Strategy's Stretch STRC Perpetual Preferred Stock IPO Backed by Bitcoin | Michael Saylor & Phong Le

Hello. Thank you all for joining us

today. I'm here with our founder and

executive chairman, Michael Sailor. I'm

Fong Lee, president and CEO of Strategy.

And I'm excited to share with you our

latest perpetual preferred offering,

STRC, also referred to as stretch. I

like to start with our disclaimer, and I

suggest you all read this uh in detail

at your leisure. And let me go through

the term sheet at a high level. Uh

Michael will go through a lot of these

terms and the strategy of stretch in

more detail later. Uh I'll start with

it. This is our fourth and latest uh

security that is perpetual and preferred

in nature. Uh and in terms of seniority,

uh stretch is senior to stride and

strike and MSTR common stock and it will

be junior to our other debt including

our convertible notes and also junior to

strife. The stated amount of stretch is

$100 per share. And what's unique about

stretch is our intention is to maintain

a trading level for stretch that's near

a stated amount. We have a few

mechanisms to try to uh create this

outcome. First of all is a variable

dividend rate which is unique and

different than the dividend rate which

has been fixed on our other perpetual

preferred securities. The second is an

ATM which we uh intend to issue uh in

short order and we'll use that ATM also

uh to uh help us maintain uh the price

at the stated amount. And the third is a

a unique call option uh that we also

will describe later and Mike will go

through.

So let me go through a performance

review of strategy uh and a company uh

to date and I'll start with uh a chart

that some of you have seen many times

and one that we're quite proud of which

is the annualized asset performance of

strategy since the Bitcoin standard era

which started on August 10th of 2020. On

an annualized basis, you've seen our

return is here is about 104%

uh which is nearly twice that of Bitcoin

at 59% and nearly four times that of the

MAG 7 at 27%. Uh and if you look at the

total returns during that same period of

time, we are uh have returned 3,324%

in nearly a 5-year period.

If you look at the last 12 months,

you'll see similarly remarkable returns.

72% for OSTR compared to 85% for

Bitcoin, 36% for gold, and 23% for the

MAG7.

In the second quarter of uh 2025,

we saw an addition of $21 billion

digital asset value. About 14 billion of

dollars of that is uh via an unrealized

fair market gain uh on our existing

Bitcoin. and additionally in Bitcoin

that we acquired during the second

quarter and $6.8 billion of Bitcoin that

was acquired during the second quarter.

Uh so we've really uh added tremendous

value to our balance sheet uh during

this period of time in the second

quarter uh increasing it uh by nearly

50%.

If you look at the performance of

Bitcoin and as a result MSTR's balance

sheet uh and digital asset value since

the second quarter in a very short

period of time uh really just about 20

days or so you'll see that we have added

an additional $7 billion additional

asset value $5.7 billion or so because

of the appreciation in Bitcoin price uh

going to all-time highs uh that we've

seen and $1.2 2 billion of additional

Bitcoin that's been purchased today.

And the result of this is a balance

sheet that is now in the top 10 uh in

the US companies uh excluding financial

services companies. Uh we well exceeded

the balance sheet of of tremendous

companies like Nvidia and we're honing

in on some of the mag seven companies

like Meta, Apple, Microsoft, Google and

Amazon. Uh so we've really created

tremendous value in the second quarter

and really in the last five years

through our Bitcoin acquisition

strategy.

Our two primary KPIs that we measure

ourselves against are BTC yield where we

have an annualized annual target of 25%.

And you'll see here year to date we're

at 20.8% so nearly 80% of the way

through uh achieving that BTC yield

target. And the BTC dollar gain target

that we've set is $15 billion. And

you'll see we're at nearly 11 billion.

So 2/3 more than 2/3 of the way through

uh achieving our BTC gain target.

The performance of our perpetual prefers

that we've issued year to date, Strike,

Strife, and Stride have been uh

tremendous uh year to date. And it's a

great backdrop for us to be introducing

uh Stretch. I'll point out here that

Stripe was launched uh in January this

year at an $80 price and it has

increased 48% since then to 118.2

billion $118

and we've added $549 million of strike

through ATM sales. On Strife we launched

in $85 and seems sim similarly strong

performance 40% increase and $219

million of ATM issuances. And our most

recent uh IPO was Stride, which was

launched at $85 and seen uh a 10% gain

during that period of time and $18

million in ATM sales. And so compared to

the preferred universe and the preferred

index PFF, the performance has been uh

uh significantly better, right? Strike

here with an ARR of 104% 48% performance

compared to -2 for the PFF index. Strike

has an ARR of 123% 40% increase compared

to 0% for the PFF index. And in a short

period of time, Stride has shown 87% ARR

10% performance versus a 3% for the PFF

index. And so those have all performed

very well. And what has occurred is

because of the increased performance or

the high performance of these

instruments and the increased price the

yields have started to go down. And with

the lower effective yields when we issue

uh when we issue the instruments via an

ATM uh it actually increases the bitcoin

torque and it increases uh uh the

accretion to to shareholder value with a

lower effective yields and increase in

bitcoin torque. So we've seen very

strong performance and we've been proud

of that and again think this is a great

time to be launching stretch. The final

piece that I'll walk through here is uh

the amount of equity we have been able

to raise uh through these instruments

and how it has started to increase

significantly over time. You'll see here

we had a record week two weeks ago of

$141 million of ATM issuances through

our three instruments. And this is going

to be our primary way uh over time to

lever up the balance sheet to add uh

performance to add BTC yield to add BTC

dollar gain and BTC torque to our

business. So with that, I'll hand this

over to Michael Sailor.

>> Thank you, Fong. I'm just really excited

about Stretch. Um, Stretch is uh is the

newest member of our preferred stock

family. It's senior. It's perpetual

preferred. Um, it's a variable monthly

dividend and we've designed it to

maintain a stable price.

You know, the par value is 100. Uh, the

dividend at par is 9% uh coming out of

the gate initially. Uh, initially it's

about a BTC rating of seven.

and uh we pay it monthly and then uh the

the dividend may adjust monthly.

Um we're building out the yield curve

with stretch. So, we've got a

convertible preferred,

we've got a long duration senior fixed

preferred, we've got uh long duration uh

junior preferred in the form of stride.

And uh stretch is is filling a different

part of of the credit market. We want it

to be short duration. Um not, you know,

it's not a 20 year or 30-year, you know,

Bitcoin bond. It's meant to be a one-mon

Bitcoin instrument.

And so if you think about the way you'd

price that,

you know, uh we've got about a 340 basis

point credit spread above the 20year

Treasury bond for Strife. And so the

effective yield of Strife is 840 basis

points. You can see the spread there. If

you were to take that same spread and

apply it to stretch and and you were to

benchmark that against the one month uh

treasury then that suggests the

equivalent stretch yield will be about

7.7%.

Now we're offering 9%

uh out of the gate um initially. We're

pretty excited about the instrument. Um

if we price stretch uh the IPO at 95

it'll be 9.5%.

If we uh price the IPO at 90, it could

be up to 10%.

STRC is designed so that we can mitigate

volatility. We want it to be the least

volatile shortest duration instrument.

We're targeting price stability. Um so

if you look at uh sulfur uh if sulfur

were to decrease then a uh a a preferred

like strife that has a fixed dividend

will tend to increase in price and when

sulfur increases um a fixed dividend

instrument will tend to decrease in

price and so that's an example where you

hold the dividend constant and the price

fluctuates

um you're getting price you're getting

volatility. You know, the the

instrument's actually engineered. It's

designed so that that happens and it's

for a certain type of investor that

wants that uh type of sensitivity. Now,

stretch is meant to be different. It's

if you want the price to be less

volatile, if you want to target a

certain type of stable price, then you

have to move something else. So the

dividend changes and you can see here

that by adjusting the dividend monthly

and reacting as appropriate to sulfur

then we have a mechanism right uh that

we can use in order to in order to

decrease the volatility of STRC and

change the characteristics of it in the

aftermarket.

Um, the other thing that's different

about Stretch is it's not a quarterly

dividend, it's a monthly dividend. And

we've heard from a lot of people that

that that investors value monthly cash

payments or monthly cash dividends. So

the 15th day of the month will be the

record date and then on the last day of

the month, uh, we'll pay the dividends

in cash and then we'll set the next

month's stretch rate. And then we'll

just do that with a simple monthly

cadence.

Now we have a number of mechanisms to to

execute the stretch credit strategy.

You know how do how do we make this

instrument a success? Um well um within

the target range we have uh we have uh

the mechanism we can adjust the STRC

dividend rate and the STRC issuance via

the ATM.

When the price falls below our target

range then we would cease

selling any STRC per the ATM.

um and we have the option to increase

the STRC dividend rate. Now what happens

when the uh when STRC trades above our

target range? Well, we have a mechanism.

We could decrease the stretch dividend

rate. We could issue stretch via a

secondary offering at or below 101 or we

can call stretch using the call option

embedded in the instrument.

So you can see it's a variety of

mechanisms. They're novel. Uh most of

these mechanisms I don't think you saw

them in strike or strife or stride

because those are different instruments

for a different type of credit investor,

right? Uh stretch has got a very

particular goal that we're pursuing.

And um you know what kind of investor

would we'd like to find? What who are we

targeting? Well, we're we're targeting

short duration, lower volatility

investors in credit that are looking

for, you know, a yield. So, if you're

buying a money market, you might be

getting a 4.2% yield or $7 trillion in

money markets. You know, maybe you're

buying short-term tea bills. Maybe,

yeah, you don't want interest rate

duration risk. you don't want to worry

about about uh the kind of movement in

the principle that takes place in a 20

or 30year swap. Um there's US dollar

denominated bank accounts, a lot of

them. Uh there's corporate commercial

paper, right? Uh and so these are big

markets. Our offering is $500 million.

It's not so big. And you can see we're

looking for those kind of those kind of

credit investors. and we're offering 9.5

to 10% effective yield for people or for

investors that are comfortable with um

uh a BTC

backed credit instrument.

Um this slide shows a different view of

that universe and you can see there's

they're just very large markets. we're

gonna enter the market and um and of

course our differentiation is a Bitcoin

backed instrument with a much higher

yield and of course you know this slide

just shows how big this entire credit

market is and how how small our entry

is. Ultimately, our focus on Stretch is

we want it to be a very unique type of

credit, a very strong form of credit for

those that believe in in Bitcoin and are

enthusiastic about the crypto economy.

Now, a lot of people will want to

compare it to Strife. Um, you know,

they're both senior perpetual

instruments, but Stripe's quarterly,

stretches monthly. They're both

cumulative.

And um you know strife because it's got

a long duration, it's going to actually

be more volatile to interest rate

fluctuations

and stretch because it's a much shorter

duration should have a a different

volatility profile

and we've got that charted here uh on

this slide as well. You can see on one

hand uh we've engineered stretch to be

our least volatile instrument and on the

other hand we've engineered MSTR equity

to be our most volatile instrument and

then we offer you know various flavors

in between for various types of

investors.

Uh now Stretch's credit is backed by our

capital structure. And so we've got a

$71 billion Bitcoin stack and this $132

billion equity stack.

So we have a we have a $59 billion

Bitcoin surplus and uh and we have about

$120 billion equity surplus.

If you if you think about the capital

structure uh in that configuration, you

can see the the debt is fairly well

collateralized.

You can see the preferred instruments,

you know, have BTC ratings between 5.8

and 7.7. If you're a skeptic about

Bitcoin, then you can see there is some

risk here. and we've calculated the

statistical risk and calculated the the

BTC credit spread that you need to

offset that risk. Um, but you can see

even after that credit spread, you can

see there's still a spread premium here.

Um, if you're a Bitcoin maximalist and

you think Bitcoin's appreciating 30% a

year, then you can see that risk, you

know, almost goes away. a it falls down

to single digit basis points and the and

the BTC credit goes to spread goes to

zero or one and so so if you're a

Bitcoin maximalist and and you believe

in Bitcoin and you're looking for credit

instruments you would be very

enthusiastic about the credit that we're

creating.

Now, we also, you know, scenario out and

consider what happens if we actually

equitize our convertible bonds. And you

can see here, um, if we were to equitize

them at the earliest allowable call

date, they'll all go away by 2029. And,

um, that's something that that everyone

should be thinking about. We think about

it. Now, we've done a pro-forma uh,

capital structure. And the proform says,

well, what happens if we equitize uh all

the convertible notes that are currently

in the money? Uh so not the entire

stack, but the ones that are in the

money. And you can see that uh it cuts

our debt uh down to $5 billion and it

increases the Bitcoin surplus. It

increases the equity surplus. When you

start to plug in that new capital

structure, uh the BTC ratings of all the

instruments move up. strife and stretch

move beyond beyond a BTC rating of 10.

You can see the remaining debt would

have BTC ratings of 14 to 35.

Now you can look at uh the various BTC

credit um that pops out and you see the

spread premiums but you know you start

to see a very different capital or

credit structure and of course if you're

a Bitcoin maximalist you can see the

risk you know collapses to just a few

basis points and in fact the BTC credit

spread uh falls to zero basis points for

all six of these instruments if we were

to do that for Bitcoin maximum

Um, for anybody interested in this, you

can go to our website strategy.com

and you can plug in the Bitcoin price

you want. You can plug in your forecast

for volatility. You can plug in your

forecast for BTC ARR. It'll it'll give

you the BTC ratings, the BTC risk, the

BTC credit. It's very interesting and

and we're happy to share that model.

Now looking longterm, you know, and and

long term for us is, you know, three

years out, we're really thinking about a

capital structure where Strife would be

at the top and we would be targeting a

BTC rating of 10 or more and stretch

would be second, but we're also

targeting 10 or more. We want these to

be our highest rating uh our highest

rated uh most secure most over

collateralized BTC credit instruments.

Um the mezzanine instrument would be

strike with a BTC rating of six or more.

The high yield instrument will be stride

with a BTC rating of three or more. Um,

all of those credit instruments will be

supported by Bitcoin, our Bitcoin stack,

which is the hard asset, which is

liquid, and they'll be also supported by

our equity in the equity capital

markets. And so, you can you can see

that's our long-term BTC capital

structure. And when you start to crank

that in and you think about what's the

plan, you can you can see that our

ability to issue credit, it'll be a

function of uh the appreciation of

Bitcoin. It'll be a function of the

increase in our equity capital base. You

know, it'll be a function of of um you

know, the issuance of the junior

instruments. As we as we issue more

stride, that will actually make strikes

stretch and strife more creditworthy. So

there's a a lot of opportunity here and

all of these instruments are very

reflexive to each other. The issuance of

one generally uh results in an

improvement uh in the prospects of the

others.

So I've laid out our capital plan and

our credit strategy. Here you can see

our long-term targets for the four

instruments in the c and the credit

structure.

You know, our plan is that uh we'd like

to reduce our overall senior convertible

debt outstanding over time and we'll

seek to equitize that um as as the

options arrive and as as available and

we'll simplify our capital structure in

order to elevate the BTC ratings of the

remaining credit instruments.

um as we move forward, you know,

preferred are our preferred credit

instrument and they'll remain perpetual.

We think that keeps our flexibility,

maintains flexibility, but also

minimizes default risk. It's just best

for our credit strategy. And then we're

going to time our future offerings and

we'll size them to maintain our target

BTC ratings and to preserve our tiered

risk and yield integrity across the the

the stack.

And our our business strategy is we want

to be the leading issuer of BTC backed

credit instruments in the world. We are

now we don't see any reason why we

shouldn't uh grow that business and

continue to be the leader in that

market. Uh we'll do it with very clear

credit standards, a disciplined approach

to leverage and uh very transparent

capital allocation.

Our

goal for stretch is we're targeting low

volatility, short duration,

high yield credit, right? Stretch is

meant to be strong credit. It's for

credit investors. They don't want long

duration. They don't want volatility. Um

they want the highest yield they can

get. I if you can I if you can uh

diminish the volatility and shrink the

duration.

How are we going to do that? Um well,

we're leaning on four pillars. MSTR, the

issuer, has a 35-year track record.

We're a well-known seasoned issuer. We

have a hundred billion plus equity

market cap, hundred billion plus options

open interest. We have nearly five five

billion dollars a day of equity

liquidity. So a very a very well-

capitalized

seasoned issuer.

We're also focused upon our digital

capital strategy. So digital performance

is really important. That's how we're

going to generate the yield on these

instruments, right? And the performance

comes from Bitcoin which has been

appreciating 59% a year for nearly 5

years now. Uh MSTR is appreciating 104%

a year. So, we are the bridge to the

crypto economy and as the crypto economy

grows and the digital economy grows, we

expect uh Bitcoin performance to

continue and we expect that will drive

MSTR performance and we expect that that

will that will be how we will um fund

and back these credit instruments.

You know, we're we're executing a

treasury operation. That's the third

prong of our stretch uh support, right?

We've got four ATMs right now. We're

going to add a fifth ATM um as soon as

practicable with Stretch. We've issued

$35 billion of securities over the past

year. Uh and we've got a 5-year track

record issuing uh these securities into

the marketplace. And so our Treasury

team will support stretch and and we

expect that's one of the elements

that'll that will make this strong

credit. And then finally um the credit

of of stretch itself is backed by

607,770

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bitcoin right the largest corporate

bitcoin stack unencumbered bitcoin that

we can use as hard collateral

that gives stretch rating of seven you

know on the IPO and uh that means seven

times over collateralized.

So when you think of stretch str

means strong and C means credit right

stretch is strong credit targeted to the

credit markets to a very particular type

of credit investor and um it's it's

unique in our credit stack. It's not

like stride. It's not like strife. It's

not like strike. It's not like the

equity. Um, we think uh that that we're

bringing a very elegant and exciting

product to the market. We hope that

you'll agree with us. Um, in our

appendix, we've offered uh a review of

our debt coverage and as you can see,

we've got a substantial stack of hard

assets that covers our existing debt

obligations. It's 14 times debt coverage

right now. Uh, we've got a review of our

dividend coverage. We've got 180 years

worth of preferred dividends covered

with hard assets. Even if we had a 75%

decline in BTC, we still have 26 years

of dividend coverage.

Uh we've got a review of our dividend

obligations and how are we going to pay

these cash dividends with our our ATM.

And you can see um you can see we've got

substantial liquidity in our equity and

and uh we feel confident that our ATM uh

will be more than supportive for all of

these dividend obligations.

Um we've also uh got some detail on our

KPIs we use. So if if you're wondering

about how we define BTC gain or BTC

yield,

you know, and and uh these various other

BTC instruments, you can uh feel free to

check out the footnotes. Um we've got uh

a discussion of BTC rating here and BTC

risk and BTC credit. Um, we've been

we've been leaders in offering a Bitcoin

equity model and we're also offering our

Bitcoin credit market. Uh, sorry, our

Bitcoin credit model. Uh, and so please

feel free to look at these. We think uh

we think these provide a a strong

statistical and mathematical

underpinning for what we're doing and

they would be interesting to any Bitcoin

uh treasury company or or BTC equity

investor or BTC credit investor. So with

that, it stretches are, you know, it's

it's it's our latest offering. We're

very excited about it. It's unique. Uh

we think it's very special. We hope

you'll agree with us. And I want to

thank you for your time and your

attention today.