Saylor's Infinite Money Machine

The Financial Hack Wall Street Missed

Today let’s talk about the financial masterpiece Saylor has engineered. I’ve spent the last four months trying to fully understand how it works, and I’ve finally decided to write this article.

I’m referring to his preferred shares, STRC, STRF, STRK…

Today I want to focus specifically on STRC. If you look at how much capital he has raised with each of these instruments, STRC is by far the most significant. And judging by his tweets, and those of Phong Le, CEO of Strategy, it’s clear they are prioritizing this vehicle over the others.

Like everything Saylor did in the beginning, I was cautious. I thought he might be taking excessive risk.

Even more so when I compared the return of this asset to others targeting similar yields.

As if that wasn’t enough, we were talking about a fixed 11.3 percent with extremely low volatility.

At that point I thought it had to be fake. Something that attractive simply couldn’t be real.

I was wrong.

Sometimes you don’t understand something until you sit down and study it carefully. That’s exactly what happened to me.

First, what is STRC?

It’s a preferred security paying 11.2 percent annually, distributed monthly.

The best part isn’t that it’s 11.2 percent before taxes. No. It’s effectively 11.2 percent net. This is possible because Saylor and his team structured it as ROC, Return of Capital, rather than a dividend.

That’s why in the second chart it shows that if it were classified as a dividend, the equivalent yield would exceed 17 percent.

After seeing this, my first reaction was simple: forget real estate and the S&P 500.

Low volatility, fixed return.

Yes, I know what you’re thinking. How on earth does he pay for it?

I thought the same. And today I want to help you understand it. He solved it with one of the most elegant pieces of financial engineering I’ve ever seen.

Until recently, this structure didn’t even exist. He has openly admitted that AI helped generate the idea.

Here’s how it works.

STRC was issued at 100 dollars per share. Roughly 28 million shares were sold, raising about 2.8 billion dollars. A substantial portion was deployed into Bitcoin.

So you might ask: fine Carlos, but how does he pay 280 million dollars per year?

Here’s where it gets interesting.

If STRC trades below 100 dollars, say at 90, and you buy it there, you still receive the same 0.94 dollars per month per share. That means your yield jumps from 11.2 percent to 12.4 percent. Investors notice. They buy. Price gravitates back toward 100.

Now what happens if the price rises above 100?

This is the genius part. He issues more shares, diluting supply and bringing the price back toward 100. In doing so, he raises fresh capital at a premium.

It’s essentially saying: the market wants yield, I’ll supply it.

How many shares has he issued in the last seven months since launch?

About 5.78 million.

That translates into roughly 578 million dollars raised. Enough to fund dividends on both old and new shares for roughly a year and a half.

I know what some of you are thinking.

“This is a Ponzi.”

Wait.

First, the company currently holds multiple years of dividend coverage in cash. Around 30.4 months.

Second, if necessary, they could begin selling Bitcoin and fund the dividend for approximately 56 years at today’s depressed price levels.

Look at traditional dividend companies and tell me how many could do that. The answer is zero.

That’s why I believe what he’s doing is extraordinary. He’s pulling capital from the bond market, a market paying 1 to 2 percent yields, into an instrument that effectively offers the equivalent of 17 percent if treated as a standard taxable dividend, with long duration visibility on coverage.

Let me leave you with one final thought.

Today, 3.125 Bitcoin are mined every 10 minutes. That’s about 450 BTC per day. In a few years, that will drop to 225 per day.

With this machine, over the last seven months he has acquired roughly 46,200 BTC, about 220 per day net of dividends.

That means he is absorbing roughly half of daily new supply without lifting a finger.

Why is the price still low? I’m not a guru, I don’t know. But I do know that supply is mathematically shrinking while demand keeps expanding. Eventually, those curves collide.

Time will tell. But I felt compelled to explain this mechanism. It is one of the most fascinating capital structures I’ve studied in years.

See you soon.