investors or Bitcoin investors — but if you construct that tortured scenario, then maybe we would slow down the credit machine. If equity investors are more bullish than capital investors, and if Bitcoin investors are more bullish than credit investors, then I think the entire system solves its own problems because we are probably not going to be able to keep up with the expansion of our BTC collateral stack.

Phong Le: I will add one short thing to this, Jeff. I think the scenario you lay out is in a maturation of the digital credit market — five, 10 years out — when digital credit is $3 trillion or $30 trillion on a $300 trillion market. We would run into this issue of how do you manage the demand for STRC. Ten months into it, I think our issue is not so much what interest rate are we paying or what does the Fed do to interest rates. I think the demand is going to be driven by awareness and marketing of the product right now.

I do not think that scenario is going to be much of an issue for the short term.

Analyst: Got it. Thank you for those thoughtful responses. I will take a pause.

CJ Jain: Thank you, Jeff. Next, I would like to invite Andrew Harte, VDIG.

Andrew Harte: Hey. Thanks for the question. I think the optionality in the business really came through clearly today. Maybe just shifting gears a bit. Earlier in the slide, Michael, you talked about Bitcoin being digital capital and MSTR being digital equity and STRC being digital credit. Then you also talked about innovators building digital money down the road — you called it like a layer three in that example. Considering STRC is going to be the foundation or the building blocks for digital money at some point as the market continues to mature, what do you think that solution looks like?

Are you having conversations with innovators who are out there looking to build on top of STRC and create these digital money solutions? Thanks.

Michael Saylor: Hold on.

Andrew Harte: Sorry.

Peter Christiansen: I

Michael Saylor: Can you hear me?

Andrew Harte: Yeah. I can hear you.

Michael Saylor: Oh, you hear me fine. Okay. I think you see it with Apex and Saturn and Hermetica and a lot of the token issuers that are creating these yield coins that are powered by STRC. They are rapidly innovating. If you look at some of the DeFi protocols that are offering 2x, 3x, 5x, 10x leverage and looping — Pendle and the like — I think they are also innovating pretty rapidly. We do not know the final shape. I think there are a thousand different combinations of digital money and digital yield. For example, there is a different currency in every country. I think you can create various yield coins in different currencies.

In Australia, you can deploy it via a regulated bank or via a token that can sell in Australia or via an ETF taken public in Australia or via a private fund in Australia. When you take the combination of currencies and platforms and containers, the sky is the limit. What I do notice is the people that seem to be moving the fastest and the most enthusiastically right now are the DeFi players. It is people that are launching stablecoins that have to compete with Tether and Circle. The issue is: how do I convince people to put AUM or put capital into my stablecoin?

I need to create either a digital money — a yield coin — zero vol, 8% and yielding — that is compelling — or I need to create like a 25% ARR stake — lock up your money for a month and I will give you 25% on three or four turns on the capital or something. Obviously, the market is going to decide who it trusts and it is going to decide what form of that it wants to buy, and it votes with its money — you can literally watch the money flowing every hour.

In that system, I think you will see some ETF players all come, but they will come slower because there is more regulatory friction there. We hold out hope that we will see a neobank offer a digital yield account. There is no reason why a bank or any neobank that is a mobile app could not just say, “Hey, we will give you 8% on your money in this yield account if you want it.” Each one of these things — it is a different counterparty, a different platform, a different regulatory container.

What I would say is we had none of these conversations going on eight weeks ago or 12 weeks ago, and now I see like three dozen — three dozen initiatives. I think there is a Cambrian explosion. Check back in 12 more weeks — I think we will have some exciting news and some exciting partners. Or just watch my X feed, because I retweet some of the more interesting digital yield, digital money offerings. They are literally happening. A lot of times people are inventing stuff and I am finding out at the same time you are, but the market is evolving in real time right now.

CJ Jain: Thank you, Andrew. Next, I would like to invite Eric Balchunas. Eric, please go ahead.

Analyst: Yeah. Hi. Thank you for having me today. Great presentation. My question is maybe a little more philosophical. I think it impacts the price in the future, but it is about the changing ownership and identity of Bitcoin. According to River, in the past 16 months, you have had businesses buying 560,000 Bitcoin. ETFs bought another 208,000. Governments bought 160,000. That is a million total Bitcoin by those entities. Meanwhile, individuals sold 730,000 Bitcoin. Some have called this the “silent IPO,” and it is arguably the reason for that 45% drawdown.

This changing ownership is being reflected, I think, at the recent Bitcoin conferences where you see an increasing number of, you know, “suitcoiners,” as some call them, which you highlighted in the slide on the government and the banks. I have noticed it has made some of the native Bitcoiners a little uncomfortable and conflicted regarding the original mission, given it was made to bypass governments and banks. To me, it feels like Facebook 10 years ago when everyone’s parents joined — some people left the platform, although the user base did grow from 1 billion to 3 billion since then.

I just want to get your read on this transition — the mainstreamification of Bitcoin — and how important it is to keep the original base of investors along for the ride and keep the sort of cypherpunk edge of Bitcoin as it goes more mainstream and gets adopted by companies, asset managers, governments, and boomers in general. Maybe it does not matter, given the size of the institutional advisory market for that price — maybe hitting a million dollars — but maybe it does. Just curious your thoughts. I will make a quick point.

You know, since we got in this space, there has been something like, call it, $1.4 trillion of wealth created for people other than the suitcoiners. I do not know who got the money, but there is certainly — I think we can trace 4% to BlackRock investors, and they must have 50 to 100 million beneficiaries. You can trace almost 4% to our investors — we have got 100 million beneficiaries. If you look at the corporates, they are representing thousands of institutions and tens of millions of investment accounts and hundreds of millions of beneficiaries — the network is decentralizing.

It is distributing through them, and it is maturing through them and finding its way into retiree accounts and insurance beneficiaries and trust funds and three-year-old trust fund babies. Everybody in the world is getting exposure now. When everybody criticizes the centralization of the network, I note that 85% of the network is held by others. It is held by the crypto OGs. We do not know how many people that is, but it almost certainly represents fewer beneficiaries than the beneficiaries that rely upon BlackRock’s ETF or a common public stock. The corporations have been spreading exposure to Bitcoin by an order of magnitude or orders of magnitude right now.

If you ask, who owns the trillion dollars of Bitcoin that is not public — there are Chinese, there are Russians, there are Americans, there are Europeans, there are South Americans, there are Ukrainians, there are Iranians. When you wonder who is selling it — well, it is a trillion dollars of capital held by crypto OGs that are unbanked. Maybe they are selling it because the currency in Iran crashed. Maybe they are selling it because of some fear of some Chinese government memo. If the Chinese mined half the Bitcoin in the first 15 years, it is kind of impossible that there are not a lot of people with Bitcoin in China.

You would figure, since they mined a great deal of it. Generally, the industry is maturing. It is rotating from the crypto OGs, but they are not going away. We spent $6.062 billion to get to less than 4%. It is pretty expensive to not get to the other 96%. If you look at all the money that BlackRock and us put in this together — the $150 or $200 billion of capital that flowed from the institutions — it did not get 90% of the network. So 90% of the network is still in global crypto OG hands. I meet people — I go everywhere in the world.

I will walk down the beach and there is someone slapping me on the back, thanking me for making them a lot of money. It is because literally people that you will never know who they are and they will never announce it — they are sitting on $1.2 trillion of capital gains right now in the crypto ecosystem. I am not worried that the crypto ethos is being squashed. People with a trillion dollars probably have a lot of power to do whatever they do, and they are continuing to do it. The Bitcoin network is still highly decentralized. The miners are decentralized. This is a global phenomenon.

If anything, what is happening is the corporates are just powering up the network. We are the people that invest the 100 or $200 billion to drive the price from $10,000 to $80,000 — or from $10,000 to $100,000. But when we do it, 90% of the gain goes to other crypto actors, and they power the entire decentralized digital economy. Good for them — that is good. They will do whatever they are going to do.

If you want to — I do not use the analogy “it is like Facebook when your parents came along.” I use the analogy “it is like the internet when it used to be a girl or a dude in a dorm who posted their blog on their web page, and then all of a sudden Amazon started selling hundreds of billions or trillions of dollars of products on the internet.” We started doing business with digital assets. Ultimately, the killer app of Bitcoin that we see is digital credit. The way you know it is a good app is when someone wants to buy a billion dollars of your product a day.

There are not that many in the history of the world — and we found one. I think that the networks are going to grow. We are going to power it up. You are going to see an explosion of all the other crypto ideas. Whatever crypto idea did not catch fire over the past decade — now they have got 10 times as much money and opportunity to catch fire, and some of them will. The ones that do not, will not — because the market does not want them. The network is evolving in every direction simultaneously. I would take issue with anybody that ever said it is centralizing — it is absolutely not. It is decentralizing.

The truth of the matter today is that there are a lot of people with money and power in the world that are going to support this network and defend this network because of the success of all the corporations — whether it is Coinbase or whether it is BlackRock or whether it is Strategy Inc. If you are going to lobby for things that are good for digital assets in Washington, D.C., it is not going to be a Chinese crypto pseudonymous billionaire hiding off the grid that is going to do that lobbying.

The trillion dollars of crypto OG money is not going to fix the accounting, fix the tax code, fix the banking system, and build the technologies that actually commercialize these apps to a billion people. They are not going to give a bank account to a billion people that pays them 10%, and they are not going to put Bitcoin on every iPhone and every Android phone in the world. That is going to be corporate actors. The corporations are doing their part. The crypto OGs did their part. Everybody is in the system. There is tension — it is healthy tension. We welcome the healthy tension.

The global geo — the fact that someone is going to sell Bitcoin because they are in Iran and some missiles got launched — that is a feature, not a bug. People are trading based upon things that have nothing to do with the way Wall Street trades the S&P index. That is what makes Bitcoin special, and that is why we welcome it as global digital capital.

CJ Jain: Thank you, Eric. Next, we will invite Ramsey El Assal from Cantor. Hi. Thanks for taking my question tonight.

Analyst: Michael, you mentioned that if Bitcoin volatility were to fall as the asset pricing accelerates, you would have some options and cards to play to preserve the attractiveness of the model. I am just wondering if you can elaborate further on what you meant there. Then, completely separately, I was wondering if you could just give us a quick update on the BTC security initiative. How has that been received, and has there been any development on the quantum risk topic worth calling out? Thank you.

Michael Saylor: I will answer the first. I will let Phong answer the second. If you go to our credit tab on our website and you type in a vol of 40, you have a BTC rating at three — stuff starts to look investment grade. When the vol falls to 30, you can have a BTC rating of one and a half, and it looks investment grade. When the vol falls below 30, your amplification can triple or quadruple. As the vol falls, the credit risk falls. The forward volatility curve changes the view of credit investors, and it is going to create more demand amongst more traditional credit investors.

It is also going to change the view of banking regulators and credit rating agencies and the like. There is nuance: if the vol is high, it is equity positive. Today, I think on CNBC at 3:50, they said the largest options trade in the entire stock market today was an MSTR options trade. Someone traded hundreds of millions of our options today in the market — number one of all companies in the entire United States. That is because of the vol. When vol is high, it feeds the equity market, and that is good — it is equity positive. When the vol falls, it will not be so good for the equity, but it is very credit positive.

The conclusion you come to is you are going to get performance through volatility on the equity side, and you are going to get performance through more amplification and more intelligent leverage as the vol falls. Of course, the entire asset class is going to expand, and people’s view of it is going to improve as the vol falls. Over the long time horizon, if the asset is 40 ARR, 40 vol, it is reasonable for it to eventually mature to be 20 ARR, 20 vol.

It is just common sense that as it gets bigger, it gets more liquid — the law of large numbers and the inertia of the market and its relative size to all the other pools of capital are going to damp the vol. I think it will always be more volatile than the S&P — always be more useful — but I think that if you are a credit investor, you want to be sensitive to it. Certainly, right now, the single number one issue in the entire market is: what is your forward volatility curve for Bitcoin?

If you think that Bitcoin is a 30-vol asset, everything we sell is investment grade and it should be priced double or triple what it is — if that is what you think. Your view of forward volatility will control how much of this you want. If the vol starts to fall, there is just no reason why there should not be a 10x bid on all this stuff. Then you might decide, rather than levering at three to one, you lever it eight to one or something. It will change the behavior of all the downstream players as the vol changes. Okay — Phong, you wanted to talk about security?

Phong Le: Yeah. Ramsey, we started to bring together a group of folks, calling it the Bitcoin Security Program or council. The objective is to bring together institutions that represent custodians, exchanges, large Bitcoin treasury companies who have a vested interest in the success of Bitcoin, and share a combined point of view on what is the potential risk and time horizon of quantum, what activities are underway in the development community, and how do we get to consensus. Likely in the next month or so, we will share who is in that group and what is our combined point of view.

Right now, I would say there are a lot of divergent points of view, and I thought it would be useful for those who are interested in the success of Bitcoin to bring something together. You will hear from the Bitcoin Security Program likely in the next month or so.

Analyst: Excellent. Thank you. Appreciate it.

CJ Jain: Thank you, Ramsey. Next, Jeff Walton. Please go ahead.

Analyst: Thank you for including me, and I am very appreciative of your leadership. I have got a bit of a two-parter here. You spent a lot of the presentation talking about risk of the credit instruments. You have created a really unique arbitrage surface between all of the different instruments — a really unique incentive structure. It has resulted in people buying and selling the instruments right below par on STRC and some of the other instruments.

First question: do you find that the market agrees with you — this is kind of in line with the answer to the last question on the forward-looking volatility curve — do you find that the market agrees with you and the instruments are trading in tandem with each other? What is the biggest hurdle in communicating that relative risk profile? Then part two: what is the biggest hurdle in accelerating the adoption of the digital credit instruments into the future?

Michael Saylor: I think all of the credit instruments are undervalued. So, no, the market does not agree with us. If the market agreed with us, then STRF would be trading $200 a share right now, not where it is. I think all of the credit instruments are undervalued. I think the equity is trading weak — it is undervalued. I think all the bond instruments are way undervalued. I would say the market is much more skeptical and biased pessimistically than we are, and that is why, for example, we are not selling STRF, STRD, STRK, STRE. We do not really have much interest in selling them. We think all of those assets are undervalued.

STRC is special because, as we pointed out, it is a variable monthly. The stochastic cost of that capital is hard to determine over 20 years, but you are not locking in a mispriced trade with STRC. I have a lot more enthusiasm to sell a billion dollars of STRC at 11.5% than I have enthusiasm to sell a billion dollars of STRF at 10%. No, I think we are embryonic. How do we fix it? It is a Lindy effect — there is a lot of education. We have to go and educate the market.

You could say part of it is we have to tell the story, and you could say part of it is people are just going to have to wait. After we have been in the market for three years, they will say, “Well, it has worked for three years,” and so I guess it is better than we thought it was. I think we will be continually rerated up — the risk will be rated down and the opportunity will be rated up as time goes by. We will not be sitting on our hands. We will be out there communicating the message, displaying it.

Partly we will do it through publishing, partly we will do it through investor outreach, partly we will do it through partners. I think as our partners create compelling digital money products or the like, that is helpful. If you just ask the question: how long will it take? How long did it take before the market thought that Amazon had a good business? It took 10 years after they started doing what they were doing. You could be a pessimist and say it took 10 years for that — and how long did it take before Netflix was deemed to be good? The truth is Apple was mispriced and misunderstood for many, many years.

If you have a revolutionary business, the market will be biased skeptical because that is just what it is. It will be skeptical. The market was skeptical of Google. The market was skeptical of Amazon. The market was skeptical of NVIDIA, skeptical of Apple, skeptical of whatever. It will be skeptical of digital credit and digital treasuries for a while. Then there will be some point when it is not, and they will — just like Warren Buffett comes in and buys some Apple and the stock price doubles and the multiples expand from P/Es of 10 to P/Es of 20 or 25 or 30 — it will happen at some point when we least expect it to happen.

But we have to do all the hard work of performing, laying down the track record, educating the market, and managing the risk of the business. That is what we are doing. If you want the optimistic observation, the fact that the market is willing to buy more of STRC — that STRC is the most successful preferred stock in the world in this century — I think that is an indication that maybe some people get it. There are a lot of indicators that it is working and it is spreading fast and virally, but we still have a lot of work to do.

CJ Jain: Thank you, Jeff. Next, I would like to invite Randy Binner from Texas Capital. Randy, go ahead.

Analyst: Yeah. Thanks. Hey, Michael. I think this one is for you, and hopefully you can hear me okay. The question I have — we talked a lot about the CLARITY Act and it is important for the broader crypto ecosystem. This bipartisan compromise is good news. But for MSTR — for Strategy Inc — for your world, what would be the most important regulatory or policy change or impact? I think we have talked about banks and insurance companies being lobbied to recognize crypto as a statutory asset. Is it something like that?

The follow-up question, in case you cover this along the way: at this point, with so many arrows pointing in the right direction for crypto regulation and guardrails, do the midterms matter that much and, for that matter, does the presidential election matter much from a policy and regulation perspective?

Michael Saylor: Bitcoin is in a safe harbor. There is global consensus as digital capital. MSTR is sitting in a safe harbor — it is a publicly traded, well-known seasoned issuer. It came public in 1998, governed by securities laws that date back 100 years. STRC is in a safe harbor. It is a publicly traded preferred stock based on 100-year-old tax law, 100-year-old securities law, trading on the Nasdaq exchange, which has been around longer than many of us have been alive. Everything that we are doing is sitting in a zone of regulatory clarity. I do not think we need any change in a law or a rule in order to 10x or 100x.

We can probably be 100x bigger from here without any change in any law or any rule. We are not asking or looking for anything. I think that CLARITY is pretty important to the dynamic and the balance of power with regard to token issuers, DeFi exchanges, stablecoin issuers, crypto exchanges, and the balance of power between the crypto industry, the neobanks, the regional banks, and the systemic big banks. There are a lot of dynamics there — they are almost too nuanced to get into right now. The significance to us is just: ignorant skeptics will gloat if it slows down, and they will all flip to uninformed cheerleaders or acknowledgers if it passes.

There is not anything that we need — it is just going to change sentiment. It is going to be a positive, bullish sentiment as it goes through. Long-term, if I look at my laundry list of things that are good for Bitcoin and good for us — it is second-order, not first-order — but the second-order is the Basel rules. To the extent that they are upgraded to recognize Bitcoin as legitimate collateral and not haircut it, it would be positive for banking adoption and especially credit adoption.

Right now, there is still a bit of haircutting of it by the credit rating agencies and the very conservative regulated entities — they want a gatekeeper or they want a regulator to tell them it is okay. At some point, if you want an insurance company portfolio manager to buy the product without knowing what it is or why they bought it, then it would be beneficial for the Basel rules to evolve and embrace Bitcoin as a legitimate asset. Right now, we are selling to informed investors that want to buy the best thing. If you look at that market — if we just slurped up 10% of private credit — that is $370 billion right there.

We have got plenty of runway for the next decade. My wish — if I had one wish — is for the Basel rules to be fixed and then for the world to recognize Bitcoin as legitimate collateral, pari passu to gold or to other capital assets on banking balance sheets and regulated entities. Then it should spread faster through the banks as a reserve asset and through insurance and the like. But it is not necessary to us. We could be a multi-trillion-dollar company and sell $400 billion of STRC and not have that fixed.

Phong Le: One thing I will add, Randy, is STRC is already a rapidly accelerating product in the category of digital credit, and that is without CLARITY as it relates to tokenization of securities, which I think will either be created through the passage of CLARITY or rulemaking by the SEC. That will only accelerate things. We showed $270 million of layer-two tokenized STRC from companies like Apex and STRK by Kraken. Those are sold outside the U.S., not in the U.S. When we get CLARITY, that will only accelerate things and will accelerate layer development on top of STRC and just accelerate digital credit overall.

It is exciting to see what may come for something that is already an exploding asset class.

Analyst: That is great. Nice.

CJ Jain: Thank you, Randy. I was just saving the best for last — James Lavish.

Analyst: Thank you, CJ. Congratulations on your new role. Phong, Michael, Andrew, thank you for having me and allowing us to ask questions. First, congratulations also on your success with STRC. I am a believer in the digital credit world, and I appreciate you all sharing the many levers that you can now use to create value for the common shareholders while protecting creditors. On that, with Strategy Inc’s energy and focus on STRC — which you have said before is a security you landed on through iteration — what do you see as the optimal future balance sheet structure maximizing the accretion of value for common shareholders?

Would that include retiring most or all of the other debt and preferreds currently outstanding? Do you believe that is ultimately necessary to attract more of the largest institutions to invest in STRC in lieu of traditional yield-generating securities?

Michael Saylor: We think we want to be debt free completely. All six of the converts may go away by either swapping them for STRC, swapping them for equity, or paying them off with cash. I think there is consensus on that. I think there is consensus that STRC is the killer, strong credit instrument. I think the jury is still out on the other four credit instruments. They are all long-duration credit instruments, and they represent important optionality for the company.

I think that our policy will be to retire the six convertible bonds, to promote and to polish the jewel in the crown — which is STRC — and then to watch and nurture the other four and improve them as we can and then observe whether or not they are material in generating demand. Right now, you can imagine the company — if I was designing a Bitcoin treasury company from a clean sheet of paper — the company would consist of one common equity, one monthly (or semi-monthly) variable preferred equity, and a big stack of Bitcoin and nothing else. That is my advice I give freely to anybody that ever asks me.

The other things are interesting, maybe, but not necessary. We will watch them. It is very difficult to create a publicly traded instrument like STRF or STRD or STRK, so we will not retire it because it represents giving up billions of dollars of optionality. On the other hand, what really is critical for us is manage the common stock carefully to get the MNAV up and the premium up, manage the Bitcoin stack, and then manage the monthly variable-rate preferred — the digital credit instrument. Those are the things that really matter.

CJ Jain: Thank you, everyone. That brings us to the end of the Q&A session. I would like to thank everyone for their questions and all the attendees for joining and listening to the earnings call. I will hand it back to Phong for any closing remarks.

Phong Le: I want to first thank everybody for attending our earnings call. I know there are tens of thousands of you out there, spending two hours and fifteen minutes of your evening with us. We find that to be very gracious and flattering. Many of you are shareholders of our common MSTR and our perpetual preferred STRC. As many of you know, we have a shareholder vote coming up that is due early June to primarily modify STRC to go from, as Andrew mentioned, a monthly dividend to a semimonthly — twice-a-month — dividend. We believe this is beneficial to our shareholders. As we mentioned, one of our principles is to make STRC better and more attractive.

We would appreciate you all voting early so that we can start to tabulate the votes. This is how you can do it — if you have questions on how to vote for STRC and for the common, you can also go to our website. With that, I really appreciate your time. Thank you for all the interest and the attention, and we will talk to you again — if not before then — at our next earnings call three months away. Thank you all.

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