Editor| WuBlockchain
At the Bitcoin for Corporations roundtable discussion on June 12, 2026, Michael Saylor engaged in a dialogue covering the Bitcoin bear market, digital credit, corporate treasury strategies, and mNAV valuation. Saylor stated that Bitcoin remains a form of "digital capital" free from counterparty risk, but the majority of global capital cannot withstand its annualized volatility of around 40%. Therefore, there is a need for digital credit and currency products backed by Bitcoin, which maintain low volatility relative to fiat currencies while generating yield. He believes these products are not meant to replace Bitcoin but to compete with money market funds, traditional credit, stablecoins, and other crypto yield assets, thereby attracting capital previously unable to directly allocate to Bitcoin into its underlying network. They also discussed whether equity financing constitutes dilution, whether preferred shares should be considered debt or hybrid capital, and why relying on a single mNAV metric cannot adequately evaluate Bitcoin treasury companies.
Audio transcription was completed by GPT; errors may exist. Please watch/listen to the original podcast.
With Bitcoin Down 50% in This Bear Market, How Did Digital Credit Maintain Positive Returns?
Michael Saylor: It's clear. On October 6, Bitcoin was priced around $125,000 per coin; now it's about half that, a drop of roughly 51%.
During the same period, the total return for STRC was about +3% to +4%, and SATA's total return was also positive. One might ask, why do we need digital credit? The reason is, when the underlying asset falls 50%, can you genuinely put your family's or company's capital into it without losing principal and ride out this downturn? You need credit products to do that.
Looking at the data, Bitcoin fell 50%, but digital credit products could still maintain prices near par, even potentially generating some positive return. As for equity, the company stock I hold is down about 75%, further amplifying the volatility of the underlying asset. I also studied another date: May 14. The market sharply declined on that day. On May 14, Bitcoin was around $82,000, and has since fallen about another $21,000.
Bitcoin dropped about 25%, our common stock dropped about 40%, but the digital credit products only dropped about 3%, with a final total return probably still around +2%. Therefore, I believe we have proven through digital credit that we can successfully strip away about 90% of Bitcoin's volatility. Our goal is of course to strip away 95%, but for now, let's say we've stripped about 90%.
Over the past 12 months, Bitcoin's annualized volatility has been around 40%. On a rolling 30-day basis, its volatility once fell to 30%, then to 28%. We even felt that performance was almost too good to be true at the time. Later, volatility surged again. Now, whether calculated on a rolling 30-day or past-year basis, Bitcoin's annualized volatility is around 40%.
Thus, Bitcoin has proven itself to be capital with high volatility, and it is digital capital. Another important trend regarding Bitcoin is its continued rise in market dominance. Looking at Bitcoin's market share within the total crypto asset market, excluding stablecoins like Tether and Circle, Bitcoin's market share fell to about 41% during the peak of FTX's prosperity.
Since then, Bitcoin's dominance has slowly climbed from about 40% and now reached 68% to 69%. In other words, Bitcoin now accounts for nearly 70% of the total crypto market capitalization. Meanwhile, if you follow the market, you'll see confidence in Ethereum has significantly eroded. The rest of the crypto market is fiercely competing—Ethereum, Solana, and BNB Chain vie with each other. For a long time, Sui was considered the next Solana, but that narrative has also collapsed. Now the market is hyping Hyperliquid.
In the Layer 2 space, there's competition between Arbitrum, Base, and others. All this competition is steadily stripping away the monetary premium these crypto tokens originally possessed. I believe even those who believe in these tokens now realize they are not money and won't retain a monetary premium long-term. Their ultimate survival depends on their actual utility, and all projects are in very tough competition.
So I think the past 12 months have been very favorable for consolidating Bitcoin's position as the dominant digital currency network. The market has established Bitcoin's positioning as digital capital. I believe we have also proven that digital credit is a viable concept. Currently, the market has lost its mind. This is often the case when a bear market enters its late stages, approaching a bottom, so the market is filled with noise and emotion.
But if you look past this noise and take a longer-term view—and since today's attendees are corporate professionals at Bitcoin for Corporations—then I'd tell you: If you already have billions of dollars and just want to preserve wealth, you should buy digital capital or digital credit. That's how you preserve funds.
If you want to invest capital, you can allocate a combination of digital capital, digital equity, and digital credit, or use leverage to create digital yield, or employ other similar strategies. That's what investors do. If you don't currently have much capital but want to create billions in wealth, and you're a team of three just starting a company, the smartest thing is to create some form of digital currency, digital yield, or digital income product based on digital credit.
I think this is the next important theme worth discussing. There are at least 10,000 such opportunities right now, each potentially worth a billion dollars. You could create a digital product, a new digital asset, a digital fund, or a digital service. These are all built upon emerging market opportunities. Digital credit is certainly not the only source of energy and opportunity, but for now, it is undoubtedly the most obvious and easiest direction to scale rapidly.
Why Should Digital Currency Peg to Fiat and Generate Yield?
Michael Saylor: If you look at this issue through the lens of the Austrian School of economics, 100 years ago, J.P. Morgan's saying was: "Gold is money, everything else is credit." And in Michael Saylor's formulation about 100 weeks ago: "Bitcoin is money, everything else is credit." All other assets carry counterparty risk, whereas Bitcoin is capital free from counterparty risk.
This is the perspective of the Austrian School, or the Bitcoin standard system, and how they understand and use the word "money." But switching to the fiat system and Keynesian standards, their understanding of money is: an asset that maintains zero volatility relative to a fiat currency.
For example, trillions of dollars in monetary assets globally, and trillions in money market funds, must maintain zero volatility relative to a fiat currency, while also generating yield. Whether that fiat currency is the euro, US dollar, or another, it's the same. Bitcoin can of course represent many different things simultaneously, I understand that.
When we describe a digital asset system and use the term "digital capital," it's actually a term within the fiat system. We mean digital capital is competing with precious metal capital, real estate capital, equity capital, and credit capital. "Digital capital" is just a fiat term, whereas Bitcoin itself is far more than just digital capital.
Similarly, when we use the term "digital credit," it's also a fiat term. Digital credit competes with assets like mortgage-backed credit, junk bonds, private credit, sovereign credit, investment-grade corporate credit. When we use the term "digital currency," it's also a fiat term. It refers to a digital currency backed by Bitcoin, maintaining zero volatility relative to a fiat currency, while also generating yield.
Why Call It Digital Currency?
Because 99.9% of global capital is within a fiat standard system. Bitcoin's scale is about $1 trillion, while other assets total about $1,000 trillion. A handful of gold bugs might agree with me that gold is money, Bitcoin is money, everything else is credit. They might even say money market funds aren't real money. Perhaps a few think that.
But looking at the whole picture, the vast majority of people globally who have capital—the ones we need to attract and guide into the Bitcoin ecosystem—believe money is a fund or asset denominated in dollars, euros, or yen, maintaining zero volatility and generating some yield. The builders in this space, whether Saturn, Apex, or others, are essentially building digital yield or digital currency products. What we're doing is building digital credit on top of digital capital. The goal is very simple: We want to capture 5% to 10% of all global credit assets.
If the global credit market is $300 trillion, we want $15 trillion to $30 trillion flowing into credit instruments backed by Bitcoin. Subsequently, we also want 5%, 10%, 20%, even 30% of global money market funds flowing into digital currency. Ultimately, conventional wisdom holds that ideal money should possess three properties simultaneously: a medium of exchange, a unit of account, and a store of value.
So, How Does One Become a Medium of Exchange?
You just need to search the entire internet to find that 99.9% of global goods and services are priced in fiat currencies. That's reality; I didn't decide it. But the fact is, almost all prices are marked in dollars, euros, or yen. Therefore, if you want to create the "perfect money" in the eyes of those holding that $1,000 trillion in capital, you must understand their needs. Their perspective truly matters because they hold the capital, and we need to attract it.
In their view, perfect money should be pegged to the US dollar and maintain zero volatility. That way, I can use and exchange it without friction or immediate tax consequences, and convert it anytime into currency to buy anything. It should also be denominated in dollars because the dollar is the unit of account used by the accounting systems of almost all multinational corporations—past, present, and likely future.
Simultaneously, it needs to generate yield above the rate of monetary devaluation. If its yield exceeds 7%, then in the eyes of nearly all non-Bitcoin extremists globally, it possesses the perfect attributes of store of value, medium of exchange, and unit of account. If you genuinely want to sell products to these people, then their perspective is what matters most. So, when I say "digital currency," I refer to an asset pegged to a fiat currency, maintaining zero volatility and generating yield. If you want to achieve this in an economically sound, technically reliable, and ethically principled way, then this digital currency will ultimately be backed by Bitcoin.
How Does Digital Credit Bring Bitcoin to the Average Investor?
Michael Saylor: I have a large following among Bitcoin believers and Bitcoin maximalists. But they often misunderstand, thinking that by selling SATA or STRC, we are encouraging people not to buy Bitcoin, or not to self-custody Bitcoin. The reality is, I've never met a single STRC holder who thinks it replaces holding Bitcoin.
Almost all buyers I encounter use funds previously allocated to money market funds, credit instruments, S&P 500 ETFs, or other equity assets to purchase these products. We are attracting people who previously did not hold Bitcoin, or capital pools that couldn't access the Bitcoin market. Even if you are a Bitcoin supporter but need money for your child's tuition in the next 12 months, you can't put all your capital into Bitcoin. Otherwise, after Bitcoin falls 50%, only half your kids might go to school this year, the other half stay home.
Many believe in Bitcoin, but they won't put 100% of their family's capital into it. They always need to keep some low-volatility capital aside. So, what we're truly providing is an alternative to JEPQ, PFF, or your favorite bank's money market fund. A bank money market fund might only pay 2% yield; that's the real competitor for these new products.
Take tokens often debated, like Saturn and APEX. Those buying Saturn or APEX are not people who were going to buy Bitcoin and put it in cold storage. These buyers are primarily crypto investors in regions like Asia (outside China), South America, Africa. They buy these yield-bearing tokens as an alternative to Tether.
Their choice might be holding a stablecoin backed ~80% by cash and equivalents, or a 100% reserve-backed, regulated stablecoin paying no yield. Whether you're from Turkey, South Africa, or elsewhere, you typically face similar choices. Another choice is buying a yield-bearing token backed by Bitcoin.
So, when considering these products, don't think they are competing with the underlying capital asset, Bitcoin. What they do is expand the entire network. The real competition is for the approximately $999 trillion in capital within traditional finance; or more directly, the roughly $350 billion in capital within the crypto market currently seeking yield.
When you want yield in the crypto market, what do you buy? You might buy Solana, Ethereum, or a token driven by digital credit and backed by Bitcoin. So, these tokens truly compete with Solana, Ethereum, and other crypto yield assets; or stablecoins like Ethena that generate yield through crypto trading activities; or ordinary stablecoins paying no yield.
Creating these products expands the market, attracting more capital to the underlying network, which benefits Bitcoin. It also creates a new investment opportunity. Suppose you are a Chinese investor; how should you allocate your capital and gain yield? Especially if you cannot stomach Bitcoin's volatility, what else can you do? I've spent thousands of hours trying to pitch Bitcoin to corporations and individuals; it's very hard work.
We pitched Bitcoin to Microsoft; how much support did we get? 1%? 0.1%? About only 0.1% of shareholders voted in favor. Convincing corporations and most individuals to invest in an asset with 40% annualized volatility is extremely difficult. But on the other hand, if you can strip out that volatility and offer a product yielding two to four times what a money market fund pays, almost everyone would be interested.
Therefore, if you want to grow the Bitcoin market tenfold or a hundredfold, merely preaching to or educating people won't achieve that. Believe me, we've spent more on Bitcoin education than anyone. But even if we spent $100 billion annually educating people about Bitcoin, the market growth rate might not match what digital credit is currently driving.
Ultimately, the right product spreads by word of mouth. People will actively tell their mothers, fathers, sisters, and uncles: "Buy this product." For the vast majority of global capital, the market is not ready for an asset with 30% or 40% annualized volatility. It's not a lack of education; it's that these investors don't have enough capital in an account that can withstand such high volatility, nor can they use that capital to buy a commodity-like asset.
In a Bear Market, Does Issuing Equity Dilute or Accretive to Shareholder Value?
Michael Saylor: It turns out, if you want to responsibly invest in a public company's stock, you need a certain level of focus. You need to read company disclosure documents and listen to earnings calls. Regarding our company, SEC filings have accumulated over 100,000 pages, with thousands of pages specifically on the balance sheet, what we've done in the past, and what we plan to do.
Therefore, to evaluate our business, you must first clarify some common misconceptions. For example, many think selling equity always causes dilution, but that's inaccurate. In fact, if you calculate assets per share post-transaction, or net assets per share after deducting liabilities, the transactions we've done have significantly accreted per-share value.
Whether we exchange equity for Bitcoin or equity for cash, the result is accretive. That's point one. Second, if the funds used to buy Bitcoin primarily come from equity financing, how much paper gain or loss the Bitcoin position subsequently incurs is actually irrelevant. The funds we used to buy Bitcoin came about 80% from equity financing. We almost always sold stock when the company's stock was at a premium to net asset value.
In 2024, we raised about $21 billion in equity capital within a few months. The issue price was at a premium of about 200% relative to the value of Bitcoin held. We raised $21 billion, used it to buy $21 billion worth of Bitcoin, creating about $14 billion in Bitcoin gain. Even if Bitcoin later falls 30%, showing a roughly $4 billion paper loss, it doesn't matter. Because the equity issued to buy that Bitcoin was priced about three times current levels.
So, when you exchange equity for Bitcoin, the only real question is: After adjusting for all liabilities, did you issue stock at a price above net asset value per share? You must calculate all liabilities on the balance sheet, then judge if the issue price was above net asset value. For us, the answer has almost always been yes. In company history, maybe only a few days we didn't, but just isolated dates.
The second question is, if you issue equity, suppose you can sell $100 billion worth of stock at $1,000 per share, later the stock falls to $100 per share, Bitcoin price also falls 80%, do you really care about an $80 billion paper loss? In fact, compared to not issuing those shares at all, you're still better off. But if you bought Bitcoin using margin loans or short-term credit, it's different. For example, you borrow a loan due next week, then the price you paid for Bitcoin becomes very important.
If I borrow $1 billion from an exchange and use it to buy $1 billion worth of Bitcoin, then Bitcoin falls 50%, that becomes a serious problem. If you use long-term debt, the problem is much smaller. If using hybrid financing like preferred shares, the key lies in the various options the issuer holds. Preferred shares never mature, and because the issuer holds multiple options, the stochastic cost of capital is lower than the nominal cost.
Take STRC as an example: When SOFR falls, we can choose to lower the dividend; when credit spreads change, we can adjust the dividend; when necessary, we have the option to defer dividend payments. These options have significant value for the issuer. Simply put, if you're currently paying a nominal dividend yield of 11.5%, from a 20-year perspective, the real cost of capital might be only around 8.5%. Moreover, since the principal never matures, you never face a forced liquidation event. This is capital that can persist indefinitely.
Therefore, we can boil this down to a very simple judgment: If you believe Bitcoin appreciates annually by more than 8.5%, then, after deducting the cost of capital, all Bitcoin appreciation can be considered net profit. If you believe Bitcoin appreciates zero annually, we have about 35 years before funds are exhausted. But according to our calculations, as long as Bitcoin appreciates 3.2% annually, we can pay dividends perpetually without selling a single common share.
So, how long does Bitcoin need to achieve 3% annual appreciation? What's the duration here? About 30 years.
Thus, from a 30-year time horizon, credit investment and equity investment correspond to two different judgments. The credit investor bets that over the next 30 years, Bitcoin's average annual appreciation will meet or exceed 3%. If not, the company's credit quality deteriorates. That's the core judgment for digital credit investment.
As long as Bitcoin appreciates 3% annually, the company can essentially pay dividends perpetually. The equity investor bets that Bitcoin's return exceeds the company's cost of capital. Most people can't accurately calculate our cost of capital and don't truly understand it, but it's probably around 8% to 9%.
To simplify, let's set it at 10%. If Bitcoin appreciates 10% annually, the company's equity return exceeds Bitcoin itself because the leverage we use is accretive. If Bitcoin only rises 4% annually, over the long term, company equity might slightly underperform Bitcoin. Of course, we also have public market liquidity and many options available.
Therefore, when Bitcoin's average annual appreciation is between 3% and 10%, company equity might underperform Bitcoin. If Bitcoin falls 10% annually, then digital credit products eventually become distressed debt. So, if you're a credit investor and think Bitcoin will fall 10% annually, don't buy such credit products.
If you're an equity investor and don't believe Bitcoin will appreciate more than 10% annually, then you shouldn't buy the company's common stock either. The various scenarios in between are managed by the company. But many analysts will say: "Only when the company issues stock above a certain price can it achieve positive Bitcoin yield."
The reality is, the threshold for a transaction to be accretive in dollar terms is actually lower. The difficulty for Bitcoin treasury companies is that you must always calculate in both dollar and Bitcoin terms, and must evaluate both assets and liabilities.
Many treat preferred shares as a liability. But preferred shares only become a liability upon company liquidation, and we essentially cannot be forced into liquidation merely because of preferred shares. A company is forced into liquidation only when debt matures and it cannot repay. So, if a company has zero debt, like your company; or like us, with minimal debt, then the company won't face liquidation.
Since the company won't be liquidated, preferred shares shouldn't be considered a liability forcing principal repayment. It's actually a form of equity capital, or can be viewed as a capital asset of the company. What truly confuses many is: If you first assume the company is liquidating, then of course you can treat digital credit as a liability and reach very pessimistic conclusions.
But digital credit alone cannot force a company into liquidation. Only maturing debt can trigger a liquidation event. This means, when operating such a company, you actually have many options and control over when and how to raise capital. Many pessimistic narratives start by assuming: "Bitcoin price falls 80%, never recovers, then the company is forced into liquidation. Under such circumstances, of course the company will have problems."
But for any business in the world, if you first assume all its assets permanently depreciate 80% and the company is forced into liquidation, then no business looks immune to distress. If you think more seriously, you start asking: How would the company actually reach liquidation? What would the world look like then? These companies' structures are actually quite antifragile. As the company's stock price falls, its amplification effect relative to underlying assets increases, making equity more attractive. Digital credit also has a self-correcting quality, often returning to prices near par.
When Bitcoin price crashes, demand for digital credit also drops. This reduces new credit supply, improving future credit conditions and forward-looking credit metrics for existing credit products. Equity has a similar mechanism. As asset prices fall, we gradually attract more demand for digital credit and common stock, and this new demand ultimately forms stabilizing forces, pushing related asset prices back up.
Audience Q: Why doesn't Strategy buy concentratedly when prices fall? Is Satoshi's wallet the one holding the most Bitcoin?
Michael Saylor: Answering the second question first. Satoshi seems to have multiple wallets, collectively holding slightly over 1 million Bitcoin. So, I believe Satoshi is likely the largest Bitcoin holder. As for the first question, we actually have multiple ATM offering programs.
Our perpetual instruments STRD, STRF, and STRK all have ATM offering programs; common stock MSTR has an ATM offering program; the digital credit instrument STRC also has an ATM offering program. All these plans are dynamically adjusted and operate programmatically based on a set of parameters. Decisions depend on equity capital market, credit market, and Bitcoin market conditions, and our judgment on which assets to buy, sell, or swap.
These strategies are not adjusted weekly or daily, but truly minute-by-minute. You'll find we believe we have other financing options. For example, the company can issue bonds. Currently we have six bonds outstanding, but we haven't issued new ones since, and we will eventually repay all these bonds.
In other words, we have largely shut down the debt financing part of the business because we believe it currently lacks strategic value and clear advantage. You'll also notice, according to our 8-K filings, we haven't sold any STRD, STRF, or STRK.
The reason is, we believe these securities are currently undervalued. Issuing now would lock in a dividend cost at a high capital cost for the company in perpetuity. So, I'd tell you: If you're bullish on Bitcoin and this company, you should consider buying these securities, because I'm not willing to sell them currently.
I'm unwilling to sell because for the company, they are an excessively costly form of financing; but from an investor perspective, they are currently undervalued. So, our approach is to actively manage these financing tools.
If STRF's price rises to $200 per share, lowering the perpetual capital cost to 5%, then we might start issuing again. Making such decisions involves considering SOFR, forward yield curves, credit markets, etc.
For STRC, we won't issue at even one cent below par, but as long as the price is one cent above par, we're willing to issue substantially. Because one of STRC's main functions is to strip Bitcoin volatility. This is how we manage and support this instrument.
Depending on credit market conditions and the company's position at the time, we allocate capital to Bitcoin or dollars. We dynamically switch between buying debt, holding dollars, and buying Bitcoin. We've sold some Bitcoin, also issued credit instruments; we might also use dollars to buy back bonds. We're conducting many different operations, all dynamically adjusted.
These decisions depend on forward yield curves, derivative market premiums, capital markets, stock markets, and various credit market conditions. Each market is different; we continuously evaluate. The general principle is we want actions beneficial to common shareholders, i.e., accretive to equity value.
We also want actions beneficial to credit quality, supporting digital credit products, especially STRC. To support STRC, we've already taken over a dozen measures. Simultaneously, we want actions beneficial to Bitcoin.
Sometimes, there can be conflicts among these three interests; we must balance between common stock, digital credit, and Bitcoin. That's essentially our business: continuously and thoughtfully weighing these factors and finding balance. Let me add one more point before we move to the next question. If you believe Bitcoin appreciates about 10% annually, close to our cost of capital, then when we report "Bitcoin yield," that yield can be analogized to net profit.
Year to date, we've realized about $5 billion in Bitcoin yield; at this pace, it might reach around $10 billion for the year. Last year was slightly under $10 billion. But when we report $5 billion in Bitcoin yield, for you to consider that yield valuable, you must first assume Bitcoin won't drop to zero tomorrow.
If you believe Bitcoin will fall 10% annually going forward, then that Bitcoin yield is less attractive because you'd discount its value at a 10% rate. If you believe Bitcoin won't appreciate at all annually, then buying Bitcoin by issuing STRC might just add a burden. I understand that.
But if you believe Bitcoin rises 10% annually, then suppose I issue $1 billion of STRC and use it to buy $1 billion of Bitcoin; I never need to repay principal, and the Bitcoin bought can cover dividend costs through its 10% annual compound appreciation alone.
In fact, even if Bitcoin only rises 8% annually with a 10% capital cost, most Bitcoin yield could still be considered net profit. If you believe Bitcoin rises 30% annually, then when we report $5 billion in Bitcoin yield, its actual value might be equivalent to $15 billion: $5 billion immediate gain, plus potentially another $10 billion in future value.
So, this business is indeed highly profitable. But the reason it's so controversial is that your judgment on the company's equity necessarily depends on your judgment about Bitcoin's future price. Similarly, your judgment on digital credit products must combine your expectations for Bitcoin's future performance and volatility.
If you're negative on Bitcoin, you could conclude the company's credit products are distressed and common stock is terrible. But if you're bullish on Bitcoin, you might think we will significantly outperform Bitcoin, achieving around 50% annual returns. Over the past five years, that's roughly been the case. Then you'd also consider these credit products investment-grade quality.
Market participants have vastly different views on Bitcoin, and many voice opinions without clearly stating their underlying assumptions about Bitcoin's future price. That's why so much controversy and back-and-forth debate arise around this issue.
Audience Q: How Does the Definition of mNAV Affect Accretion vs. Dilution Judgment?
Michael Saylor: Our definition of mNAV is: first calculate the company's equity market value, then add the nominal value of net debt and preferred shares, arriving at mNAV on an enterprise value basis. This number is published on our website.
But any lawyer will tell you, the value of a public company's securities cannot be based solely on a single metric disclosed on a website. If you review our 8-K, 10-Q, and 10-K filings, you'll see extensive risk disclosures explicitly stating this metric does not measure company liquidity nor fully reflect overall financial condition. Investors must still consider the company's entire assets and liabilities to form judgment.
So, I don't think our mNAV calculation method is problematic. But mNAV isn't the only usable metric. You can also calculate net asset value differently: calculate the company's total assets, subtract debt, and if willing, further subtract preferred shares, arriving at net asset value per share.
Thus, you can calculate total assets per share or net assets per share. If a company's capital structure is mostly common stock with minimal debt, differences between these calculations aren't significant.
But when a company's capital structure includes 30%, 40%, or even 50% preferred shares, these differences become important. Then, total assets per share might be over $100, while net assets per share might be $80 or $90. If you're calculating the price at which the company needs to issue stock to achieve positive Bitcoin yield, that issuance price threshold would be higher than the price needed for positive dollar yield.
For example, suppose a company is worth $1 billion and it issues $100 million worth of stock. Is this dilutive? If you exchange $100 million worth of stock for only $10 million cash, that's clearly dilutive.
Typical dilutive transactions often occur when companies purchase intangible assets. For instance, I acquire another company with $1 billion worth of stock, then a year later have to impair that asset because I find it's actually worth only $50 million. That means I exchanged $1 billion stock for $50 million real value, causing $950 million dilution.
Such dilutive transactions often happen acquiring businesses and their goodwill, because you might overvalue the purchased assets. Or, I buy a Picasso painting with $100 million worth of stock, but it's actually worth only $25 million; that could also be a dilutive transaction. But if you exchange $100 million worth of stock for $100 million cash, cash hardly has room for significant impairment. It's $100 million cash.
So, future discovery that it's a dilutive transaction due to goodwill impairment is almost zero. Therefore, a company with $1 billion market cap issuing $100 million common stock does not dilute existing shareholders. It merely expands the capital structure from $1 billion to $1.1 billion. Asset value per share remains the same. Your share count increased 10%, but company assets also increased 10%.
If the company originally had $1 billion assets and $1 billion market cap, then issues $100 million stock and receives $100 million cash, the transaction merely expands the company's capital structure. This benefits credit quality because the company has more cash, enhancing debt repayment ability. It also usually improves stock liquidity.
So, it's not dilution at all; just company scale expands. What complicates calculation is companies having different liability types. For example, a company has $10 billion debt maturing in one year. That's not the same as having $10 billion perpetual credit capital with adjustable dividend yields that never matures.
You can certainly compare them accounting-wise, but one is truly a maturity liability; the other only has liability attributes upon company liquidation, while in a going concern, it's closer to an asset.
That's why it's called hybrid capital, precisely why it's complex. In such cases, expanding the company's capital structure, adding cash or Bitcoin reserves, is often rational because it reduces credit risk and improves stock liquidity.
The reason lawyers caution not to rely on a single metric is you won't see in quarterly filings us simply stating: "This quarter's BTC Yield is X." Quarterly filings typically contain about 95 pages, fully disclosing the balance sheet, all cash, net debt, and obligations.
As an executive of a public company, under Sarbanes-Oxley, I've signed statements almost every quarter for about 30 years. You need to confirm the company has no undisclosed off-balance-sheet liabilities. So, to judge whether a company is accretive or dilutive, you must understand all its tangible assets, cash, and all liabilities.
But the question is, is it appropriate to directly deduct $1 billion preferred shares as a liability? If you're a bank, preferred shares themselves measure capital adequacy; they're equity capital. Preferred shares may carry cumulative or non-cumulative dividend obligations, but they're not ordinary debt on the balance sheet.
So, when you ask what's accretive, generally, if a company issues stock above net asset value per share in exchange for tangible assets like Bitcoin or cash, the transaction accretes shareholder value. You can calculate net asset value per share: Bitcoin plus cash, minus all liabilities. Of course, you first need to judge which items should be considered liabilities.
If the company issues stock below this value, the transaction is dilutive. So, dilutive equity swaps exist. Judgment must combine the company's entire assets, liabilities, and per-share balance sheet at transaction time. So, you're right. The market can propose another mNAV calculation, which might suit some analytical purposes better.
But I want to point out: when we initially created the BTC Yield metric, digital credit hadn't been created. Over the past 12 months, our business model has changed. In fact, digital credit has only existed for about 10 months. It was only three or four months ago we truly confirmed this model works.
So, the business model is still evolving, and the metric system is also evolving. We haven't completed all work. By the way, I also want to credit you. Before you went public, we couldn't publish the "Bitcoin per share" metric on our website. Lawyers previously thought directly publishing this metric was too risky. But now, we've added metrics like "Bitcoin per share" and some new metrics related to digital credit, and these metrics continue to evolve. I don't think the system is final.
BTC Yield can be understood, provided you make assumptions about Bitcoin's average annual return over the next 30 years. Suppose you predict Bitcoin's average annual return over the next decade is 20%, then BTC Yield as a metric isn't problematic. But if you ask me: "How much accretion did this transaction generate at this moment, or on Monday morning when the 8-K was filed?"
Then you should calculate net assets per share, and after deducting all liabilities, calculate Satoshis per share attributable to common shareholders. However, there's still an important premise: debt liabilities are easy to deduct because they have a definite dollar amount and clear maturity; but how to value hybrid credit instruments like STRC remains highly debatable.
Some critics say STRC isn't credit. But it's clearly a credit instrument. You can ask AI: Are dividend-paying preferred shares credit? It will tell you preferred shares are credit instruments; financial instruments paying dividends are also credit. It's credit, but not debt.
I also note our debt often includes options favorable to creditors. For example, investors in convertible bonds can choose to sell bonds back to us if the bond price is below par on the designated put date. This is an option held by investors, a potential obligation for the company.
But preferred credit instruments like STRC contain options mainly held by the issuer, the opposite. In traditional debt, options held by creditors can burden the company; in preferred equity credit instruments, options held by the issuer are an asset for the company.
Thus, I don't believe there's a simple metric explaining all situations. I can tell you the whole set of digital metrics for digital treasury companies is still evolving in the market. What you do influences us; what we do influences you. All participants influence and learn from each other.
This is a constantly moving target; these business models are even less than 12 months old. Suppose I say the company generated $5 billion in Bitcoin yield; that statement assumes you believe Bitcoin will appreciate 10% annually going forward. If you're an equity investor, you must make several assumptions: Can Bitcoin maintain 10% annual appreciation over the next decade? Can the digital credit issuance business model operate stably for ten years? Can Bitcoin volatility remain relatively stable over a decade?
If answers to these three are yes, you might assign the company a 10x P/E ratio. But if uncertain, you might assign only 2x. So, there's huge modeling space in valuing these equity and credit instruments. Investors can reach vastly different valuation conclusions based on more complex assumptions.
I believe the company's obligation is to disclose all information as completely as possible. Actually, we've disclosed almost everything we can. But some critics say: "I didn't listen to earnings calls or read company filings." The problem is, you must read these materials. If someone doesn't have patience to read one page, they probably won't read 100.
My advice to all: If your attention span is short, give the documents to AI, let AI read, analyze, and parse for you. That way, you at least form an informed view, not draw conclusions arbitrarily to post on Twitter for clicks.
Moderator: I know you have a brief follow-up, but let me add first. My first job at CalPERS was producing risk and analysis reports for four different portfolio managers. They managed fairly similar fixed income portfolios, but each requested very different calculations and perspectives.
So, I think the answer is, there's no single metric that tells the whole story, and we shouldn't expect one. If you succeed, if we do this well, we should provide our most reasonable analytical perspective while disclosing all relevant data, letting investors easily build their own frameworks to measure risk and return their preferred way.
Ultimately, market evaluation of us should depend on: over the long term, did we outperform Bitcoin, not whether a single transaction was accretive or dilutive. Because I think for almost every transaction, this debate will always exist.
Audience Questioner: I've held Bitcoin since I was 18. I genuinely support everyone who wants Bitcoin to succeed. My brief follow-up mainly seeks to further understand your definitions. Take Google. I think Google was inspired by your financing methods. They seem to have raised hundreds of billions. Setting aside preferred shares, look at Google's ATM issuance of common stock. Both Google's own statements and investors' and shareholders' understanding describe it as a dilutive transaction because the company exchanged additional common stock for cash.
Do you believe this definition of dilution shouldn't apply to Strategy, or other Bitcoin treasury companies?
What Kind of Equity Financing is Truly Dilutive?
Michael Saylor: Let me clarify one point. If you issue $1 billion worth of stock to invest in semiconductors or buy NVIDIA chips with a four-year useful life, that transaction is likely dilutive unless you can prove the business generates cash flows offsetting dilution. Note, if a company with $4 trillion market cap issues $1 trillion worth of stock for $1 trillion cash, by definition, that itself is not dilutive. It merely expands the capital structure, and at transaction completion doesn't dilute per-share value.
What could cause dilution is: The company invests that cash in money market instruments yielding only 2% or 3% after-tax, while the existing business's return on capital might be 12%. So, whenever you issue stock and exchange equity for another asset, if that asset's return on capital exceeds the company's existing business, the transaction accretes shareholder value.
If its return matches the existing business, the transaction is neutral; the company just has a larger capital structure. If you buy a business performing worse than the existing one, the transaction is dilutive. For example, you own a monopoly business with 80% gross margins growing 40% annually, but acquire a business with only 10% margins growing 5% annually at the same valuation multiple as yours.
Suppose your company trades at 40x P/E, but also acquires a slow-growing, less profitable company at 40x P/E; that's a dilutive equity transaction. So, whether a transaction accretes or dilutes ultimately depends on use of proceeds. For instance, if I issue stock to buy Bitcoin, and the stock issuance price is above the company's net asset value per share, the transaction always accretes shareholder value.
If I didn't buy Bitcoin but bought cash assets yielding less than Bitcoin, then the question becomes: Why did I do that? Suppose I did that to improve the company's credit quality and support issuing $20 billion of STRC next year; then essentially, I'm investing cash to grow the digital credit business. This use might make the transaction accretive.
I'm not saying capital raises never dilute. They certainly can. I mean you must consider fund use. Take Oracle; it completed about 100 acquisitions. Were those accretive or dilutive? Each time Oracle acquired another software company, the CFO would build a ten-year cash flow model, then explain to investors: "We believe this transaction accretes shareholder value because we can cut these costs, future revenue will reach this level. Our existing business has 40% operating margin, 8x P/S; we're acquiring this company at 2x P/S with current 20% margin, but we can raise it to 40%."
Investors seeing these assumptions might think these are accretive transactions. But the company must justify each transaction individually. Successful companies complete accretive transactions; Wall Street history is filled with companies that failed by repeatedly doing dilutive transactions.
If you exchange equity of a high-quality, monopolistic, fast-growing company for hardware depreciating in four years, and the related business quickly collapses thereafter, that's clearly dilutive. Conversely, if you acquire another monopoly business with equity, and its growth matches or exceeds the existing business, the transaction accretes shareholder value.
How Should Investors Build a Valuation Model for Strategy?
Michael Saylor: I think any common stock investor must form clear judgments about Bitcoin's future volatility curve and forward price curve. Once you have views on these two factors, you can build a company valuation model. Beyond that, you must understand the company's assets, liabilities, cost of capital, and capital duration. You need to know if it's debt maturing in one year or six years, and other similar conditions.
You must first build a complete model, then input your assumptions. The model will eventually tell you the fair value of the company's common stock, and whether the company has credit risk and how much.
Michael Saylor: If you hold $1 billion worth of stock, like our major institutional investors, you'll definitely have your own model. All equity analysts also build models. They input assumptions, then judge whether credit products are cheap or expensive currently, whether common stock is cheap or expensive.
The best investors also trade dynamically. They might say: "I like the stock when company mNAV is 1.2x; when mNAV rises to 3x, I'll sell some." They trade based on valuation.
Derivatives traders do similarly. If you watch our stock, it trades nearly minute-by-minute following Bitcoin price. Believe me, I can't control that. I can't make company stock trade synchronously with Bitcoin every minute.
That's because traders at Susquehanna, Citadel, or Soros run their models in Bloomberg terminals. Convertible bond traders also have corresponding models. They continuously buy, sell, and arbitrage based on calculated fair value. If you visit our website, you can also input assumptions about Bitcoin's future volatility and average annual return curve; the system calculates reasonable credit spreads for various credit products.
So, once you form your judgment, you'll get a fair value range and invest accordingly. You can't make serious investment decisions relying on a single number. You must have a complete, mature capital structure model and form clear forward views. If you want to be a real trader, you must do this. If you don't want to do this analysis, my suggestion is buy digital credit products and hold long-term, or just buy Bitcoin and hold long-term.
Audience Questioner: Yes, we discussed this in the previous roundtable too. It's actually interesting conversation because people might be talking about two different mNAVs. If everyone calculates their own metric, the person next to me says mNAV is this number, another says a different number, but we all claim to discuss the same concept.
Michael Saylor: I think the market hasn't reached consensus on which metric to adopt. Also, mNAV itself isn't the only metric; many others exist. If you read our disclosures, lawyers dedicated a full page to limitations of each metric. They explicitly state that forming a responsible, comprehensive judgment requires reading the company's full financial reports and all SEC filings.
They're not wrong. I only need to add a line or clause in a security instrument to render any single metric globally inadequate. So, investors must read full documents. That's why we file these documents, encourage reading, and strive to communicate fully. So, while some metrics are indeed reference-worthy, I don't think a single metric explains all situations.
These business models are nascent, currently less than a year old, and each company's model differs. In contrast, retail industries using similar business models and reporting methods have existed for about 80 years. Many industries like airlines, retail, and hotels have stable business models for about 50 years.
But you can't expect our industry to be that stable because these instruments and business models are actually only about 12 months old, so naturally more dynamic.
