STRC (STRC)

Why has $STRC been struggling? Strategy has billions in convertible bonds outstanding. These bonds behave differently depending on the share price. When $MSTR trades high, convertible bonds act like equity. Bondholders expect to convert into shares, so the debt effectively disappears from the capital structure. When $MSTR trades low, those same bonds act like debt. Bondholders expect cash repayment instead. The debt becomes real again. Here is the problem. When $MSTR fell from $180 to $80, roughly $2 billion of convertible bonds effectively transformed from equity back into debt. That debt sits senior to the preferreds, meaning $STRC holders suddenly had $2 billion more in claims ahead of them in the queue. At the same time, Bitcoin was falling, which meant the collateral backing everything was shrinking. More debt above you, less collateral below you. That is why the preferred prices fell. The market also realised that with Bitcoin at 45% volatility, there was a meaningful chance of a much deeper drawdown over the next two years, at which point the capital structure gets genuinely stressed. Preferreds price in that tail risk first because they are the first to feel pain in a distressed scenario. This is why Saylor sold Bitcoin for cash and why he wants to retire the convertible debt entirely. Removing the converts removes the mechanism that transmits common stock volatility into the preferred products. Of course $SATA does not have this problem which is why it's faring much better.

Digital credit daily trading volumes fall to their lowest in 3 months. $STRC held ~80% of volume share these last two weeks. https://t.co/x7b6X0hJ4p

The $STRC ATM hasn’t been active since May 14. Welcome to the digital credit winter.

Stick or Twist? Strategy and Strive have a decision to make on whether to increase the yield for $STRC and $SATA respectively. Both products have been unable to trade at par so it will be interesting to see what they do next. I think there is room for yields to go higher. https://t.co/6TGP3X4rFk

A very balanced review of the current state of $STRC in this article from @Roxom. 👇🏾

The most retarded part of the panic dump of $STRC paired against BTC has now been fully retraced Unless you think that STRC should trade much lower *even* with BTC at $60k, then the STRC/BTC ratio dumping suggests market irrationality because BTC should be a higher beta on the way down Several other factors could influence this ratio and it's not that straightforward, but overall I think it's a correct mental framework

Raise a $10M seed round. Put it in $STRC and earn 12%. Two days later, tell investors you have a $1.2M run rate. Raise a $100M Series A. Put that in $STRC too. Two days later, tell investors you have a $13.2M run rate. Raise a $1B Series B, take $50M in secondary, and return the rest. Who’s working on this?