Michael Saylor, chairman of Strategy (MSTR), received widespread acclaim from the investment community on Friday for his company's record high operating income, net profit, and earnings per share in the last quarter (see the figure below).

In fact, the company's stock price has risen 166% in the past year, twice the increase of Bitcoin (BTC) during the same period.

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By any standard, such performance is considered outstanding. Especially in the context of numerous imitators flooding in, which could divert investor funds, such performance is even more rare.

But this doesn't mean that Strategy can rest on its laurels. As a leader in the cryptocurrency fund management field, it has certain privileges and now seems ready to fully leverage this advantage.

Bitcoin reserves continue to increase, but strategies have new changes.

As of the time of writing this article, Strategy holds 628,791 bitcoins, worth $71.9 billion. The company has accumulated this asset portfolio through various means: issuing common stock, various types of preferred stock (which can provide dividends or conversion rights in the coming years), and convertible bonds. The details of the various types of preferred stock are shown in the figure below.


But now, the company plans a major adjustment to its financing methods—specifically, to completely eliminate debt. Although its balance sheet performance is good (according to financial reports, the enterprise value reaches $126 billion, with debt only $8.2 billion), the company still aims to reduce debt to zero. In the investor conference call following the July 31 financial report release, the company announced plans to redeem existing convertible bonds and focus on multiple batches of preferred stock issuance.

This means that its $6.3 billion preferred stock issuance is expected to grow significantly. In fact, during the investor presentation, the company announced plans to refinance $4.2 billion through its latest preferred stock product Stretch (STRC), which targets a monthly return of 10%.

'This decision reflects the positive development of Strategy's financing capabilities in the capital market. The convertible bond market is filled with hedge funds and arbitrageurs who establish long positions in Strategy by purchasing convertible bonds, but at the same time, they reduce net risk exposure by shorting a large amount of stock (about 25%). This means that for every bond they buy, they sell a large amount of stock, which is only slightly bullish on Strategy,' said Lance Vitanza, managing director at TD Cowen, in an interview with (Unchained) (full discussion available on X platform or YouTube). 'A few years ago, convertible bonds were the best financing channel for the company. But as Strategy has developed, they are now able to enter the preferred stock market, where the terms are better, the value-added potential is greater, and pricing efficiency is higher.'

This move once again confirms why Saylor is regarded as a 'demigod' in the Bitcoin community—he is not only revered for hoarding Bitcoin but also respected for his responsible operating methods. With few exceptions, he almost never relies on leveraged financing and mainly depends on the equity market.

Although its robust capital structure can avoid forced liquidation (unless Bitcoin prices plummet by more than 80%), Saylor continues to push the limits.

Always imitated, never surpassed.

But don't expect many followers in the fields of Bitcoin, ETH, SOL, BNB, etc., to emulate this practice. These institutions are just getting started, and as I've pointed out in other related reports, they are eager to scale quickly through competition.

This means they will utilize all tools of the capital markets: including private placements (PIPEs) from publicly listed companies, credit lines, and of course, debt.

In previous reports, I wrote: 'Each method has its pros and cons. Private financing can raise a large amount of money in a short time, helping to launch reserve strategies, but it may create significant selling pressure. Issuers can also choose to register shares with the SEC before issuing, but the financing cycle is longer. Nowadays, more companies are adopting a hybrid model: one-third of the funds come from private financing, while the rest is raised through convertible bonds or credit instruments. While this method can delay selling pressure, it increases leverage on the balance sheet, which can cause problems if prices plummet.'

This means that debt is very practical in financing: shareholder dilution may only become apparent years later, and in the current bubble market, the coupon rate is almost zero. For example, the Bitcoin fund management company Twenty One raised $485 million in May by issuing convertible bonds to launch its strategy; Anthony Pompliano raised $235 million in June for his Bitcoin fund management company ProCap Financial through convertible bonds.

This is essentially a 'buy now, pay later' model.

A unique existence

For investors, this means they must always keep in mind: in today's crowded cryptocurrency fund management field, Strategy remains a unicorn. Currently, it is the only company able to enter the preferred stock market. Its first preferred stock issuance was in January this year, and future issuance sizes will be significantly expanded.

For other companies, entering the preferred stock market and eliminating debt remains a vision. 'Most of these companies will start from the convertible bond market, hoping that some will grow and eventually qualify for entry into the preferred stock market,' Vitanza said.