Strategy - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue fell 3.6% year over year to $111.1M and declined sequentially from Q4’s $120.7M; gross margin compressed to 69.4% vs 74.0% a year ago and 71.7% in Q4.
• GAAP diluted EPS was a loss of $16.49, driven by an unrealized fair value loss on bitcoin of $5.906B under newly adopted fair value accounting; non-GAAP diluted loss per share was $16.53.
• The company raised ~301K BTC year-to-date and ended Q1 with 528,185 BTC (cost basis $35.63B; fair value $43.55B); management increased 2025 BTC KPIs to 25% BTC Yield and $15B BTC $ Gain from prior 15% and $10B targets (positive strategic signal).
• Catalyst: Adoption of fair value accounting (newly visible earnings volatility), aggressive capital raising (new $21B common ATM) and raised BTC KPI targets; near-term stock reaction likely tied to bitcoin price path and investor perception of KPI credibility vs GAAP loss magnitude.

What Went Well and What Went Wrong

• What Went Well

  • Subscription services revenue grew 61.6% YoY to $37.1M; product licenses + subscription services up 23.6% YoY to $44.4M (cloud migration traction).
  • Capital markets execution: ~$7.7B net proceeds in Q1 and ~$2.3B additional in April via ATM equity, convertible notes, and preferred IPOs, supporting BTC accumulation.
  • Management raised BTC KPI targets (Yield to 25%, BTC $ Gain to $15B) reflecting confidence in treasury strategy and market momentum; CEO emphasized share price strength and leadership in corporate bitcoin adoption.

• What Went Wrong

  • GAAP operating expenses surged to ~$6.0B due to $5.906B unrealized fair value loss on bitcoin under ASU 2023-08; operating loss was $5.921B and net loss $4.217B.
  • Gross margin declined to 69.4% from 74.0% YoY; total revenue down 3.6% YoY and sequentially lower vs Q4.
  • Consensus misses: revenue below Street; EPS miss extreme given fair value loss; EBITDA swung deep negative, highlighting earnings volatility under fair value [GetEstimates Q1 2025; values from S&P Global]*.

Transcript

Shirish Jajodia (Corporate Treasurer and Head of Investor Relations)

Good evening. I'm Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 first-quarter earnings webinar. Before we proceed, I will read the Safe Harbor Statement. Some of the information we provide during today's call regarding our future expectations, plans, and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-Q, filed with the SEC, and our 8-K filed on April 7, 2025. We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today's call, we will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at strategy.com.

I would now like to welcome you all to today's webinar and let you know that we will be taking questions using the Q&A feature at the bottom of the screen. You can submit your questions throughout the webinar, and Michael, Phong, or Andrew will answer the questions at the end of the session. Please be sure to provide your name and company's name when submitting your questions. I'll now walk you through the agenda for today's call. First, Phong Le will cover the business highlights for the first quarter of 2025. Second, Andrew Kang will cover the financial results for the first quarter of 2025. Michael Saylor will provide an in-depth strategic review of our Bitcoin Treasury strategy. Lastly, we will open it up to Q&A. With that, now I'll turn the call over to Phong Le, President and CEO of Strategy.

Phong Le (President and CEO)

Thank you, Shirish. Hello, everyone. I'd like to welcome all of you to today's webinar. With just a few days to go, I'm excited to invite you all to Strategy World 2025. Next week, May 5th through 8th in Orlando, Florida. Shirish, you may want to thank you. Come meet our software customers, partners, and employees, explore our innovations in AI and BI, and engage with global corporate and thought leaders shaping the future of Bitcoin for corporations. You can visit our website to register if you haven't already, and I look forward to seeing many of you in Orlando. Moving on to the Bitcoin highlights for Q1 2025. Strategy remains the largest corporate holder of Bitcoin in the world, now holding 553,555 Bitcoins, with a total Bitcoin market value of $52 billion as of April 28th.

In the first four months of 2025, we acquired an additional 106,085 Bitcoin for a total purchase cost of $9.9 billion, an average price of approximately $93,600. In Q1 2025, Bitcoin's momentum accelerated meaningfully, driven by a series of landmark government actions. Most notably, the Trump administration announced the establishment of a strategic Bitcoin reserve. This bold move marked the first time a sovereign government publicly recognized Bitcoin as a national reserve asset. In parallel, the administration's broader pro-Bitcoin regulatory stance has further legitimized the asset class and attracted heightened institutional interest, setting the stage for deeper integration of Bitcoin into the U.S. financial system. On the capital markets front, we have also made significant progress.

In the first quarter of 2025 and quarters to date, in Q2 2025, we raised $6.6 billion net proceeds through our At the Market, or ATM, equity offering program, and raised $2 billion through the issuance of a convertible note offering. We also raised $1.4 billion through our newly listed preferred stock, STRK and STRF. We expect to continue issuing innovative fixed-income securities and seek to enable our common stock to outperform Bitcoin via intelligent leverage. Strategy has added to its balance sheet in every single quarter since August 2020, across 60+ announcements, and 100% of our Bitcoin holdings remain fully unencumbered, demonstrating our long-term conviction and unmatched consistency in executing our Bitcoin strategy. This makes us the most committed corporate holder of Bitcoin globally, representing 2.6% of all Bitcoin in existence.

As the chart shows, our pace of accumulation accelerated meaningfully over the past two quarters, reflecting both market opportunity and strong Treasury operations execution. As the world's first and largest Bitcoin Treasury company, we remain hyper-focused on capital markets innovation and our Bitcoin operations to strategically accumulate more Bitcoin. We've now utilized $37.3 billion of capital to increase our Bitcoin holdings and drive shareholder value. That capital was acquired through three primary mechanisms. First, $10.6 billion of debt issuances, of which $8.2 billion in aggregate principal is outstanding. Second, $1.4 billion in perpetual preferred equity through STRK and STRF, reflecting investor demand for both yield and Bitcoin-linked instruments. Third, $25.9 billion of Class A common stock issuances. Fourth, $836 million of cash flows from software operations.

As we reflected in this quarter's capital markets activity, 2025 continues the momentum we built in late 2024, with $10 billion already raised year-to-date through a diversified mix of securities. This included $6.6 billion in equity and $3.4 billion in fixed-income instruments, demonstrating the breadth of our investor support and the strength of our market access. These offerings reflect our ability to tap multiple capital sources efficiently and strategically. Q1 demonstrated that the $18.1 billion raised in Q4 was not a one-off. We are operating at a new baseline. Rather, it represents the foundation of our evolving and scalable capital strategy. In terms of the largest treasuries in the world, we have gone from virtually negligible to now the 13th largest in treasury compared to the S&P 500 universe entirely through our Bitcoin holdings. We are growing fast.

Over the next two to four years, we believe we have the potential to surpass many of the companies ahead of us on this list, continuing to scale our Bitcoin treasury with conviction and discipline. Five years ago, when we embarked on the Bitcoin journey, we were the only corporation with the courage and conviction to do so. Today, there are over 70 publicly listed companies globally holding over 700,000 Bitcoin who are adopting our playbook. There are newer corporate entrants adopting Bitcoin, and some are recurring Bitcoin stackers like us. We welcome all corporates to Bitcoin and are extremely proud to see Bitcoin treasury companies emerging in the U.S., Japan, India, France, and other countries. We believe our unique attributes and track record of transparent investor relations, conviction in our Bitcoin strategy, innovative offerings, high volatility, combined with the scale of our Bitcoin holdings, will continue to differentiate us.

Since we adopted our Bitcoin strategy in 2020, Strategy stock has outperformed every major asset class and every S&P 500 company, appreciating 2,887% to date. To put that in perspective, Bitcoin itself is up 692%. The S&P 500 has risen just 65% over the same period. While NVIDIA has been the top-performing S&P 500 stock during this period, with an 874% gain, we've outperformed NVIDIA by more than 3x. It's not even close. If you look at the last 12 months, we've similarly outperformed all the largest companies, as well as all the key indices. If you look at the last three months, when the broader macro markets witnessed the most volatility since 2020, we still managed to outperform the Magnificent Seven and key indices. Our performance metrics speak to the uniqueness and strength of our position in the market.

Since launching our Bitcoin strategy, Strategy has MSTR has not only outperformed Bitcoin itself, but every stock in the S&P 500. That kind of return doesn't happen by accident. It's the result of strategic focus, intelligent leverage, and our disciplined execution. We're also one of the most heavily traded and closely watched equities in the market today, both in spot and in options markets. MSTR consistently ranks among the top across open interest, daily trading volume, trading volume as a percentage of market cap. This level of engagement reflects more than just price action. It's a sign of growing institutional interest, retail participation, and the market's recognition of Strategy as the capital market center of gravity for Bitcoin. Now, I'll turn to our capital plan.

In October of last year, we introduced the 21-21 plan, a bold but disciplined framework to raise $21 billion in equity and $21 billion in fixed-income capital. We designed it to be agile, scalable, and responsive to market dynamics. Since then, we've reported having raised $20.9 billion in equity and $6.4 billion in fixed-income capital, meaning we're 65% complete. Notably, 99% of the equity portion has been completed in a mere six months. We believe the accelerated progress is a testament to the strength of our market access and the credibility we've built with all groups of investors who've demonstrated increasing demand for our securities. What's next? Remember our original inspiration from the Hitchhiker's Guide to the Galaxy, the answer to the ultimate question of life, the universe, and everything. The number was 42 for our $42 billion capital plan.

Given our success, we're now going to double down with a new plan, the 42-42 capital plan. That's $42 billion in equity and $42 billion in fixed income targeted through the end of 2027 and inclusive of our original $21 billion capital plan. This gives us the scale to pursue our strategy with conviction and the flexibility to continue to adapt across market cycles. To that end, we're pleased to announce that today we've filed for a new $21 billion ATM program. Later in the presentation, Michael will share with you a framework for how we think about our securities and credit risk as it pertains to our Bitcoin strategy, including illustrative examples of how this framework would apply to the different types of securities we've offered, MSTR, our convertible bonds, STRK, and STRF.

We are excited about this opportunity to discuss the framework, which we believe is helpful for understanding our capital financing decisions. Under the new 42-42 plan, we are 32% complete. That leaves us with around $57 billion of additional capital to be raised through the end of 2027. As we move forward, we will focus more on the fixed-income side of our plan. Through instruments like STRK, STRF, convertible notes, and potentially new structures we may explore over time. At the same time, we will continue to utilize the equity ATM when conditions are favorable and when it represents an accretive and efficient option for our shareholders. The market has shown strong demand for our instruments, and we tend to continue tapping new pools of capital in a thoughtful, value-accretive manner while maintaining a disciplined leverage ratio between 20% and 30%, allowing us to responsibly scale while maximizing long-term value.

We intend to remain highly efficient with our use of our overall capital. We have $185 million of total fixed annual obligations for interest and dividends, which we can cover using a fraction of our daily trading volume as new stock issuances. To put in perspective, our ATM activity this year alone has raised $6.6 billion, and our obligations represent just 3% of the daily traded volume of our equity and less than 1% of the total equity we've raised in the last 12 months. As a result, we're comfortable raising additional fixed-income capital to buy more Bitcoin without being restricted by available cash or cash flow from our software operations to service all of our interest and dividend obligations. Michael will explain later why the strategy is highly accretive to our shareholders. We're tracking well ahead of our KPI targets for 2025.

Year-to-date, we've achieved a 13.7% BTC yield, putting us well on pace to reach our full-year target of 15%. BTC yield reflects the Bitcoin gain we've generated through our treasury operations. Our BTC gain is approximately 61,500 BTC year-to-date, representing a BTC dollar gain of $5.8 billion at the current Bitcoin price. Given our strong year-to-date performance in the favorable market environment, we're raising our KPI targets for 2025. We've raised our BTC yield target from 15% to 25%, reflecting confidence in our ability to create value for our shareholders. At the same time, we're increasing our BTC dollar gain target from $10 billion to $15 billion. These new targets better reflect the scale of our strategy and the value we believe we can unlock through disciplined Bitcoin acquisitions.

We remain disciplined in the use of both the ATM and other capital-raising sources, doing so in a way to achieve our BTC yield and BTC dollar gain targets. I'm now going to turn the call over to Andrew, who will discuss our financials for the quarter in further detail.

Andrew Kang (CFO)

Thank you, Phong. I will begin with a quick review of the software results, then go into more detail on our Bitcoin results. In Q1, total software revenues were approximately $111 million, down 3.6% year-over-year. The lower product license revenues, along with support revenues in Q1, continue to be as expected, and our overall revenue trend continues to reflect the ongoing transition of our software business from on-prem to the cloud. Our cloud results in Q1 subscription services revenues increased 62% year-over-year and now make up approximately 33% of total revenues, continuing our quarter-over-quarter double-digit growth.

Our subscription billings also grew again by 38% in Q1 to $24.5 million. The decline in product license revenues and support revenues continues to be offset by growth in cloud, and we continue to see growth in demand from our cloud platform and anticipate this trend to continue and strengthen in the coming quarters. Lastly, cost of revenues were $34 million, up 13% compared to Q1 of last year. The increase was driven primarily by higher cloud hosting costs, which we expect to continue in future periods as a direct result of our growth in cloud. Moving on to Bitcoin, we adopted fair value accounting for our Bitcoin holdings on January 1 this year, which has fundamentally changed how we value our Bitcoin treasury asset. To the left of this slide, we began the year with our Bitcoin holdings valued just under $42 billion.

On January 1, upon adoption of the new rule, we recognized $17.9 billion to our beginning balance of retained earnings, which was the difference between the carrying value on our books and the fair value based on Bitcoin price as of December 31. One fundamental difference now under fair value accounting is that our holdings are marked on the last day of every quarter, not throughout the quarter as before. Any new Bitcoin purchased during the quarter are initially held at the purchase price of those Bitcoins, and all prior quarter and new quarter purchases are fair valued as of the last day of each quarter. In Q1, the price of Bitcoin declined from approximately $93,400 at the end of the year to roughly $82,400 at the end of Q1, resulting in a $4.9 billion unrealized fair value loss on our pre-Q1 holdings.

We also purchased throughout the course of Q1 an additional 80,715 Bitcoin at an average price of approximately $94,900, representing $7.7 billion of new purchases. On the last day of Q1, because the market price of Bitcoin was approximately $82,400, these new purchases also reflected a fair value decline of about $1 billion. As a result, our overall Q1 unrealized fair market value loss was $5.9 billion, which flowed directly through our income statement. The next slide is an illustration on how fair value could impact the current quarter. This waterfall chart begins with our March 31 Bitcoin holdings on the left, valued at $43.5 billion. Since 3/31, we have seen a substantial recovery in Bitcoin price, which has increased since the end of Q1.

Using a Bitcoin price of $95,000 as an example, the change in Bitcoin price would reflect an illustrative $6.6 billion unrealized fair value gain on our Bitcoin held at the end of the previous quarter. In Q2 so far, we have purchased an additional 25,370 Bitcoin at an average price of $89,303, which represents a $2.3 billion investment. At the example price, the new Q2 purchases would reflect an increase of roughly $100 million in fair market value. In this illustration, our unrealized fair market value gain would be approximately $6.7 billion, and the market value of our total Bitcoin held today would reflect the fair value of approximately $52.6 billion. As Phong mentioned, Q1 was a milestone quarter for us with the IPOs of two new innovative preferred equity offerings. STRK, our 8% convertible preferred, is trading with an effective yield of roughly 9%.

Since launch, STRK has delivered an 8.4% price return, outperforming the median return of all preferreds offered since 2015. STRK is trading with an average daily volume of roughly $33 million, which is nearly 80x the typical preferred trading volumes, demonstrating strong institutional demand and a deepening market for this product, which is strengthened through a $21 billion ATM, institutional block trades, and follow-on retail demand. STRF, our 10% fixed coupon perpetual preferred, has shown even stronger liquidity and investor demand and has quickly emerged as a top-tier preferred instrument. With a price return of 7.5% since issuance, it has meaningfully outpaced the broader preferred market as well. Average daily volume for STRF has been $26 million, again significantly higher than the peerset.

When you compare the strong BTC risk and BTC credit profiles of these prefs, there is tremendous unlock through the eventual recognition of the underlying BTC support of these instruments and the potential changes in the rate environment in the future. Both STRK and STRF stand out as one of the most liquid and high-performing preferred stocks issued in the last decade. They serve to provide innovative securities to institutional investors, insurance companies, Bitcoin longs, retail investors, as well as the broader fixed-income universe. This slide highlights why we believe STRK and STRF are structurally superior to traditional debt. These instruments provide us with permanent capital with no maturity, no refinancing risk, no restrictive covenants, and no collateral requirements. They're also publicly listed, giving us flexibility to tap follow-on capital as needed, both institutionally and for retail investors.

In contrast, traditional bonds come with fixed maturities, repayment or refinancing risk, and often require covenants and collateral. Over a 30-year period, that can lead to significant leakage from refinancing costs and added operational complexity. Our preferred equity allows us to maintain leverage without repayment risk while providing durability and scalability. Bitcoin is a 100+ year asset. These instruments provide a 100+ year exposure. In Q1, we issued a new $2.0 billion convertible note, which was well received by the market. The notes due March 2030 have a 0% coupon and priced with a 35% conversion premium, reflecting a conversion price of $433 per share. We also redeemed our 2027 convertible notes in Q1, and our nearest debt maturity is now not until late 2028. The remainder of our scheduled debt maturities are evenly spread out through 2032, with a weighted average scheduled debt maturity of approximately 4.9 years.

We now have $8.2 billion of total unsecured convertible debt outstanding, with a low blended interest rate of approximately 0.42%. Since issuance, nearly all of our converts have increased in value significantly. On a blended basis, convertible bonds are up 62%, even outperforming Bitcoin itself. What is even more striking is Strategy's converts in comparison to other traditional securities, such as U.S. high-yield and investment-grade corporates and other U.S. convertible bonds. The traditional convert market has historically offered investors, such as hedge funds, access to volatility across different industries and asset classes. The innovation we introduced through our converts still provides volatility, but our converts offer increased volatility through Bitcoin exposure. The differentiation of our converts from others is the credit coverage that we offer, which Michael will discuss in more detail shortly.

Strategy was the largest issuer of converts in 2024, and our success can be attributed to expanding the investor base of this historically closed market. In addition to traditional hedge funds, we have seen increasing participation from long-only investors, and now with access for retail investors through vehicles like the BMAX ETF, the Bitcoin Corporate Treasury Convertible Bond ETF. Our outstanding debt and preferred securities, including converts, STRK, and STRF, are significantly supported by the value of our Bitcoin reserves and even more so by the scale of our common equity market value. As of April 28, we have $109 billion in equity market cap, and so we have about $100 billion in equity cushion and over $43 billion in Bitcoin cushion over our fixed-income liabilities. The point is that we believe our capital structure is extremely well fortified.

This chart gives you a simple way to think about our capital stack across both seniority and volatility. To the far right, you'll see MSTR Equity. That's your full exposure to our high-performance Bitcoin strategy. Then there's STRK, our convertible preferred. That's a step up in seniority, and it pays an 8% dividend, but it also gives investors some upside through equity conversion to MSTR. Above that is STRF, our 10% perpetual preferred. It's non-convertible, non-callable, and really meant for the kind of capital that wants long-dated fixed-income exposure to our balance sheet without the volatility of the equity. At the top, we've got our convertible notes, senior instruments with capped upside but higher protection in the capital structure. What you're seeing here is a full spectrum of choices, whether someone wants equity upside, yield with optionality, or pure senior exposure.

That's what makes our overall capital structure so scalable. We are building a platform where investors can pick their spot on the risk-return curve, and we can raise capital intelligently from each part of that curve. Thank you for your time today and for your continued support of Strategy. I'll now turn the call over to Michael for his remarks.

Michael Saylor (Executive Chairman)

Okay. I want to thank everybody for being with us today. I am going to start with an observation. Strategy is the world's most widely held Bitcoin security. You could think of it as the most widely held Bitcoin proxy. In fact, substantially more widely held than any of the spot ETFs in the world. We did some review of that in the past few months, and we found that there are 13,000 institutions that have accounts holding MSTR.

These institutions are not just asset managers, a lot of pension funds, insurance companies, and even sovereign wealth funds. We traced 814,000 retail accounts, and we have 500+ ETFs and funds and indices that we're embedded in, like the Nasdaq 100, the Russell 1000, the MSCI index. Some of these are extraordinary. For example, you know the Norway Sovereign Wealth Fund. It's benefiting every single citizen of Norway. We've traced our holdings to insurance companies that have millions of beneficiaries and pension funds that have many, many millions of beneficiaries. All told, our best estimate is 55 million beneficiaries who are either indirect holders of MSTR or they're beneficiaries of the institutions that are invested in MSTR. We can go to the next slide. I'd like to talk a bit about our BTC models.

You are probably familiar with BTC yield and BTC gain because we have talked about those a lot over the past six months. In fact, I get lots of questions about how the company is going to continue to outperform Bitcoin. How are we going to continue to grow the stock? What is the basis for the premium to NAV? In and of themselves, yield and gain only tell you part of the story. If you want to understand how we create shareholder value, we have to look out much more than just the current period. We are looking out a decade, and we are considering the consequences of all of our capital markets transactions. We internally use a variety of these BTC metrics, and I am sharing them with you today. I am going to explain how we use them, how we think about them.

Some of them are valuation metrics. Some of them are credit metrics. We've got some that are forecast metrics. If we go to the next slide, like volatility and ARR. We have treasury metrics where we're calculating the value of our treasury. We have metrics that allow us to assess how accretive any particular trade or any particular transaction is at any point in time. We even have some risk metrics. We have not just credit risk metrics for the credit instruments, but we have BTC risk metrics where we assess the hurdle rates and the break-even points of our various capital markets transactions. Let's dive right in. First of all, the degree to which any capital markets transaction is accretive and going to create shareholder value is a function of some outlook or expectations.

One thing that's really important is, what do you think about BTC? Do you think that Bitcoin is going to go up 0% a year forever? If you do, we call that a skeptic. Do you think that Bitcoin is going to track the S&P index about 10% a year or so on average? We call that a trader. Do you think that Bitcoin looks like a Magnificent Seven stock or a dominant digital monetary network, a Google, a Microsoft, an Amazon? Those normally have growth rates of 20%. We call that an investor, a tech investor, if you will. Do you believe that Bitcoin is destined to demonetize lots of other assets as digital capital? That makes you a maximalist.

My long-term forecast, personally, that I shared last July in Nashville was that I thought Bitcoin was going to go up 29% ARR on average for the next 21 years. You can see my forecast over the next 21 years is about a maximalist forecast on average for a long period. If you are more aggressive than that, and in the near term, especially over the next five years or 10 years, you might have a shorter time horizon, or you might just think that the base case is conservative and you might have a more bullish case. You might be a double maxi and think a 40% gain is coming, or even a triple maxi and think a 50% a year ARR is possible.

Just keep those numbers in mind as we do this analysis because the important takeaway is your view of the equity and the credit instruments as an investor will be a function of your view of BTC. First point to be made, why do people want to hold MSTR? What drives the premium to NAV? What creates the magnetic appeal or the gravitational attraction of this asset? One thing is the volatility. We have a volatility which is higher than BTC. It is also higher than any of the S&P 500. When you have that kind of volatility, you can generate yield by simply selling that volatility. We have quantified that value of that volatility in a metric we call the MSTR rate. Think of it as the simple annualized yield you can generate by selling at-the-market call options with a 30-day to expiry.

If you just keep rolling those call options and keep selling them all the time, you generate 103% simple annualized yield on MSTR. That's substantially higher than NVIDIA or IBIT and substantially higher than the Nasdaq 100. You can look at it as, again, it's like the magnetic attraction to capital. People might very well buy MSTR to sell that vol, not even knowing what BTC is, not even knowing what MSTR is. All they know is they want that 103%. Now, another point that I'll make is if you're in a taxable account, you're getting 103% yield that's taxable. And so your after-tax is going to be 70%, 60%, whatever that is.

If you're in a tax-free account or a tax-advantaged account, or it could be a retirement account, or if you're an offshore vol trader, if you're sitting in Dubai or you're sitting in a zero income tax environment and you reinvest this rate, you can get to 200% or more annualized yield. Of course, that makes our security, MSTR, globally interesting to traders and very interesting to people that would simply like to sell vol. Another point that I'd make is that when you're considering an equity to sell vol on, what you'd like is volatility. You would also like liquidity. You would also like durability. You want 103 vol with $5 billion of equity trading every day, and you want it to continue for a decade. You want credibility. Think volatility, liquidity, durability, credibility. Now think about three classes of companies.

Weak, struggling companies occasionally are volatile, but their underlying operating business is losing money, so they're not durable. If you have a volatile business and you're losing cash, it's interesting to trade for a while, but the trade doesn't stick around. On the other hand, strong companies, well-run companies, the Microsofts of the world, they actually have a management team that engages in very decisive actions to strip the volatility away from the balance sheet and strip the volatility away from the P&L. The primary philosophy and dynamic of a well-run company is to get rid of the volatility. If you have a meme company, a meme stock of sorts, or a random company, you might get massive volatility either for a good reason or a bad reason. The management team normally doesn't have credibility and durability.

How are you going to keep it for a decade? You see what we have done is we have created a volatility engine. When you take volatility, when you take a fire and you cultivate it, it becomes a furnace. If you're smart, you make it a reactor, and it becomes a power plant. Of course, what we're doing is creating a crypto reactor that could run for a long, long period of time. That rate combined with the credibility of the management team and the transparency and the durability, plus the liquidity, actually drives and attracts a lot of capital to MSTR. Next. Now let's talk about equity analytics. On any given day, we consider how are we going to raise money and how do we generate yield? How do we generate gain? How do we generate shareholder value?

If we were to sell $100 million of MSTR equity at a multiple to NAV of 2, then generally what happens is we capture a BTC dollar gain of half of that. The spread is 50%. We capture $50 million of that as the gain. That is the accretive component to the existing common stock shareholders. That converts to a BTC gain of 526 Bitcoin. That converts into a yield that is dividing our BTC gain by our entire stack of Bitcoin. Works out to nine basis points. We are capturing a yield by selling the equity and buying the Bitcoin. When we do that with convertible notes, we do it at a zero coupon up 40 in this model, and we are just using that to make the math simple.

The same transaction with converts would result in a 12 basis point yield, a $64 million BTC dollar gain, a 64% spread, if you will. We get not 526 Bitcoin, but 676. If we do the same thing with STRK, given our general model for STRK, which is an 8% dividend and a 150% conversion premium, now you're saying we're getting to a 15 basis point yield, 842 Bitcoin, and $80 million gain. That's an 80% spread. You see the leverage is getting greater. That 842 Bitcoin is achieved without dilution to the common stock. All of the capital, all of the investment income or the capital gain, if you will, from the 842 Bitcoin forever will accrue to the existing shareholders, the existing common shareholders, and not to the new STRK shareholders. That is how we're creating an upside opportunity.

Now when we go to STRF, STRF is the simplest model because we're selling $100 million of a preferred. We're not diluting the common stock at all. So we've got a $100 million gain of Bitcoin without any share dilution. Works out to 1,053 Bitcoin. And that's a 19 basis point yield. There you go. You see, as we go to more debt-like instruments, we're generating less dilution. They're more accretive, and they generate a higher BTC dollar gain. That we call BTC KPIs. We report that upfront. We can immediately calculate these numbers, and you're seeing them generally week by week. Now let's go to the next part of the analysis. Think about the next 10 years. When we sell that $100 million of equity, we capture the $50 million gain upfront. Okay, that's great. That is shareholder value created.

In fact, the question is, what happens over the next 10 years? We use 10 years as a long time frame. Most investors do not really have patience. Long time or forever is about 10 years. You will see a lot of analysis here that is about 10-year analytics. What you can see here is if you are a maximalist like me and like many of our common stock shareholders are maximalist, and you crank in a 30% BTC ARR forecast, that $100 million of capital grows to be $1,379 million in year 10. Now what has happened? We have created $50 million in gain one time, but we have actually created a lot of investment income. Half of that investment income is attributable to the equity dilution, and so the new shareholders are benefiting from it.

The other half of the investment income is captured by the common stock shareholders that existed before the transaction. That's what we call BTC dollar income. BTC dollar income is the value that's created for the common stock shareholders of MSTR by having sold the $100 million of equity. If you ask the question, you know, how much value is created for the shareholders over the course of the decade, it works out to be the gain plus the dollar income. You end up with value of $689 million. We call it BTC dollar value, $689 million. You can take the ratio of the value created to the capital raised, and that works out to what we call BTC torque. That's sort of a return on capital measure. What is our return on capital? 6.9x. Why is that valuable?

If you want to outperform BTC, then you're going to need to find a way to get leverage. That torque is leverage that allows the MSTR equity to outperform BTC over time. If you want to drive up the price of the value of the stock, or if you want to drive up the MSTR stock, you have to create value. You can see right here, if we create $689 million of either gains or incremental investment income without dilution, that is the value creation. We're creating $6.9 of value for every dollar of capital we raise when we do this kind of transaction. There's another metric you can calculate, which is BTC multiple. BTC multiple in this case is equal to the total BTC NAV, like $1,379 million, over the equity issued.

You can see that the equity was $690 million or so. In this case, and this makes total common sense, right? We started with an MNAV of 2. We sold $100 million of equity. Half of it was a gain. You know, the investment income attributable to that gained amount is one half. The investment income that's attributable to the equity dilution is the other half. Now, I think that if you look at this BTC multiple, that will tend to set the floor for MNAV. It's not the ceiling. It's not necessarily the average. There are about a dozen other factors that drive a premium to BTC, and they drive the MNAV north. One of them in isolation is our equity sales or our equity financing here.

Focus upon the two BTC multiple and think that if we do a lot of capital markets activity around a two multiple, that will tend to drive the MNAV toward or above or keep it above two. The degree of impact it has, of course, is a function of how fast we raise capital and the amount of capital we raise relative to the existing Bitcoin NAV. There are three possible objectives of our capital markets activity. The first and the principal objective is drive up the price of MSTR. Second, outperform BTC. Third, increase the MNAV. If you think about it, you said, well, which one do you want the most? You want the price of MSTR to be maximized. The other two are consistent with it. How are we going to do these things?

It's a function of raising capital at a high spread such that we create shareholder value at the fastest possible rate. Bear in mind, this chart's the baseline. Now let's go ahead and look at what happens if we substitute convertible bonds. The converts have 40% leverage in them. What you can see here is that our torque goes up to 8.9. There's a lot more torque on this, almost $9 of value creation for every dollar of capital raised or $9 of BTC dollar value for every dollar of capital raised. You see the BTC multiple moves to 2.8. That's going to tend to drive up or support a much higher MNAV. It's also going to tend to create more BTC dollar income for the common stock shareholders. Now let's go to what happens if we go to STRK.

At STRK, you can see we have a higher premium. Now the torque is even increasing. The return on capital looks even more impressive. Of course, the 150% premium ought to do that. What you can see is the expected equity dilution, and this is the theoretical equity dilution, is much lower. The BTC multiple goes to 4. You could imagine that tons of financing of STRK will tend to justify an MNAV of more than 4 if we can change this to be a substantial mix to our capital raising on an isolated basis. There are a couple of other dynamics here. One point I make is this is really on an isolated basis, and it is a theoretical calculation because as a practical matter, the $340 million of equity you see in year 10 is sitting in the STRK instrument.

If STRK is generating a dividend, it's quite likely that people that buy STRK will never want to convert STRK into equity. They have the right to do so, but they may not do it. This is an example of a theoretical equity dilution, but practically speaking, you're getting a lot of leverage from this instrument because you're attracting a new class of investors, and they don't want to actually convert this to pure equity if they're buying it in order to hold it for the liquidation preference and the dividend. You can see torque is improving, multiple is improving, and we're generating $10 of BTC dollar value for every dollar of capital that we raise. Now, let's talk about STRF. The torque for STRF increases to 12.8.

You see a lot of torque because at the end of the 10 years, you've only issued $100 million of equity. That's equity that we assume we issue to pay the dividends. We've got $1.37 billion of NAV. What's interesting here is you see the BTC multiple goes to 13.8. So STRF is incredibly leveraging to the common stock shareholders, and it generates potentially extremely high return on asset and extremely high return on equity. Now, let's look at broader cases here. Coming back to my chart, you can see that when we do these transactions, only a small part of the story is the BTC gain, right? $50 million worth of gain immediately, but we're looking at $639 million as the share of BTC of investment income attributable to the shareholders without expected dilution.

The real BTC dollar value, $689 million, of which less than 10% of it is the gain upfront. Most of the leverage you can see is really coming on the back end of the transaction. You can see as we go to the right, you're getting to substantially larger value creation, $800 million, $1 billion, $1.3 billion. That's all assuming a 10-year time horizon, 30% ARR, and 2x NAV. Now let's look at other cases. I'm going to show you BTC torque for 1x NAV. If we were to sell equity at 1x MNAV, then you can see there isn't any torque, right? If you're basically selling the equity at the MNAV, you're not really creating shareholder value on an isolated basis. That is the first order result of the capital market transaction is simply to expand the equity capital of the company.

By the way, that's not necessarily a bad idea. You might be expanding the equity capital of the company, making the other credit instruments more creditworthy. You might increase liquidity. You might actually increase volatility because of name recognition and for a lot of other second-order reasons. On an isolated basis, you're not generating torque here. If you look at the convertible notes, you generate a little bit of torque. You can still generate some torque. If you're a maximalist, you expect 30% ARR, you're going to generate a 3.9 torque, $4 for every dollar of capital raised. You can generate shareholder value using convertible financing if you are very bullish on Bitcoin. When you go to STRK, it becomes easier. For STRK, you can see you're generating a lot of shareholder value here, even just as a trader with a more skeptical outlook.

The torque increases a bit faster. Of course, the real strategy, if you've got a low MNAV to get the engine going, is you're selling STRF because STRF is generating extreme torque. STRF is generating $13 for every dollar of capital raise, even with MNAV of 1. You see the STRF numbers go from 1.6 as a trader all the way up to 56x if you're a triple maxi. That's our one MNAV chart. Let's look at it for other multiples. Here's two MNAV. What you see here is when you get to 2x MNAV, you can generate pretty decent torque with the equity, $7 for every dollar capital raised. You can generate a lot more with the converts. You can generate a ton with STRK. STRF, you know what you'll notice is the torque is exactly the same.

It is invariant to the MNAV, right? It's just a pure fixed income instrument. Now let's go to 3x MNAV. Now, you see at 3x MNAV, you're starting to generate $9 for every dollar capital raised over the 10 years if you're a maximalist. And of course, that really improves the returns of convertible notes and STRK dramatically. You know what doesn't get any better? STRF, right? STRF torque is exactly the same regardless of what the MNAV is. You see that it's getting easy to generate torque with MSTR and convertible notes as the MNAV increases. Now, let's take a look at BTC multiple. This is also instructive. You're sitting with a multiple of 1. Your BTC MNAV or BTC NAV is equal to your BTC equity. What you can see is it doesn't really matter what your outlook is for BTC.

Your multiple is 1. And with converts, it's 1.4. And with STRK, it's going to go there is a little bit of sensitivity. You can get up to a 2.3, you know, a 2.3 multiple to 2.4. But you can see when MNAV is pretty low, you have to go to STRK or to STRF. But now look at STRF. Look at the BTC multiples for that. You're going from 1 to 57. And if you're a Bitcoin maximalist and you think you're going to get 30% ARR, you're getting 13.8 multiple. You could imagine driving the MNAV up from 2 to 3 to 4 to 5 to 6 using STRF-type financing, you know, even when the MNAV is 1, right? The MNAV could be 1, but the issue is how much capital do you have? How much Bitcoin do you have that's collateral?

Because if you have a lot of Bitcoin that serves as collateral and you can sell a lot of STRF or other kinds of currency swaps or fixed income instruments, you're going to actually put leverage back into the capital structure and you're going to drive that MNAV back up. Of course, you're going to drive outperformance against BTC as well. Let's look at 2. When MNAV goes to 2, you can see the equity's pretty, you know, it's pretty predictable, 2x no matter what your BTC forecast is. STRF is pretty predictable as well. The convertible notes start to become more effective and STRK becomes a lot more effective when you're doing that capital raising at 2. At 3? Now you see convertible financing at 3, and you might very well put a floor of 4-5 MNAV underneath the stock.

With STRK, you're getting to numbers like 4, 5, 6. With STRF, of course, STRF does not really care. This gives you a sense of the sensitivities of BTC torque and BTC multiples to MNAVs. Now let's try to chart it. We have a yield curve, and I am showing you the BTC yield curve. On one side of the yield curve is STRF. What you can see is I have created the yield curves for various MNAVs ranging from 1-2-3-4-5. When the MNAV is 1, you have a very steep yield curve. You can see here that you are getting max yield with STRF and some with STRK. Then you are getting a bit with the converts. I mean, they all work. You see the equity is not generating any BTC yield.

As the MNAV increases, the yield curve flattens. Of course, you can see, you know, at an MNAV of 2, you're getting decent, healthy yield across all parts of the yield curve. As the MNAV increases and it flattens, you can see the yields on the equity and the convertible equity instruments start to approach the yields from the hard, you know, from STRK and from STRF. This is important to keep in mind. Let me convert that to spreads for you. Spread is the percentage of the capital we raise that results in a gain to the shareholders. That is how much of the capital is an accretion. You know, if I've got a spread, I've got an MNAV of 5, that means when I sell $100 million worth of equity, $80 million is the value of the gain.

Our shareholders are capturing 80% of that capital, right? It is an 80% spread. You can see here that, you know, STRF is a 100% spread instrument. STRK generates spreads anywhere from 60%-92% based upon the MNAVs. The converts will generate spreads from 29%-86%. Of course, MSTR, if the MNAV is 1, it generates no spread. When the MNAV is 2, it is a 50% spread. There is a pretty big difference between 2 and 1, massive difference. When you get to 3, it is a 67% spread. That is 2/3 of all the capital you raise is a gain generating yield for the shareholders. That yield is what allows us to outperform. Why do we go to the next slide? You are asking the question probably, this is all well and fine.

If I'm selling these fixed income instruments, I'm getting a higher yield, I'm generating a higher spread, but what's the risk? You've got an 8% coupon or dividend on STRK, you've got a 10% dividend on STRF. We think about what is the hurdle rate that we have to overcome in order to avoid missing our numbers. In this case, if I report that we generated 100% spread on STRF and we show you BTC gain equal to $100 million, under what circumstances would that not be true in a decade? The answer is, as long as BTC ARR is north of 7.2%, then that gain holds. In essence, the hurdle rate is 7.2% for STRF. The hurdle rate for STRK is 6.1%. The hurdle rate for the converts is 2%.

The hurdle rate for the equity, intuitively, this should not be surprising, is 0%. As long as Bitcoin is appreciating more than 0%, then there will have been a gain and a yield on an equity transaction. You know, generally, most of our equity investors expect BTC to appreciate more than 7.2%. As I said, the maximalist thinks 30%. Generally, if you believe BTC is going up 10%-20%-30%, you know, most of the financing we're doing is comfortably above these hurdle rates, which means that when we say we generated a BTC yield of some percentage or a BTC gain of something, I think you can be comfortable that it's a reasonable metric for you to take into account. Now, let's think about breakevens. Under what circumstances would it be a mistake to have done any of these financings?

Another way to say it is, are there any circumstances under which we do not create shareholder value? I am using a 10-year timeframe. I am going to show you some numbers. If we sell equity at 1x MNAV and the price of BTC is $95,000, the breakeven price is $95,000 in 10 years. The BTC ARR, or the breakeven rate, is 0%. That is kind of common sense. Now, if I sell at an MNAV of 2, the breakeven price drops to $47,000. Bitcoin could decrease 6% a year for a decade, and you would still be better off as a common stock shareholder with us having done that transaction. In fact, when we are selling equity at MNAVs of 2, 3, 4, 5, we are de-risking the company. We are not increasing the risk.

You can see here, I've got the breakeven prices and the breakeven rates for the equity, for the converts. I've got it for STRK. I've got it for STRF. You know, common, you know, it's kind of a bit of a surprise, but you know, we sell a lot of STRF. We attach a 10% dividend to it. It turns out that even if Bitcoin goes up 0% a year, we're still breaking even over the 10 years. We're not actually taking, I think, as much risk as it might be perceived by a traditional investor who doesn't really think hard about what's going on here. Let me show you some pictures to make this easier. This is a breakeven price for equity over the 10 years.

What you can see is that if you thought that Bitcoin was going to go down to $65,000 a coin over 10 years and you had a chance to sell it at 2x MNAV, you should do it, right? Whenever a BTC treasury company, a BTC company is selling at 2x, 3x, 4x, 5x MNAV, they're de-risking the entire value proposition for their investors. They're not increasing risk at all. You can see if you get a chance to actually sell equity at 5x MNAV, Bitcoin could crash to $20,000 a coin, and you would have created shareholder value having done it over a decade. Let's go to the next slide. This shows that same breakeven price for convertible notes. As you can see, it's really, it's a lot less risky than you might think it is. I mean, you're staring at the numbers.

Bitcoin can literally go down, and you would have wanted to have done this. This is on an isolated basis, too. That is to say, we're just isolating this transaction. We're not considering the second and third order benefits of having raised billions of dollars of capital. If you raise extra capital, you get more liquidity, you might get more volatility, the vol will go up, people will come, you know, it'll increase the MSTR rate, it'll attract new capital, etc. There are a lot of integrated benefits from this. On an isolated basis, you know, there's the breakeven price. Let's go to the next. You see with STRK, the breakeven price is a function of MNAV, and it's a lot less correlated than the equity is. You can see the higher the MNAV, the less risk there is.

The truth is, you know, when you're doing a transaction like this, it's kind of beneficial to you under most circumstances. It de-risks the balance sheet. Next. Of course, STRF, this is very simple. 85,000, 85,000, right? Doesn't matter what the MNAV is. You can figure out that if you think that BTC is going up in value, then probably this is a good idea. If it's going down, it's probably not a great idea. Let's go to the next. Now I'm going to talk about, you know, the $100 billion question, which is, why does MSTR trade at a multiple to BTC NAV? There are a lot of misconceptions about this. People, you know, you hear all sorts of things. People think it, you know, they don't really understand why.

I think I'd like to share some of my observations as to why. First of all, MSTR, the security, has a compliance advantage over BTC, the commodity, or BTC spot ETFs for many investors. Many classes, many investors, either they have their money locked up in funds where they're not allowed by the trustee or the custodian to buy BTC. There are many wealth managers that won't let you buy the ETFs. There are countries, like in the U.K., where there are examples where they would let you buy MSTR, but you couldn't buy BTC. There are places, you know, there are many, many brokers. They will let you buy MSTR. They won't let you buy the BTC spot ETF.

When the security has a compliance advantage, then there are pools of capital that are going to buy it because their choice is to not get any BTC exposure or to do it through MSTR. That creates a premium to NAV. The second point, MSTR is a credit advantage to BTC. If I have a security trading on the Nasdaq that's deeply liquid, I could borrow against it via margin loan. Maybe I get a SOFR +100 basis point loan. That means that, you know, I have a lot of capital and now it's liquid. I can borrow against it from a big bank that I trust. I can't borrow at SOFR +100 basis points against BTC from my Morgan Stanley or JPMorgan or Bank of America or fill in the name of a big bulge bracket bank.

I can't get margin loans on BTC at all. In most cases, you can't get a margin loan against BTC spot ETFs. It's very, very hard to find people that will extend margin credit. This impacts the market in two ways. One, I could buy a bunch of MSTR and hold it forever and just live off of loans that I take against it while it appreciates. That's a nice strategy. The other way it impacts is if I had a portfolio with, you know, fill in the blank, if I had $100 million of equities, I could buy $1 million of MSTR borrowing the money from my prime broker with no cash down. People can buy and leverage into a company that has a credit advantage, and then they can borrow against it and margin it.

You have to ask the question, if you live in a neighborhood and the houses on the left side of the street are eligible for Fannie Mae or Freddie Mac mortgages, and the houses on the right side of the street you have to pay cash for and you can't put a mortgage on, all things being equal, if the two houses are identical on either side of the street, which house is going to have the higher price? I don't think it's complicated to figure out that if I can borrow the money to buy the house on the left side of the street, I'll pay more for that house because there's no money down and there's a 20% deposit.

If I have to come up with cash to buy the house on the right side of the street, I'm going to offer less as a cash buyer because it takes me 20 extra years of my life to come up with cash. I mean, it's not complicated, right? It's financeable. BTC is not really being financed. I don't know of any major bank in the world that will finance BTC. It's very, very difficult, you know, to find anybody that will finance BTC spot ETFs. Let's go to the third point. MSTR has a higher volatility than BTC. We talked about it. You know, if Bitcoin is trading with a vol of 50, we'll oftentimes be 80. If it's 60, we might be 90. That results in a higher MSTR rate than, say, the IBIT rate.

That means that you have a larger, deeper, richer options market. Why would I want to accept 60% when I could get 100%, right? I mean, it's very simple, apples to apples thing. The volatility drives the options market, drives the yields, attracts capital. The next point I'll make is that the options, they have that higher simple annualized interest rate for those selling vol. That makes it possible to create ETF instruments like MSTY and IMST. Those ETFs, they basically are selling the vol of MSTR. They have very, very high annualized dividend yields. For a typical investor that wants to capture 100%, 150%, 200% dividend yield by selling the vol, they don't want to, it's difficult to trade in the options market. Maybe they just buy MSTY or IMST. That makes it easier for investors to monetize that volatility.

How popular is this? MSTY today looked like it had $3.1 billion or $3.2 billion of AUM in it. IMST has raised something like $40 million of capital in a few weeks, a week or two weeks or something, not that long. These are attracting capital flows. They are attracting capital that wants to monetize that volatility. They are part of our emerging ecosystem. Why MSTR? Because we are the most liquid, we are the most volatile, we are the most durable, and we are the most credible place to get that. Our equity is becoming volatile, liquid collateral for traders. That creates a demand for the equity that drives up the price of the equity as these instruments are delta hedged or as people buy the underlying equity so they can sell the covered calls.

My next point I'll make is that our convertible bonds, they attract capital from a new class of arbitrageurs and hedge funds that otherwise they wouldn't buy BTC and otherwise they wouldn't buy BTC spot ETFs. If you're unique, you've got a differentiator. We're an operating company. We can issue convertible bonds. A spot ETF cannot. There isn't any comparable type instrument on top of a BTC commodity. That takes me to my next point, which is BMAX, which is another ETF that was launched. It provides investors with a very convenient way to access MSTR converts. Most investors, if you're not QIB or 144A certified or compliant, you can't just buy the convertible bonds. They're over-the-counter traded. You could buy BMAX. BMAX buys, it's like 80% or something exposed to MSTR convertible bonds. That's a unique characteristic of MSTR.

Again, the uniqueness, the opportunity is a differentiator. MSTR, the security, is included in QQQ, MSCI, and crypto indices. As we get built into all these ETFs, that drives passive capital flow. You know, on a day when the Nasdaq 100 is surging up 2%, there's a lot of capital that's going to go into the risk on trade. It's going to go into QQQ that will find its way to us. That is an advantage over underlying BTC. The BTC ETFs and BTC itself, they're not in the Nasdaq index. If you're wondering, why would there be more demand for our stock? Because we're a security and because we do get indexed like this. The next point I'm making is that the MSTR brand is recognized worldwide. Our brand recognition and our scale, they drive superior investor interest.

It's very common, and it's very interesting to note. If you combine this with the next point, many investors, they're obligated to invest in securities or they're biased toward investing in securities because the history of commodities is not good, right? The only commodity that you could ever invest in over the long term is gold. And gold is considered to be kind of a slow debt asset. So most investors, the great majority of their money is made investing in securities. When I'm speaking at investor conferences and I'm telling everybody how great Bitcoin is and I'm giving them 100 reasons why Bitcoin is great, it's not uncommon that they say, well, I decided to buy your stock. I don't have to ask them. They're like, well, I get it that Bitcoin is great, but my prime broker doesn't handle Bitcoin.

I just want to buy the security. It's quick, easy, it's marginable. I can buy it in 15 seconds. People can't, you know, it's like, why did Domino's Pizza get successful? Domino's Pizza was successful because people like pizza and because anywhere in the country, you could pick up the phone, call the operator and say, give me Domino's and say, hey, send a pizza. You know that there's a Domino's Pizza somewhere close to you. The brand is weaker for the next 100 pizza companies. Maybe their pizza is better, but I just don't know who's in the place I'm traveling to. It's just like, why do people buy Diet Coke? I go to a restaurant and I ask for some other kind of Coke. They don't have it. Then I ask for Diet whatever. They don't have it.

I get frustrated. After I get beat down because they do not have it, I think, I am just going to ask for Diet Coke because I know there is a 95% chance they are going to have it. You are an investor. You have a lot of money. You do not have a lot of attention span. You know, what is this Bitcoin thing? What is the stock I can buy? You know, MicroStrategy or Strategy. I see that on the screen. The brand does matter. It makes things easier. You know, if I am going to buy the third best or the fourth best or the fifth best, I have to research it. You know, no one has heard of it before. There is a lot of impedance. With that, you see, the next point I will make is that MSTR represents the strongest BTC exposure in the strongest capital market.

A lot of people want to buy a stock in the United States on the Nasdaq or the New York Stock Exchange. They trust it. If you're looking for BTC exposure, give me the biggest and give me it in the safest place. It's very simple. The last three points I make on this NAV thing is that STRK is a unique security. It's a lot more leverage than equity. It's a lot more leverage than a convertible bond. Again, as I pointed out, it's quite possible. We'll sell, you know, we could sell a lot of STRK, billions and billions of dollars of it that's backed by a lot of equity. The equity never, the conversion rate never takes place because people don't choose to convert to common equity. You are creating a lot of leverage when you finance with STRK.

You're acquiring a new class of investors that maybe would be afraid to invest in common equity because it's too much of a roller coaster. By the way, there are a lot of people that might like Bitcoin and they're afraid to invest in a spot ETF because what they want is kind of like Bitcoin with guardrails and/or Bitcoin with a downside insurance policy. STRK looks more like something with guardrails, you know, than just buying the straight spot ETF that gives you pure Bitcoin vol. STRF, another example of a unique fixed income security. It attracts new types of capital. It's a perpetual dividend. There's no one offering a 10% dividend at par forever. It's very uncommon to see that. I've never seen that in any other security. It's also, you know, as Andrew pointed out, these things are high performing, but they're very liquid.

The fact that they're high performing and liquid is an appeal to an investor. They draw new capital. As capital flows into STRK and STRF, that's extremely accretive and leveraging for the performance of the equity. If you study banks, you know, you notice the number one strategy of most banks in order to create leverage for the common stock is they issue preferred stock. It's a safe way to do it. It's mezzanine capital, mezzanine equity, if you will. You know, you could say we're doing something innovative, but we're also lifting a page from the book of conventional banking by putting in place this mezzanine capital structure. If you would ask any bank, why do you do it? The answer is it's good for our common stock.

It increases the yield, the dividend on the common stock without creating risk on the balance sheet. The last point I make here is that we have the potential to generate BTC yield in perpetuity via fixed income securities. You know, the MNAV could go to zero. We can still generate yield by selling STRK, selling STRF, selling other corporate bonds, selling any fixed income instrument. We also can scale up the sales of those things. In essence, if we're selling, you know, if we're selling something 10x over-collateralized by BTC, we can basically sell preferred instruments that are equal to 10% of the capital structure. If Bitcoin goes up, we just keep scaling up the preferred instrument in the same way. This is an opportunity that it isn't like it's one and done.

It's like we could reasonably be doing this forever because there's always going to be a demand for USD yield. If you believe that BTC is going to have the performance of the S&P index or more, then you'll always be able to swap BTC yield for USD yield and capture a spread. If we can do that, then we can create performance which is superior to BTC. We can maintain a multiple of NAV. I tend to think that a very reasonable way to calculate the right BTC premium for the company would be to take the expected BTC yield and multiply it by a multiple of 10-20. If we can generate 25% BTC yield, then 10x that would be a 250% premium to NAV, an MNAV of 3.5, if you will.

If we can, if you put a 20 multiple on it, you could find your way to a 500% premium to NAV. You look at all these things in their entirety, and then you take into account the rate at which we raise capital and the spread at which we raise the capital, then all of those things give you a sense of how we outperform Bitcoin and how we grow the NAV. Let's go to the next section. You know, one thing, yeah, let's go to the next page. Sorry. Yeah. What's our strategy to maximize shareholder value? Continuously adjust the rate and the mix of our BTC treasury operations based on market conditions. We're going to work the yield curve. When the yield curve is steep, we go to the far end of the yield curve and we do fixed income.

When the yield curve is flat, we work all sides of the yield curve. Also, there's a function of how much demand is there in the market for every type of security we're selling. Then we're balancing near-term capture of BTC yield and gain with long-term BTC value creation. Yeah, I mean, I can maximize the yield and the gain this year, but I also got to look out over the next decade. As you could see from my slides, 90% of the gain is going to be over the 10-year period that follows the transaction. We are always balancing short-term versus long-term, just like Amazon did that for 20 years. The goal, you know, is to drive up the stock price, to drive MSTR to the max, and then to grow the company and reach its full potential. We will support MNAV, right?

We are seeking to drive it up over time. When you look at the MNAV and you're wondering, what are we thinking? We are thinking we want it to go up, not down. We're never acting to hammer it down. When the MNAV is expanding and when there's massive demand in the marketplace, of course we're looking to sell and convert that into a BTC gain, a BTC yield, and BTC income and BTC value over time. The best way, of course, for us to generate the, to support the MNAV is maximize intelligent leverage with STRK, with STRF and other fixed income instruments. We'll be educating the capital markets to build demand for every type of security we issue. There's a lot of investor relations and education.

We will work to attract capital, new forms of capital by creating innovative securities for new classes of investors. STRF is a new type of security. STRK is a new type of security. We have other ideas for new types of securities. Securities that would attract capital from global markets, attracting capital from Japan or Europe or Canada or other markets, and also attract capital from other classes of investors, different types of investors that want a different risk-return ball profile and yield profile. We have some flexibility there. We are going to create and share BTC credit metrics and models that can assist investors in valuing and assessing the risk of BTC collateralized credit instruments. We are going to pursue credit ratings for our fixed income securities.

The credit side of this is really important because as you could see from my torque and my multiple calculations, the thing that will drive our, you know, drive our outperformance that allows us to achieve a 2x BTC return or get MNAVs of 4, 5, 6, 8. If we want to drive that up, if we want to drive our performance up, if we want 2x or 3x the volatility of BTC over time, then we need to develop the credit markets. I have thrown a lot of metrics at you, and I have talked about a lot of things, and we have a lot of securities, but lest there be any confusion, MSTR, the common equity that is, that is the principal metric for shareholder value creation and company performance. If you are asking what is winning, winning is maximizing the price of MSTR, right?

I mean, if I have a choice of driving the price up by a factor of 10 and having MNAV be 3 or having the price go up by a factor of 2 and have MNAV be 6, I think that you would want me to drive the price up by a factor of 10, not a factor of 2. We are always thinking about the, you know, what is going to maximize MSTR shareholder value creation, and we are balancing every other metric against it. Now, I have talked about BTC credit, and that is important to our strategy. Why do we not go into a bit more detail on that? Because I think that is also very important. I am going to share with you our BTC credit model and our credit analysis. Let us just start with a few important metrics.

The BTC rating, that would be the amount of collateral we have versus in BTC divided by the liability. So we have $10 of Bitcoin against a $1 liability. That would be a BTC rating of 10. BTC risk is the probability of that liability, that debt instrument being under-collateralized by BTC at the end of its term. You know, I've got $10 of collateral. I got $1 bond or $1 of debt, and it's five years. In five years, am I still going to have the $1 to cover the liability? That's the risk. BTC credit, that's the credit spread necessary to offset the risk for a given security. How much more credit spread, how much more yield do I need to be paid every year in order to offset that BTC risk that I'm thinking exists?

The BTC credit hurdle, that is the BTC ARR necessary to create an investment-grade instrument. How bullish would you have to be on Bitcoin for you to look at this credit instrument and say, this should be investment-grade? Our proxy for investment-grade is a 100 basis point credit spread, just so you know. It turns out that that credit model is driven by some forecast assumptions. What do you expect the ARR to be? What do you expect the volatility to be over time? Now I am going to show you how these play out, you know, in our capital structure. Let's go to the next slide. Here is BTC risk. What you can see is that if I actually ask the question, what is the risk of a 10x over-collateralized instrument? I have $10 of Bitcoin for every dollar I owe.

If the volatility is 70, right? You'll see it's 16 basis points. There's a 0.16% probability you'll be under-collateralized in a one-year horizon. Of course, if you've only got $2 of Bitcoin for every dollar of debt and you've got a 70 vol, there's a 26% BTC risk. There's a zone, high volatility, low BTC rating, where you're looking like junk. There's another zone where you're looking like investment-grade. Now let's take this and apply this to our capital structure. Can we change the slide? Okay. Sorry. This is a bit more elaborate BTC risk matrix. What this is showing you is how the risk builds up over time.

If you have a BTC rating of 5 and you've got a 5-year bond, then that's, and you've got a 50 vol, that says that you've got a 19% BTC risk, a 19% risk of being under-collateralized at the end of the 5 years. You can see over 10 years, you're looking at a 41% risk. Risk will increase with higher vol. Risk will increase with higher duration. Risk will increase with lower BTC rating. Let's go to the next slide. This is our existing capital structure. I'm showing you eight fixed income instruments. Let's assume that you're a skeptic. You actually think that Bitcoin is not going up. Bitcoin is going to trade 0% ARR for the next decade.

You're, you know, I'll say skeptic because I think if you thought Bitcoin was going to zero tomorrow, you're not going to buy any of these instruments. But hardcore skeptic thinks Bitcoin is not going to perform like the S&P index. If you actually calculate the BTC rating of these instruments, this is not hard. You can see the senior credit instruments is the 2028 convert. It's 52x over-collateralized. The next one is 13x over-collateralized. Now what's the most junior fixed income instrument? It would be STRK, which is 5.3x over-collateralized. What you can see is now what is the BTC risk? The duration of the converts is short. The duration of the 2028 note is 2.4. That means the risk is literally 0%.

The credit spread, the BTC credit you would have to have to offset the risk is rounded down from one basis point. It's zero. There is zero likelihood, a very, very small likelihood that we're not going to have $1 billion of Bitcoin collateral to pay this note off in 2.4 years. That makes intuitive sense, right? You have to have a 98% drawdown on the Bitcoin. Now the question is, what's the market credit spread? The market thinks that that's a 500 credit spread instrument. The pricing of that is 500 credit spread, market credit spread. The BTC credit rating is zero. That means the premium is 500 basis points. If we go to the 2029 convert, what you can see is that the BTC credit calculation is 21 basis points for the skeptic. The market credit spread is 975 basis points.

Massive spread premium. If you go to the 2030, you could take the 48 basis point BTC credit, compare it to the market credit spread of 1,075. All down the line, what you see is for the converts, there are massive spread premiums. The market credit spreads are actually at the level of distressed debt. A junk bond index is like 380-400 basis points. This is double junk, triple junk. It is like the market thinks that the company's going to fail tomorrow, and it trades the credit like that. In fact, even if you're a skeptic on Bitcoin, the BTC credit rating would be somewhere between 21 and 200 basis points. Now you can see how you would rate the preferreds. They have a longer duration, 10 and 11 years.

You would come up with a credit rating of 470 basis points if you're a skeptic for STRF and 514 for STRK if you're a skeptic. There's still a substantial spread premium. Now, if you're a credit investor, you might very well take the spread premium and think, well, if I can close the spread premium, I multiply that by the effective duration of the instrument. That's how much the instrument could trade up. There's an opportunity there if these things get rated properly. Now, let's look at this same capital structure if you're a Bitcoin maxi, a maximalist. If you think Bitcoin's going up 30% a year, look at the BTC risk. It's 0, 0, 0, 0, 0, 1%, 1%, 1%. And then the BTC credit spread or credit rating, it looks like 1 basis point, 2 basis points, 8 basis points, 14, 13, 13.

This has a profound impact on your view of the preferred stocks, right? All of a sudden, the preferred stocks are looking like they're trading at a 600% spread premium because they're not that risky for a Bitcoin believer. They're just trading at a massive credit spread. You know, maybe even more so for the convertible bonds, right? Now you're seeing 1,000 basis point spread premiums over what you might expect to be the risk. This is an interesting opportunity for all sorts of investors, right? For equity investors, for fixed income investors, et cetera. Let's take this a little bit further. Next slide. This shows you BTC credit values across various classes of investors. You see, if you're a skeptic, you might think that the right BTC credit rating for the convert coming due 2032 is 238 basis points.

If you think the Bitcoin is going to perform like the S&P index, it becomes 100 basis points. If you're an investor and you think it's like a big tech stock, it becomes 40 basis points. If you're a maximalist, it becomes 14. You can see the credit risk and your view of the credit is very much a function of your view of Bitcoin. The differences with the preferred stocks are equally strong. I've got the market credit spread. On the right, I've got a fascinating metric, BTC credit hurdle. We're going to make this very simple, right? Which is how fast or how much does BTC have to go up in value each year over the next decade for this credit instrument to be deemed investment-grade?

Like what's it take for it to have a credit of less than 100 basis points a year to offset the risk? What you can see is for four of the six converts, Bitcoin could decrease and it would still be investment-grade by our BTC credit standards. You can see that the 31 and the 32, they would require just BTC to go up 10% a year and they should be investment-grade. You can see that if you believe Bitcoin's going up about 16% a year, then the preferreds are investment-grade. It is a very, very interesting way to see the world when you acknowledge that BTC is collateral. Let's go to the next slide. Here's a nice graph. What you can see is that as you move from skeptic to trader, all of these credit calculations, they fall below the junk-grade threshold.

Junk is 380 basis points right now. That's the index. Of course, once you get to like investor class, they're all looking investor-grade, right? This is a view of BTC credit that you can use. Let's go to the next slide. Here we calculated BTC credit across volatility. Bitcoin is traded with a volatility between 40-80 over the last five years. Recently, it's been in the 40-60 range. The real question is, at what point do these things not become investment-grade if I'm a Bitcoin maximalist, right? You could see like around 60%, 65% volatility. At what point do they become junk? They almost do not become junk, right? Next slide. The story is very different for the skeptic, right? If you're a skeptic, you know, they stop being investment-grade, you know, when Bitcoin is more than 40% volatility.

You can see they all, you know, cross junk around 50. What you expect for volatility matters and what you expect for BTC ARR matters. We think that these credit models are elucidating, especially for the crypto community and for the world's full of fixed income investors that like Bitcoin. If you're a Bitcoin maximalist or you're a Bitcoin enthusiast, but you run a fixed income fund, a preferred stock fund, a convertible bond fund, or a hedge fund, this all of a sudden starts to really make a difference to your thinking. Shall we go to the next slide? Here's the traditional credit ratings. We're not credit rated. I mentioned, you know, one of our interests is to get credit rating agencies to cover and to start to rate this credit.

You can see if you thought the BTC credit was 50-100 basis points, you could make a reasonable argument that this ought to be an AA-rated instrument or some of them could be AAA-rated instruments. Of course, what you can see right now is that the market treats them as less than CCC, they're just distressed debt. This is a massive opportunity. Next. There are two ways to see the world. If you think about credit ratings, most credit ratings are created for companies that borrowed money that they don't have. A company needs $1 billion. They don't have the billion. They borrow a billion and they promise to pay it back by creating a future expectation of cash flows. They say, we're going to generate $250 million of cash flow each year, EBITDA multiples four.

The credit rating agency is literally handicapping the future expectation of cash flows. They're greenlighting the lending of money to a borrower that doesn't have the money. There's another way to see the world, which is a company on the Bitcoin standard, we already have the money. We have $50 billion of money we could liquidate tomorrow if we needed to. We want to borrow $10 billion. If I have $5 for every dollar I want to borrow, I've already got the money. The credit risk analysis isn't really a question of evaluating whether or not you'll generate the money in the future. It's really just evaluating whether you're going to lose the money you already have.

There is a perverse irony here, which is that all of the credit instruments that MSTR has issued are over-collateralized by five to one or more. There is not a single investment-grade company in the U.S. that is over-collateralized by even three to one. That is to say, our company has better collateral and our collateral position is stronger than any borrower that is rated by any credit agency in the U.S. In fact, super investment-grade might have 2x or 2x-3x collateral coverage. There is definitely a disruption coming in this market. You know, there is a reason that all the borrowers do not have collateral. It is because either their treasury asset is short-dated sovereign debt. Of course, the yield on short-dated sovereign debt is much less than the cost of capital to borrow. It makes no sense to hold that as collateral, right?

Their treasury asset is Bitcoin, in which case it totally makes sense to hold as collateral. Unless you're on the Bitcoin standard, you won't have any collateral and you can't tap the credit markets being over-collateralized. What we're really engaged in here is introducing the idea of BTC as collateral and collateral-backed lending. The idea of loaning money to someone that has collateral makes all the sense in the world if you're loaning to an individual or you're loaning to an institution. It happens all the time. If you're JPMorgan or Citi and someone's got a large stock portfolio, you would loan to them based on that collateral. It almost never happens with publicly traded companies because publicly traded companies don't hold security portfolios. They don't hold them because of securities laws that prevent them from capitalizing on securities.

We are driving a new way to see the world. What happens if there is a bunch of public companies that have a bunch of collateral that is appreciating faster than the cost of capital and they want to borrow against it? In theory, it all ought to become investment-grade if you are properly collateralized at the right ball and the right BTC rating. In practice, none of it is right now. This is a campaign of awareness that will be waging over time. Next slide. This is a great chart. You wonder about upside and downside. When you buy our equity, you are getting 40% of the upside, 40% of the downside, 80% of the upside, 80% of the downside. It is just linear risk, upside, downside. We have drawn that line. We have also calculated the delta and the downside of all of our convertible bonds and of STRK.

What you can see right here is a lot of the converts, the 31, 32, 28, and 30A, they're high delta instruments. They're giving you 80%-100% of the upside of the MSTR common, but they're giving you less than that much downside. If you look at the 2030 convert for a simple example, you're getting 75% of the upside and 10%-15% of the downside, right? If you look at the 29 convert, this is a fascinating one. It's about 60 delta. You're getting 60% of the upside and it trades below par, no downside, right? Unless the company defaults, you're going to get paid par. So it's got negative downside. You're getting a guaranteed yield to maturity and you're getting a 60 delta instrument. If you look at STRK, STRK is trading below par.

Below the liquidation preference, below par, but with something like a 35 delta. If you're an equity investor, these are all very compelling. You can construct a portfolio that's 100% upside, 50% downside, or 100% upside, 60% downside, or 100% upside, 25% downside. They're very interesting opportunities. Right now, the market is very inefficient and the pricing of these is very inefficient because the market doesn't recognize BTC credit. There are a number of reasons why I'll get to in a second, but I invite all of you to think about these instruments because they're opportunities. Next. Key takeaways of fixed income. The credit markets are grounded in traditional finance practices and metrics. They have not yet embraced BTC as collateral. They have not adopted real-time risk management practices for BTC.

You can calculate BTC risk, BTC credit every second, you know, as the price of Bitcoin changes, as the BTC rating changes, as the volatility changes. You can update it every day as the duration of the credit instruments shrinks, right? Traditional credit ratings are issued by an analyst once a year and they go stale and they're opaque. You can now create very transparent crypto credit metrics. The market's not there yet, but this is an opportunity. The reason the credit instruments trade with such wide credit spreads is because the markets are traditional. Most of our MSTR convert investors, they're arbitragers. They're not Bitcoin investors. They're not equity investors. They're not bond investors. Basically, they're buying $100 million of the bond, shorting $80 million of the stock. They're not bringing $100 million of capital to the bond. They're bringing much less capital.

That's one of the reasons I believe that the bonds are valued the way they are valued. If we have long Bitcoin investors, long MSTR investors, or long fixed income investors or credit investors start to enter this space, I think we're going to see those credit spreads and those spread premiums compress. The OTC market is one of the culprits. It's very inefficient. It's constrained. There are 144A regulations. You have to be a qualified institutional buyer. That means most retail and a lot of investors, they just, they can't buy these or it's a pain to buy them. That impairs the bond value. That impairs the liquidity as well. That creates much wider credit spreads. I've laid out these BTC models.

I believe that there are strong reasons to treat MSTR fixed income securities as investment-grade, even though the market assigns credit spreads comparable to distressed debt. I think if you think about it, if people agree with me, if they agree with us and they like Bitcoin, they'll start to view the, they'll start to view Bitcoin not as a speculative asset, but as a safe haven asset. And they'll start to view these instruments not as distressed debt, but as investment-grade debt. As the perceptions of BTC evolve from speculative asset to safe haven, which is massive discussion in the community all the time, it's reasonable to expect major credit rating agencies to begin rating the MSTR credit instruments. Just like we expect banks to embrace Bitcoin, just like we expect insurance companies to embrace, just like the U.S.

Government, the state, the local, the city governments are embracing Bitcoin, the credit rating industry is going to embrace Bitcoin. It's just a question of when, which we can't be sure of. MSTR has the potential to issue investment-grade fixed income securities. We could emerge as the world's first investment-grade Bitcoin treasury company. I think this is a great opportunity for us. I don't think it's appreciated, but what happens if we get an investment-grade? What happens if we're able to get our credit instruments rated? There will be new pools of capital. We'll be incorporated in new indexes. New classes of investors will be able to buy these things. That capital will flow into our securities, then into Bitcoin. It will be beneficial to BTC, to MSTR, to all of our fixed income and credit securities. It'll be beneficial to all the investors. Why?

Because if you're an investor that appreciates the value of Bitcoin, then those securities we're selling will offer a superior yield and better performance. I think we showed you our convertible bonds are outperforming the other converts. They're outperforming the junk bonds. They're outperforming investment-grade bonds. Our preferreds are outperforming other preferreds. It's not complicated. If you pay higher yield or give higher performance, and if you can show people that you have comparable credit risk or lower credit risk, then you're going to create demand for capital, right? If you believe in Bitcoin, if you're a Bitcoin Maxi, then those securities do offer superior yield and superior performance. They do offer substantially lower credit risk in your point of view because you believe Bitcoin is good collateral. That's an interesting, it's a very important message. It's an important opportunity for us.

On the next slide, I've taken up a lot of your time today. I appreciate it. I appreciate all of your attention. I'm pretty much nearing the end here. I'll end with a call to action for all of you and for every interested investor, potential investor, anyone that's interested in Bitcoin or MSTR, or if you simply, you know, are an interested investor in making the right decision, what would I suggest? I think our investors should contact Moody's, S&P, and Fitch. If you own our equity, if you own our debt, if you own our preferreds, you should call these credit rating agencies or any other credit rating agency, talk to your representative, and request that they begin to cover and rate these instruments. Everybody will benefit.

When I say everybody, I mean the entire 400 million people that like crypto, everyone that owns Bitcoin, everyone that owns MSTR, all 55 million of our beneficiaries, everyone that owns the debt, the credit rating agencies will benefit, right? The fixed income investors will benefit. The world will benefit, right? This is just a good thing for the world. It is inevitable that the credit rating industry should embrace Bitcoin and embrace this kind of lending. If you are an equity investor, I would suggest you consider, take a hard look at the MSTR convertible bonds and STRK. A lot of investors just have dismissed them out of hand because they are like, well, I just do not buy that. Or maybe they could not because it is over the counter, or maybe it is new or different, or they are just busy.

You know, if you're going to buy equity with 100% of the upside and 100% of the downside, it makes sense that you should consider an instrument that might give you 60% of the upside and 10% or 0% or 5% of the downside, right? You know, if you deem yourself to be smart in portfolio construction, there's a lot of very interesting portfolios that can be constructed when the market misprices risk and misprices exposure. I think the equity investors could benefit from this because, in my opinion, the fixed income instruments are undervalued relative to the equity right now. If you're a fixed income investor, you know, you're a preferred stock or a corporate bond investor or a convert investor, I would say you should reconsider these instruments. You know, think about them again.

Think about them in, you know, along the lines of the BTC credit, the BTC risk we've laid out. Build your own models. One of our objectives is over time, we will go ahead and publish our BTC model to the world. We'll open source it. We'll make these things available. The math here is not complicated. You could pretty much do a similar type of math that I've showed you using ChatGPT in deep research mode if you want to. Anybody with a Bloomberg can do it. Any qualified quant can do it. I would encourage you to do it and think about how you feel about these things. Because in my opinion, the actual credit spreads represent a substantial premium, well, to the BTC credit rating. I think the BTC credit ratings are a valid way to see the world and to see the risk.

If you're a retail or non-QIB investor, you're locked out of the convert market because of 144A restrictions. I think you should consider BMAX. BMAX is a very innovative ETF that's constructed to provide or provide convert exposure to investors that aren't able or unwilling to buy the underlying convert. Look at instruments like that because I think the convertible bonds, especially the short duration convertible bonds, again, they're treated like distressed debt, but they've got very high deltas. My ask of all investors, every MSTR watcher, every Bitcoiner is educate your peers on the opportunities presented by Bitcoin. Talk about Bitcoin and then talk to them about BTC equity and BTC credit. They're sophisticated subjects, as you can tell by this elaborate mini tutorial I've given you.

Most people don't understand them, but it's in your interest to educate other investors in the benefit of Bitcoin. It's in your interest to explain the nuances in the MSTR equity opportunity. And if you're holding our convertible bonds, if you're, you know, if you're holding these preferreds, you know, and you talk to someone that actually makes investment in fixed income, if you introduce them this opportunity, it's good for them. It's good for Bitcoin. It's good for the world. It's good for you. It's good for the common stock. There are no losers. We're basically in education mode here. These aren't my opinions. I will note that you can form your own opinions, but I think there's plenty of reason to think that they're reasonable opinions. Shall we go to the last slide? I just want to end with our principles.

We presented these October 30th last year. They are just as valid today. Just remind everybody, our plan is buy and hold BTC indefinitely, prioritize the MSTR common stock, treat all investors with respect, consistency, and transparency. Structure our company to outperform BTC. We are working to create more vol, more leverage than BTC. Keep acquiring Bitcoin, generate positive BTC yield. Do this as rapidly and responsibly as we can, subject to market dynamics. They literally change every day. You know that. We will issue innovative securities backed by BTC from time to time if we think there is a market need for them. We will think hard about it before we do it. When we do things, we try to make sure they are not just accretive, but they are also structurally, you know, responsible and durable and scalable. We are going to protect the balance sheet. We want a pristine balance sheet.

Finally, we're going to promote global adoption of BTC as a treasury reserve asset. With that, I want to thank you for your time. I really do appreciate it. I know this went long, but hopefully we gave you a lot of food for thought. For many of you, I'm looking forward to seeing you in Orlando next week. We're going to go into deeper details. I'm sure there'll be a lot of questions. We're going to answer a lot of questions. We're going to have a lot of other Bitcoin treasury companies there. We will continue with our strategy to educate the market and build a very healthy BTC ecosystem for everyone involved. Thank you for your support and wishing you the best.

Shirish Jajodia (Corporate Treasurer and Head of Investor Relations)

Thank you, Michael, for the very insightful session today.

I know we went a lot over the original one-hour mark, but we'll take three quick questions here. I'll begin with the first one for Andrew. Now that you have adopted the fair value accounting, how do you feel about the big swings in earnings as a result of the Bitcoin price volatility?

Andrew Kang (CFO)

Sure. Thanks, Shirish. I guess, first off, the fair value accounting, even with the swings, is far more transparent for our investors and more accurately reflects the true value of our Bitcoin holdings versus the previous accounting rules. Certainly a win for us and other companies adopting Bitcoin. The old accounting was in many ways a barrier, I feel like. With that hurdle gone, we should continue to see a steady stream of new corporate adopters of Bitcoin as a treasury asset. The transparency, I think, is vitally important.

How do we feel about the swings? We, of course, like the positive swings more than the negative swings. The reality is that Bitcoin is volatile. I think, you know, overall, I think we're unfazed by the downswings and believe over time there will be more upswings. As I noted earlier, my $95,000 Bitcoin price example would reflect a $6.7 billion gain. Right now, Bitcoin is trading closer to $96,500. Today we're at the end of the quarter, and if that were the price at the end of the quarter, our unrealized gain would be closer to something like $7.6 billion in gain in a single quarter. I think in the long term, you know, we all believe Bitcoin price is going to go up.

Over that same long term, our reported gains will reflect that same trend in our overall earnings.

Shirish Jajodia (Corporate Treasurer and Head of Investor Relations)

Great. Thanks, Andrew. The next one is for Michael. What are your thoughts on the recent MSTR playbook adoptions from other companies, and how does the company plan to sustain its leading role?

Michael Saylor (Executive Chairman)

You know, I think it's a very virtuous cycle, and it's a mutually beneficial competition. The more companies that adopt the Bitcoin standard, the more legitimizing it is. As more companies adopt the Bitcoin standard, they're out there educating equity investors, and that brings more equity capital to the market. As they start to issue credit instruments, they will educate fixed income investors and credit investors. That brings new capital to the market. There's only 450 Bitcoin a day. As we're all buying that Bitcoin, the price of Bitcoin is stabilized, supported, and then driven up.

You know, 99.9% of the capital in the world is invested in the traditional fiat physical financial economy. We're just at 1% or 0.1%. If it grows from 0.1% to 1%, the advantages of accelerating institutional adoption are profound, and they offset any possible competition for capital. I also think, you know, each capital market needs its own set of BTC companies. In France, you need a local French company. You need a local company in Brazil. You need a local company in Japan. The U.S. market can absorb dozens and dozens of companies because there are so many ways to differentiate. Every company is going to have its own approach. Of course, a lot of investors, you know, they say one, you know, one incident or one data point is just a random point.

Two, you know, is a line maybe, but three is a trend, right? When you get to the point when there's three, four, five, six companies, a lot of investors will be more comfortable investing in the space because they're going to want to limit their exposure to any one to a certain risk responsibility in their portfolio. They're going to look for the next one, the next one. I think the more companies that join, the better it is for Bitcoin, the better it is for the companies in the space. They're really going to accelerate the transition to the Bitcoin standard such that the companies that do not join will find themselves pressured to join over time.

Shirish Jajodia (Corporate Treasurer and Head of Investor Relations)

Great.

The last one here for Phong, can you please update us on the pace of capital raises under the 40-42 plan and how you're thinking about striking the right balance between equity capital and the fixed income capital going forward? How do you think about the impact of dilution from another $21 billion equity?

Phong Le (President and CEO)

I will start with, I think that's the big question that we spent the last two hours addressing, right? We have conviction in our capital raises and adding to our capital plan. We talked about that. You have to start with, why did we lay out a BTC financial framework? The existing fiat financial framework does not work for BTC, right? Dilution, our BTC KPIs, say we look at things on a BTC yield, BTC per share, BTC gain basis.

I think you saw Mike's presentation. Every single capital raise we've done via our ATM, if you look at our strategy.com website, has been accretive on a BTC yield and a BTC per share and a BTC gain basis. If we issue an ATM or equity at greater than 1x MNAV, all other things being equal, that's accretive and it's not dilutive to shareholders. That said, if you look at our fixed income instruments, those are even more accretive. You look at BTC yield, all of us being equal. We need that fixed income market to become more mature and more efficient. As MNAV rises, the yield curve starts to flatten and issuing equity starts to look more and more like issuing fixed income. Fixed income instruments do require more BTC ARR to get positive income.

I think the ask and for all of us who are interested in Bitcoin is we need to develop and make that market for fixed income more efficient. That is an opportunity for Strategy and that is an opportunity for Bitcoin. It is not lost on us that we have pushed the ATM more heavily than we have pushed fixed income. The market for fixed income is actually larger than the market for equity. It is incumbent upon us, Bitcoin folks, to make the fixed income market become more efficient. We are going to work on that. As that happens, we are going to continue to issue equity, issue debt, and we are going to do it in a way that is accretive to our shareholders.

I think it'll, you know, the more everyone processes the last couple of hours, they'll start to understand the BTC financial framework and they'll understand how we as Strategy think about what we're doing to raise capital.

Shirish Jajodia (Corporate Treasurer and Head of Investor Relations)

Excellent. I think that brings us to the end of this webinar. Any final remarks from Phong?

Phong Le (President and CEO)

Yeah, I want to share with Mike and Andrew and Shirish, thanks for everybody for sitting through and understanding more about how we think about Bitcoin and think about Strategy over the last two hours and 10 minutes. We appreciate all of your support. For those who will be in Orlando next week, very excited to meet and interact with all of you. Those who won't, we'll talk to you again in 12 weeks or so. Thanks and have a good evening.