It’s time for a deep dive on MSTR—Microstrategy Inc. (now Strategy Inc., but the ticker symbol has yet to change).  Let’s start with a one year chart:

As the chart shows, MSTR had a blow-off top in November 2024 and then dropped 56% by the end of the first week of April.

Zooming in, since the first week of April, Strategy Inc. is up over 70%.

So, it’s volatile.  What’s next?  I have no idea, but obviously MSTR will either break the red resistance line and go higher, or collapse below the green uptrend line and go lower.  On the assumption that Bitcoin continues to rise, MSTR should also continue to go up, as it is a leveraged bet on the price of Bitcoin.

But here’s where it gets interesting.

Strategy Inc. has common shares (MSTR) but has four other classes of shares, each with different attributes.  Let’s review:

STRF (pronounced “Strife”) – Series A Preferred shares

STRF are preferred shares, paying 10% annually.  They are designed for institutional investors (like pensions).  The dividends are cumulative, so even if they don’t get paid this year, they accrue and must be paid before common share dividends can be paid.  So, they are kind of like a bond.  If an institution wants exposure to Bitcoin, but can’t hold it, Strife is a way to get exposure to Bitcoin and a relatively low risk yield.

STRK (“Strike”) – Series A Preferred shares

Like Strife, Strike has a cumulative preferred dividend, but it only pays 8%, and it is convertible to MSTR shares at a premium.  So, if MSTR’s stock price rises above the conversion threshold, holders can convert STRK into MSTR.  So, they are kind of like a long call option.

STRD (“Stride”) – Series A Preferred shares

These shares are non-cumulative, and they are junior to both STRF and STRK, so if the dividend doesn’t get paid one year, that’s it, you lose it, so they are more risky than Strife and Strike.  They are currently trading below par, so while the coupon rate is 10%, they are yielding around 12%, which makes sense because they are more risky.

The MSTR Capital Stack

So, if MSTR was to go bust, who gets paid first?  As with all companies, the secured creditors get paid first, then the unsecured creditors, then the equity holders.  At MSTR, the order of payment priority would be:

1. STRF
2. STRK
3. STRD
4. MSTR

In terms of risk, STRF is the least risky. The yield is high, and they are cumulative, so the risk of non-payment is low. However, there is no convertibility, so there is no upside. It’s like a bond.

STRK is higher risk, but the dividends are also cumulative, and you do get some upside.  It’s the middle ground between pure debt and pure equity.  If Bitcoin is going up, so will MSTR, and so will STRK.

STRD is at a higher risk.  The dividends are non-cumulative, but since it’s trading at a discount, the yield is highest.  As long as MSTR is paying the dividends, STRD is a great bet, because the yield is the highest.  While Bitcoin is going up, STRD should also go up, so you hold it during the upswing, pocket the dividends, and then sell when the yield drops.  This is not a long-term investment.  You hold during the uptimes and sell during the downtimes.

But what if you think Bitcoin is poised for a significant upswing?  You buy MSTR.

MSTR is for investors who think Bitcoin is going up and want a leveraged bet.  You don’t get any yield, so there is no downside protection.  MSTR is not for income; it’s for capital gains.  As we saw in the first chart above, it can go up 70% and drop 50%, all in a year.  It’s very risky.

Of course, there is a middle ground, as discussed here many times.  You can own MSTR, and sell out of the money covered calls to generate yield.  That’s a good strategy when Strategy Inc. is trading down or sideways, but when it has an explosive up move your profit is capped, so you’ve got to understand where you are in the cycle and act accordingly.

For me, now, I’m simply holding MSTR.  Simple and easy.

We’ll see how it works out.