Summary Strategy's preferred stock offerings create a sophisticated yield curve, attracting diverse capital while minimizing dilution and maximizing BTC/share accretion. Recent management pivot on equity issuance guidance allows more flexible, opportunistic capital raises, supporting BTC accumulation even at lower mNAV multiples. The key risk is mNAV falling below 1, which could force dilutive common stock issuances or BTC sales, threatening the entire investment thesis. Given high volatility and fat option premiums, I now prefer selling puts and covered calls on MSTR over holding common shares for better risk/reward. If you've been following my analysis on Strategy ( MSTR ), you'll remember my deep dive into each of their preferred stock offerings. I have explained in detail how Michael Saylor and team have artfully constructed a stretched yield curve, tailoring securities to attract capital from various investor appetites. Just for a quick recap, if you are unfamiliar with the capital stack, STRK ( STRK ) offers an 8% yield with convertibility, allowing investors to balance income and potential BTC upside. STRF ( STRF ), the most senior security in the equity stack, yields 10% at par and is overcollateralized by Bitcoin ( BTC-USD ), drawing the more conservative institutional money. STRD ( STRD ) adds a junior 10% yield for risk-tolerant yield hunters, all while subtly artificially enhancing STRF's safety profile. And STRC ( STRC ), the low-duration option, starts with variable monthly dividends at 9%, standing as a superior alternative to money market funds through elaborate price-stabilizing mechanisms. Strategy's Yield Curve (Q2 Investor Presentation) In case you want to read my more in-depth analysis of each name, here are the quick links to these articles: My STRK analysis My STRF analysis My STRD analysis My STRC analysis This yield curve, formed by these preferreds, provides a deliberate framework that spans durations and risk levels, allowing Strategy to tap diverse funding sources while minimizing costs. The ingenuity lies in how each layer reinforces the others. Issuing STRD, for example, bolsters the Bitcoin collateral backing STRF and STRK, elevating their appeal and enabling premium pricing. In a falling-rate environment, STRF could see yields fall to 4-5% as investors chase its high-yield/security combo, letting Strategy raise capital at bargain rates compared to common equity or even STRK. For STRC, long-term yields might settle at 3-4% as it evolves into a staple for cash equivalents, all while leveraging Bitcoin's expected 21% CAGR over the next 21 years (Strategy's projection) for massive arbitrage. These issuances are profoundly accretive to BTC/share, converting low-cost capital into appreciating assets with minimal dilution. But as much as I marvel at this engineering feat, I have to admit that no precedent exists at this scale, and that scares me. And even if the math behind this technically works, you have the execution risk of it all to think about. Nevertheless, and shifting to the topic we are discussing today, despite the preferreds' promise, common stock has driven most Bitcoin funding so far. And, given that many MSTR investors have consistently complained that raising hundreds of millions of dollars per week will suffocate any bullish momentum and contribute to a compression in the mNAV. Thus, along with its Q2 results, management outlined a structured approach to eliminate speculation about when MSTR will or won't issue common stock and let investors know that if the mNAV is indeed below a certain level, a pause on issuances will occur, to help the multiple take a breather. The image below shows that initial guidance. MSTR's Initial Equity Issuance Guidance (Q2 Investor Presentation) Basically, no issuances below 2.5x mNAV except for debt interest or preferred dividends, measured raises between 2.5x and 4x, and aggressive deployment above 4x. This framework, in theory, should protect the premium, prioritize preferreds, and prevent mNAV erosion from unchecked dilution at not-so-accretive levels. But by mid-August, Saylor and Co. pivoted, as issuances below 2.5x mNAV were back on the table and permissible "when otherwise deemed advantageous," expanding beyond just obligations. Here is the image of the updated guidance that came out just days after the original structure. MSTR's Updated Equity Issuance Guidance (Form 8-K filed Aug. 18) Last week, this added flexibility was instantly tapped in a substantial common stock ATM raise under the $21 billion program, with MSTR printing nearly $310 million worth of common stock . As you can see, little to no money was raised from the preferred stocks. I mean, they are still large amounts, given these are weekly raises, but nothing in comparison to the enormous common raises. ATM Program Progress (From 8-K filed Aug. 25) Of course, the fact that the company flipped its own guidance in a matter of days has, rightfully so, ignited debate. Personally, I believe that both sides have a point. Yes, the initial guardrail appeared shareholder-friendly, curbing issuances during low-premium periods. With mNAV around 1.6, we would see $0 of MSTR issuances (other than rather small amounts for preferred dividends), and thus the multiple itself could potentially expand as these daily ATM volumes drop. At the same time, however, that rigidity risked stalling the Bitcoin engine. With mNAV subdued, strict limits might pause buys amid dips, thereby squandering the opportunity to "buy BTC while it's cheap." This looser stance empowers opportunistic accumulation, and given that, in theory, issuing equity at any point over 1.0 mNAV is actually accretive to BTC/share, even at today's below-average mNAV of 1.6 , it should still make sense to print stock, as it would be accretive. For this reason, I actually support the shift in guidance. For me, it shows that management isn't afraid to be criticized for changing their minds, and changing your mind about something shows you they are not stubborn on their ideas as well. Again, remember that all of this is an experiment in financial engineering, as I mentioned earlier. They are tuning it in real time, and the last thing investors should want is not pivoting to a better model just for the sake of not causing short-term frustration. The Risk to be Afraid of As this whole money-raising circus unfolds, there is one specific risk that I am afraid, if it were to occur, could, I dare say, even dismantle MSTR's investment case. This is if mNAV were to fall below 1, which isn't impossible and could indeed occur, following a steep BTC decline, causing the levered MSTR to decline deeper. The problem is that this would force common issuances below book value to service the preferred dividends, which, of course, would lead to the exact opposite effect of using shares at a premium (i.e., erode BTC/share). So instead, Strategy could be forced to sell BTC to service these liabilities, thus dismantling the "accumulate-only" ethos, and frankly enough, make investors question whether Strategy actually has a meaningful reason to exist in the first place, against say, buying actual BTC or just a levered ETF and related instruments. And look, before you lose hope, the argument that accretion dynamics should uphold the premium is real. Preferreds like STRF's security lure institutions, STRC's steadiness pulls money-market-fund seekers, reinforcing the structure and thus justifying a premium on the common, which, in turn, makes the whole flywheel work. Why I am Changing my Strategy So where does that leave me? After watching all of this unfold, I’ve decided to step off the MSTR equity rollercoaster entirely. I’ve sold my common shares, not because I don't believe in MSTR's flywheel or because I disagree with the pivot in guidance, but instead, because farming the premiums from selling puts and writing covered calls makes for a much more attractive proposition. Volatility is still high, even well below its previous highs, and with premiums this fat, the margin of safety is greater, all while the potential returns can be juicy. If the stock rips higher and I never get assigned, great, then I keep the premium. If it dips and I do get assigned, I’ll gladly pivot into a covered call strategy, farming income while positioning for any upside rally in MSTR common. MSTR's 1-Month Volatility (Koyfin) I am now holding the MSTR Sep18'26 310 Put, which offers a premium of $61.80. If you sell this put now, even if you get assigned, your break-even would still be about $248, so I feel the margin of safety is rather significant even for the scenario in which BTC holds steady yet MSTR undergoes a mNAV compression. So, I am still long, but from a different angle.
