It's wild to me that highly intelligent people still don't understand the risk of Saylor's strategy.
They get too bogged down into specifics of debt deals, "infinite money glitch" stuff, and so on, and lose sight of the basics. Here's a few:
0: THERE IS NO SUCH THING AS FREE MONEY!!!
This isn't a technical point, but it's a basic rule of reality that you can't ignore. Someone is always paying.
Either Saylor's going to lose money, his creditors are, or either could, but both are making bets (which involve risk) that they'll be the winner.
Because of how public Saylor has been with this strategy, and hyping up Bitcoin as an investment, everyone knows what the game is. He isn't profiting from an information asymmetry. Everyone knows the game. He's making a bet. Which can go wrong.
If his bets win consistently, then people won't want to lend to him (lose money), or will lend with much less favorable terms. Either way, the game ends at some point.
1: Interest Payments
Many of MicroStrategy's loans charge interest. Some basic research indicates about $35.1 million in interest every year.
Bitcoin generate any revenue. So they have this recurring bill that needs to be paid. Unlike using loans to grow the business (which then grows revenue), the primary way you'd "earn" from Bitcoin investments is to sell some (presumably at a higher price than you bought).
Unless these loans are either refinanced or paid off, they will continue to cost money without generating any revenue.
2: Stock Price
Cutting through lots of technical specifics, for the 0% interest loans, they're basically paid in stock. Instead of being paid in interest, lenders are "pre-buying" stock at more favorable prices, with certain conditions to mitigate risk.
Here, both lenders and Saylor are making bets: that MSTR will go up. If it does, everyone wins. If it doesn't, lenders get paid back, but Saylor has to pay somehow: sell underperforming stock (further dumping), or sell Bitcoin (or pay with something else, if he gets it).
3: Correlation With Bitcoin
The underpinning of this entire thing is a dual assumption: Bitcoin will go up consistently, and MSTR will act as a Bitcoin proxy.
The challenge is that the two are very different assets, and MSTR holders don't actually own rights to Bitcoin! As has been publicly disclosed, Saylor may be forced to dump Bitcoin to prop up his company. Because of the immense amount of signalling and relentless marketing, some have bought that this correlation will continue. Long-term, it very well may not.
If Bitcoin's price doesn't keep going up, Saylor gets rekt. If MSTR's price doesn't keep going up, he also gets rekt.
This is pitched to the general public as a long-term bet on Bitcoin. If it was, MicroStategy would simply buy Bitcoin with loose capital as cheaply as they could, rinse and repeat. Only risk there is Bitcoin itself crashing (it sill may).
But in reality, Saylor is betting both Bitcoin and MSTR go up under very specific conditions and timeframes. The certainty of this is much lower than a pure bet on Bitcoin. That's why he's doing everything in his power to lie, pump, and scam: he needs to effect the outcome in the short-term, or he knows he'll lose the bet.
If you buy MSTR, or Bitcoin under the assumption that MSTR will continue to pump it. You're taking a risky bet. May work out, may not. But don't be deluded into thinking it's "bAsIcAllY rIsK fReE."
Where does the yield come from? You, that's where.
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