Strategy (MSTR) Q3 2026 earnings call transcript
https://earnings.opennash.com/companies/mstr/2026-q3/ (machine-generated)


CJ (Chaitanya Jain) (Investor Relations) [0:01:15]
Good afternoon everyone and thank you for joining us for Strategy's third quarter 2026 Earnings Webinar. I am CJ, Head of Investor Relations at Strategy. Joining us today are Andrew Kang, Chief Financial Officer, Phong Le, President and Chief Executive Officer, and Michael Saylor, Founder and Executive Chairman. And thank you for joining us for Strategies Third Quarter. We'll begin with approximately 60 minutes of prepared remarks, starting with Andrew, followed by Phong and Michael. We'll then move to a 30-minute live Q &A.
Before we begin, I'll briefly cover our safe harbor statement. Some of the information we provide in this presentation 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 fluctuations in the price of Bitcoin and the risk factors discussed under the caption, Risk Factors in Strategy's quarterly report on Form 10Q filed with the SEC on August 3rd, and the risks described in other filings that strategy may make with the SEC.
Except as required by law, we assume no obligation to update these forward-looking statements, which speak only as of today. With that, I will turn the call over to Andrew Kang, CFO of strategy. Andrew Kang, CFO of Strategy.

Andrew Kang (CFO) [0:02:46]
Thank you, CJ. Q3 was an exceptionally strong quarter across all parts of our business. We now hold 848 ,517 Bitcoin and recorded a record $21 billion fair value gain on our Bitcoin holdings in Q3. MSTR share price increased 76 % during the quarter and our market cap rose to $62 billion as of October 23rd.
STRC's one month volume weighted average price was $99.27 as of the close of markets on October 23rd. And as we speak today, we are just one penny away from par. Our combined Bitcoin and dollar reserves represent 49 years of interest and dividend coverage, strengthening the credit quality of our digital credit platform. Q3 marked our 25th consecutive quarter, more than six years of building a consistent and ongoing track record of adding more Bitcoin to our balance sheet.
Since Q3 of 2020, our holdings have grown from approximately 38 ,000 Bitcoin to the 848 ,517 Bitcoin, accounting for 4 % of all Bitcoin that will ever exist. Strategy remains the largest institutional holder of Bitcoin in the world. Our Bitcoin holdings exceed that of IBIT, that of the largest nation states, other ETFs, and all other major DeFi institutions. We aim to actively manage our holdings along with our cash reserves to benefit both our long-term common stock shareholders and our digital credit investors.
The sheer scale of our reserves gives us a market-leading advantage to actively manage our strategy and goals through both bull and bear market cycles. Our treasury assets have grown from approximately $54 billion at the end of Q1 this year to $74 billion in this comparison. That makes strategy the seventh largest treasury among S &P 500 companies when we include all cash and Bitcoin on our balance sheet. As you know, the number 21 has a great deal of significance for us.
We all know that there will only ever be 21 million Bitcoin in existence. And this last quarter, we recorded an approximately $21 billion in fair value gain on our digital assets in the third quarter. We started Q3 with about 846 ,000 Bitcoin valued at approximately $50 billion. And during the quarter, Bitcoin's price increased from approximately $58 ,700 to close around $83 ,600, adding $21 billion in value. We also added a net 1 ,666 Bitcoin during the quarter.
And as a result of the recent rally in Bitcoin price, at the end of Q3, we recorded a $20.9 billion fair value gain on digital assets and ended September with over 847 ,600 Bitcoin worth approximately $71 billion. For the third quarter, we reported a record $20.9 billion of operating income. 19.1 $1 billion of net income and 44.75 in diluted earnings per share. This was the highest operating in net income for any quarter in the history of the company.
This milestone achievement for the company highlights the resilience and strength of our capital base and balance sheet, which allows us to weather the storm through bear markets, but also readies us for exponential growth in bull markets. Bitcoin per share has grown from approximately 56 ,600 sats at the end of 2020 to over 187 ,700 sats as of October 23rd, reflecting a CAGR of approximately 23 % over that same period. Year-to-date, Bitcoin per share is 3.7 % lower as we effectively deployed and managed through our capital management framework with a focus on strengthening the underlying credit of our capital structure.
As we enter the next stage of Bitcoin price appreciation, we will be further positioned with a stronger capital base and a more robust reserves to amplify BTC yield in the long term. We raised approximately $5.4 billion of total capital during Q3, bringing the total year-to-date capital raised to $21.2 billion. We raised $22.6 billion of capital in 2024 and $25.3 billion in 2025, importantly reflecting our effective and impactful access to the capital markets in both rising and falling Bitcoin cycles.
During Q3, digital assets increased from $49.7 billion to $70.8 billion, reflecting Bitcoin price appreciation and the net addition of Bitcoin during the quarter. Cash and short-term investments increased to just under $5.9 billion, including $5.8 billion of total USD assets at the end of Q3, which provides more than sufficient liquidity to meet our interest and dividend payments, strengthen our overall credit quality, and provide liquidity for general Bitcoin treasury needs. Our preferred equity ended the quarter at $13.1 billion down from the previous quarter with the execution of our stretch open market repurchase program.
Common equity increased to $55.4 billion, bringing total equity to $68.5 billion, up $23.2 billion, or 51 % during the quarter. Our Treasury assets as of October 23rd were approximately $74 billion, consisting of $68.9 billion of Bitcoin and $5.1 billion in USD assets. After taking into account $6.7 billion of convertible debt and $13.3 billion of preferred stock at their notional amounts, our net reserve is approximately $53.9 billion, dollars or approximately 67.3 $1 billion net of the out of the money converts our ev nav is currently 1.15x amplification 1.28x with a low net leverage of approximately 2.4 percent and our us dollar assets provide three point year 3.4 years
of interest and dividends coverage at current payment obligations We have approximately $6.7 billion of total convertible debt outstanding compared with the $69 billion of Bitcoin and $5.1 billion of US dollar assets, representing a BTC rating of 42X. Four of the six converts are currently trading above par for the two that are at the moment below par. The earliest put date remains significantly in the future and not until March, 2028. We have substantial asset coverage and the staggered put maturity schedule gives us ample levers to effectively manage these obligations in the future.
We now have 17 equity analysts covering us, all which carry buy ratings, an average MSTR price target of approximately $248 and an average published Bitcoin target of approximately $111 ,000. I am pleased to announce that our shareholder proposal to move our preferred equity dividends to daily record and payment dates has been resoundingly approved by our shareholders. The final vote reflects 99.3 % of approvals of votes cast in support of the amendment. Daily dividends for stretch will begin on November 1st record date with a November 2nd payment date.
STRF, STRK, and STRD are scheduled to follow with a January 1st record date and a January 4th payment date. Dividends will accrue on every calendar day, including weekends and holidays, with payment on the next business day. The overall annual dividend amounts remain unchanged and are not impacted as a result of this enhancement. Smaller, more frequent payments are designed to reduce volatility, improve liquidity, broaden investor demand, and get cash to investors sooner. Calendar day accruals also make Stretch and are perhaps better suited to the future of tokenized products and increasingly around-the-clock markets.
Thank you to everyone who voted in favor of this change. And finally, as announced earlier today, I will be stepping down as Chief Financial Officer, effective November 5th, for personal reasons. It has been an honor to serve as Strategy CFO for the past four and a half years and to be part of such an extraordinary period of growth and innovation. I am extremely grateful to Michael, Phong, and the board for their trust and support. And to all of our employees, thank you for your hard work, perseverance, and dedication.
To the entire finance team, a special thank you. It has been a privilege to work alongside each of you, and I am incredibly proud of what we have accomplished together. To our shareholders, analysts, and everyone who has joined us over these last 18 quarters, thank you for your time, your engagement, and your support. It has meant a great deal to me. And for the last time as CFO, I will turn the call over to Phong.

Phong Le (CEO) [0:13:02]
Thank you, Andrew.
We will miss you. And I do appreciate your four and a half years of service to strategy. You've seen the company through great times and also through a couple of bear markets with a steady hand. And I wish you well in the future. The plan going forward throughout the course of 2026 is for myself to step back into the CFO and principal financial officer role. Starting in January 2027, we'll split the CFO role between our software and our Bitcoin businesses, which are quite different.
stepping into the principal financial officer role covering our software business will be a long-time veteran of strategy Reza Virasteh who currently runs operations reporting to me and has previously been a part of the finance leadership team running fpna he knows our software business inside out and do will do a great job overseeing that the principal financial officer of our bitcoin business will be myself and also i'll continue to be the ceo of the company I'm looking forward to wearing those dual hats and looking forward to continue to lead with strong folks in our Bitcoin business that you're all familiar with.
CJ here, who runs investor relations and product, and Sharish, who runs our treasury, will report to me directly. And I think for all intents and purposes, the transition will be seamless to our shareholders, our investors, our analysts, and our employees. and I'm looking forward to a bright future for the company. Speaking of bright futures, I will cover off on our digital equity strategy and our digital credit strategy with a recap of Q3 and 2026 year to date and why I believe we have a very bright next year ahead of us.
Then I'll hand it over to Michael who will cover our digital capital and Bitcoin overall outlook and just general strategy for the company. So first, let's talk about digital equity. We had what I would consider to be, and what Andrew mentioned, a very strong Q3. I'll start with MSTR, our common equity, is amplified Bitcoin. We are built to outperform Bitcoin, and we did exactly that in the return to a bull market in Q3. Bitcoin increased 43 % over the course of the quarter, MSTR increased 76%.
In addition, we added 176 ,000 Bitcoins since the beginning of the year. So through a fair market cycle, we were able to significantly increase our Bitcoin. And that's more than 3X, the second largest Bitcoin treasury company in the world, added all in the course of three quarters. And it has allowed us to be the number seven ranked treasury in all of the S &P 500%. As Andrew said, we raised $21 billion of capital year to date, another 21 number coincidentally, and we have the fourth largest issuer capital in the U .S., again, in a Bitcoin bear market.
We reduced our net leverage 2.4 to 2.4 percent, down from 8.4 percent in q2 and our downside is really now well protected where bitcoin could fall 78 to 18,000 before we are 1x covered for our liabilities uh by our bitcoin uh value asset value and our objective still stands we're going to double bitcoin per share over the course of the next seven years and we think we are on our way to that so i feel very strong about mstr and where we're able to go on a go forward basis as a reminder digital equity that's mstr is a combination of two things one amplified bitcoin we're going to increase bitcoin per share and two digital credit
and you've seen STRF stretch stream STRK STRD and potential future innovation on top of that for example daily calendar day dividends our cap structure is really a volatility transformer right what do we do we take digital capital bitcoin which has a volatile vol of 36 we reduce that vol in our digital credit stretch down to what is about 10 right now uh we believe we can reduce that further down to potentially even 5% with a 12 dividend rate and all of that that excess ball and the excess returns gets accreted to our digital equity MSTR that's basically the formula of the company and what we're able to do with Bitcoin which is such a rare capital asset we're the
most among the most liquid stocks relative to our size and amongst the most liquid stocks in the S &P 500 universe you'll see here if we take a look at our options open interest as a percentage of market cap, we're number two in the S &P 500 universe, and our daily traded volume as a percentage of market cap is also number two in the S &P 500 universe. What does that mean? That means there's a lot of interest in what we are, which is a amplified Bitcoin company.
And there still is a lot of interest in Bitcoin, despite all of the attention that is growing towards ai and other related stocks uh if you take away uh the market cap and don't look at us as a percentage of market cap but just on total value we're the number 17 options open interest company amongst the s p 500 universe and we're number 18 in terms of daily traded volume uh and and that's a pretty big deal for a company like ours uh which has grown from about $1 million to over $1 billion to over $70 billion of market cap in the course of six years last year we were the number one equity issuer in the
world a year before in 2024 we're the number two equity issuer in the world and this year year to date we're number four raising $21 billion in the equity capital markets three ai companies are ahead of us ai and space spacex ai and search alphabet ai and semiconductors intel what does this tell you it tells you that in any bitcoin market we're able to access the equity capital markets and this also tells you that there is still significant interest in bitcoin and digital assets and we see a bright feature for the category overall if you take a comparison uh to the 2023-2024 bull market in that market we outperformed bitcoin significantly that's the last real bull market we
saw during that two-year period from 2023 through 2024 bitcoin returned 454% mstr returned 3.6 x that 1 ,897%. So as we believe we're entering another Bitcoin bull market, we believe because we're amplified Bitcoin, we have the potential to similarly outperform Bitcoin during the next year to two years. What's the difference between the previous bull market in 2023 and 2024, and what we expect to see in 2026, 2027 and beyond is we are a very different shaped company.
In the last bull market, we had 132 ,500 Bitcoin, of which 37 % were encumbered by Bitcoin-backed loans. Now we have 848 ,500 Bitcoin, nearly seven times what we had before, and 0 % of that Bitcoin is encumbered by any of our debt or our preferreds. We added 18 ,000 Bitcoin in the last bull market. We have since added about 200 ,000 Bitcoin in this market. The Bitcoin floor in the previous market was 18 ,000, this time around at 17 ,000.
Our BTC rating was 0.9x, which actually meant we had less than 1x coverage on our liabilities. This time we have 4.6x coverage on our liabilities. Our net leverage bottomed out at 110 % in the past market, this time around 2.4%. And the USD duration that we had was zero. We didn't have any US dollars on our balance sheet. And this time around is 3.4 years. So compared to the previous bear market to this bear market, we have strengthened the company significantly over the course of the last year and what means as we exit the bear market into a bull market we have a stronger balance sheet and we think that creates even more opportunity for amplification
and more opportunity for growth for our common equity over the course of the next couple year bull run that we expect to see Our Bitcoin reserve, as I mentioned, was $132 ,000, now is $848 ,000. $2.2 billion versus nearly $70 billion. $0 in US assets versus $5.1 billion now. No digital credit versus $13.3 billion now. And a net leverage of 108 % versus 24%. So what have we been doing for the last year?
We've been building a fortress balance sheet so that as we enter a bull cycle, we think we can outperform the last bull cycle that we went through. Since the Bitcoin all-time high, Bitcoin's fallen 35%, while our holdings of Bitcoin rose 33%. So as Bitcoin price went down from $124 ,000 to $81 ,200, we've taken that opportunity to buy Bitcoin at a less expensive price and grow our Bitcoin holdings 33 % to $849 ,000. so why do we think that there's an opportunity for mstr to grow not just because we believe that bitcoin price is going to grow but we think mstr is the combination of two things right one is the net bitcoin that we have on our balance
sheet and two is the btc dollar gain multiplied by whatever multiple you might attribute to that which is really the functioning of our digital credit business. So we can grow Bitcoin per share and we can grow MSTR through two levers, essentially. One is through increase of Bitcoin price amplified to our common equity and increase of our digital credit business, which increases the Bitcoin gain, which can be ascribed a multiple. And we think both of those components will start to take effect over the course of the next couple years what else happens during a bull market well what else happens during a bull market is we see m nav start to expand right the 2021 bull market saw m nav median
daily m nav at 2.28 2023 2.57 2024 2.60 we currently six sit at 1.15 but we see the potential for that to also grow over the course of the bull cycle and as i mentioned before ultimately what is the goal The goal is to double Bitcoin per share in seven years through the use of digital credit. How does that work? And it's important to emphasize the interplay between digital credit and digital equity.
If we can sell digital credit by selling stretch at $100 into the market, right, that generates amplification to the company, right? it means that we are able to buy bitcoin and pay 12 on that digital credit and accrete all the benefits of a greater than 12 gain which generates amplification the amplification create increases bitcoin per share and the increase in bitcoin per share allows the common equity to outperform bitcoin over time what are the levers levers are a lower cost of credit which we look at very closely The levers are higher digital credit sales, which we think we'll be able to turn on again soon.
And third lever is a higher MNAV. So let's talk about digital credit. I talked about MSTR, digital equity. Now let's talk about digital credit and our five instruments that we have. The first, the ecosystem is scaling really fast. We're really still only 22 months into digital credit. We have six issuers, not just ourselves, in a $16 billion market. Stretch is returning to health. It's trading between $99 and $100 per our commitment. And today, Stretch closed at $99.99.
We strengthened our U .S. dollar coverage. We've heard from our shareholders of our digital credit that that's important. Grew the digital U .S. dollar assets from $2.5 billion to double to $5 billion. dollars and we're supporting our digital credit security stretch we repurchased $202 billion to stretch and we have $957 million capacity remaining uh and of course yesterday daily dividends were approved for stretch which takes effect uh november 1st and STRF STRK and STRD which take effect january 1st and we're excited about that innovation and we're continuing to improve our credit profile which i'll talk through in a little bit so how you think about digital credit one thing to think about is digital credit
is really a combination and alloy of bitcoin and us dollars so much like when you take iron and you combine it with chromium we create an alloy stainless steel which is stronger which is lighter which is better than the combination of the two bitcoin with 46 years of coverage and dollars with 3.4 years of coverage creates a 60 40 percent alloy called digital credit that's what digital credit is it's ultimately a better version for certain shareholders of bitcoin and of us dollars and the sum is stronger than the parts this market as i mentioned scaled to $16 billion in 20 months and it's still fairly nascent and early uh it is a brand new product never seen before
in the history of capital markets. And we're pretty excited to see others come into the market. I'd mentioned our five IPOs that we did last year and Strive has since IPO'd Seta and recently Sats, two additional great products. Metaplanet has announced that they plan to issue digital credit. BMNP, which is an Ethereum-based digital credit instrument, was launched earlier this year. CHAD, which is a Solana-based digital credit instrument, was also launched earlier this year. MORE was launched.
And we'll see other products start to launch and Layer 2 products start to build on top of this. It is early, but it is very promising to see the digital credit ecosystem start to build out. And why is digital credit attractive? Well, if you look at the market today, there's been a lot of talk about AI private credit. The yields aren't bad at 10%, but they are opaque instruments, and they're not nearly comparable in terms of the yields that you can get on a tax equivalent basis with other forms of digital credit like the ones we've issued.
And of course, worse than private credit are junk bonds, bank preferreds, investment grade, mortgage backed, etc. Other instruments in terms of lower yields and different risk return profiles. levels. As tax rates start to go up, both at the municipal level and the state level, you'll start to see that digital credit becomes even more attractive because it is a return of capital instrument. What does that mean? The return of capital means that the taxes on the dividends are tax deferred.
So rather than paying taxes, it lowers the cost basis as long as you don't sell the underlying instrument and so you can have a tax deferred status for as long as 10 years that compares to qualified dividends which might pay a 20 to 35 tax so $100 of dividends to stretch and digital credit stays at $100 $100 of dividends and a qualified dividend instrument becomes 65 to $80 and $100 $100 of uh interest and earnings on a taxable interest instrument like a money market becomes half of that when taxes are taken out so this is one of the reasons that we think digital credit is this superior instrument we spent
a lot of time thinking about after the downturn of q2 to stretch and some of our digital credit credit instruments on how to improve our digital credit. And we put a capital framework in place. And we spoke about that at length on our previous earnings call. We built up a US dollar reserve that is a minimum of one year of dividends and interest. And now is three years of dividends and interest. We said that we would monetize Bitcoin for the purposes of funding the US dollar reserve, servicing our debt and interest obligations and repurchasing securities.
these we sold a little bit of Bitcoin as a result of that but a fraction of the Bitcoin we hold uh we began a digital credit repurchase program and we spent about $2 billion buying back stretch and we have $957 million remaining authorized we put in an MSTR repurchase program of $1 billion of which we have used none of it so far and we said we're going to keep the stretch dividend right around 12% we're not really going to increase it because we don't think that it will drive more demand for the product in a material way and we don't think it's best for our common shareholders to increase the dividend obligations associated with stretch
the sixth pillar that we added over the course the last quarter is we added you to sd cash and we added 242 which is currently at about $242 million so what's the point of the usd cash i'll start with the point of the usd reserve it is designed to support the preferred dividends and debt interest in fact it is uh reserved and set aside explicitly for the purpose of paying dividends and interest the us dollar cash balance gives us a lot more flexibility right it gives us flexible liquidity so we can buy bitcoin we can buy back instruments like stretch which we've been using it for and other general treasury purposes so it's truly thought of like a cash
balance that we can use for general corporate purposes to improve our bitcoin business and ultimately to improve our digital credit which ultimately improves our digital equity mstr usd duration this is the amount of usd that we have to cover our interest and dividend and obligations rose nearly 7x from our may lows right so we had about half a year of usd duration previously now we have three and a half years of the usd duration and we think that's quite important usd strength is a new uh metric that we put in place and usd strength is the usd duration as a percentage of the blended macaulay duration of our perpetual preferred instruments and our convertible instruments and what you see there
is the usd strength gives basically an estimate of how much usd we have to pay dividends over the macaulay duration of our instruments and that's increased from 6% to 40% so we think these are both very strong uh metrics and it shows the strength of our credit and the investment uh attractiveness of our credit What else have we done? We've paid dividends, 40 dividends over the last two years. We intend to continue to pay all of our dividends across all of our instruments.
We think it's important to do so to drive confidence in the digital credit instruments, which ultimately drives confidence in digital equity and MSDR. we introduced some of these metrics last quarter and I want to re-emphasize these metrics because they're quite important ones and they're good ones to think about how does digital credit and digital equity interplay and how does Bitcoin ARR impact it I'll first start with the hurdle ARR 10.6 percent you might say why is it not 12% the same as the stretch dividend rate Well, the hurdle ARR blends all of our instruments together.
And as long as we see Bitcoin go up more than 10.6%, what that means that all of the accretion above the 10.6 % goes to our equity, right? And so that's what we saw happen in Q3, where Bitcoin went up significantly and the equity saw the accretion above and beyond the hurdle ARR. And that is one of the reasons we are able to produce amplified Bitcoin through our common equity. And then the second ARR is the breakeven ARR.
This says that as long as we see 2.2 % increase in Bitcoin price on an annual basis, we'll be able to satisfy our dividend and interest obligations. If we were to want to, just by selling the Bitcoin that we accrete, the Bitcoin value we accrete, the 2.2%. And that means into eternity, we'll be able to continue to pay dividends and interest, which means that the digital credit works. but it may mean that the equity could underperform Bitcoin because we're not over our hurdle ARR.
The last ARR is our floor ARR, 17.4%. If we see Bitcoin going down at 17.4 % a year, what that will mean is the ability to cover our credit and our debt goes down to 1x. And so at that point, the credit will get stressed below 17.4 % ARR, and it means we may want to consider other different structures for the business. So how do we think about these 2.2 % breakeven ARR, 10.6 % hurdle ARR, negative 17.4 % Bitcoin floor ARR?
If we look historically and we look at every four-year window back to 2015, Bitcoin has experienced a rolling four-year ARR on average of 42.7%, which is pretty incredible, the returns of Bitcoin over the last 10 years. But more importantly, Bitcoin has beaten the 2.2 % break-even ARR in every single four-year window during that period. All right, so that break-even ARR, our ability to pay our interest and dividends through Bitcoin increases, historically has occurred every single day in that four-year window.
And we put another metric in here, which is the expansion of the U .S. monetary supply, M2 supply, which has been 1.9 % on a four-year annualized growth basis. And it's interesting to see how Bitcoin four-year ARR has moved roughly with that M2 monetary supply, as you might expect. we have two pages on our website that i thought would be useful to go through if you ever go to strategy .com and go to the credit page you can see these two analyses and these are put important analyses because what i would state is early on into the development of digital credit people have a hard time understanding what is the risk what are the credit spreads and
how do these arr's come into play. And so let me explain the first page on our credit tab at our website, which really goes through the credit analysis of our different instruments, our convertible bonds, and our preferred stock. So to analyze the credit, there are a couple assumptions that we make, and you can change these assumptions on the page. First, we assume the current Bitcoin price, right around $81 ,200 as of the end of last Friday.
The US dollar assets we have, and then you enter two additional things, which is the Bitcoin volatility and the Bitcoin ARR. Here we decided to be conserved and put 10 % in. Recently, JP Morgan released a study that ascribed a 10 % Bitcoin ARR, so we thought that would be a reasonable input point. And 40 % Bitcoin volatility is what we've seen historically over the course of the last four years. When we enter those things in and we run the analysis, what are we looking for?
First thing is we look at what is the BTC rating, right? What is the coverage that we have over the existing notional value of our preferred stock and our debt and if you go down to the most junior instrument STRD it means we have 4.6 x coverage of bitcoin over our preferreds and our debt right so what is the risk that that btc rating goes to one what is the risk that we will only have bitcoin right to cover 1x all of these instruments and the risk that occurs at the end of the mcauley duration for our most junior instrument is 6% uh if you want to play around the model and put a 20 bitcoin arr in
there you'll see is quite sensitive to that and that actually takes the risk the btc risk of an instrument like STRD down to roughly one and a half percent right with that risk we can impute then a credit spread for each of these instruments you'll see the most junior instrument STRD has a credit spread of 86 stretch has 54 basis points in all of these cases they're investment grade instruments with that level of btc credit right and the last thing we provide here is the btc floor all right and this one makes probably more common sense we're at $17,662 uh that basically means that our bitcoin stack will be valued at equal to our
cumulative notional of all of our debt minus our U .S. dollar assets and our prefs. But the big picture here is if you look at these instruments on a Bitcoin risk and credit basis, they're very low risk instruments. Then we have another page that says, well, how do you equate this to a price, right? And what is potentially a reasonable modeled price or a derived price for these instruments? And you'll very quickly understand that if you take a look at the effective yield of these instruments, right, and you look at something like Stretch, which has a 12 % effective yield, STRD, which has a 14.35 % effective yield, you take out the risk-free yield, you'll see a market
spread for these instruments that is much greater than the BTC credit spread that we were able to impute. right and if you were to take that uh differential you might be able to derive a much higher price for these instruments what's the reason for showing this model the reason for showing this model is one uh Bitcoin risk is not well understood and not well modeled today so we thought it'd be good to provide a transparent way to look at this and two probably more importantly is we are early in the world of digital credit.
Early in digital credit, we're a couple years into the products. It'll probably take another year or two years for the market to understand, but we think there's a lot of opportunity in digital credit. And if you just take a step back, right, stretches a 12 % now daily dividend instrument, which is four to five X collateral covered. And we think it's a a great option for folks out there. It has shown the ability to go through a Bitcoin bear cycle, and we're fairly bullish on this market going forward.
So let me deep dive into Stretch and talk a little bit more about that. Highlights of Stretch as of October 2026. I mentioned a 12.1 % effective yield, $160 million of trading liquidity. It is still the most traded preferred in the entire global capital markets by a lot. The volatility is starting to come down to 10%. I believe we can get it below 10%, potentially approaching it below 5%. And I mentioned the U .S. dollar strength.
Even after buying back $2 billion of stretch, it's still $8.4 billion of notional, very large, liquid, perpetual preferred instrument. and the 8.4 $1 billion the notional is backed by 5.1 $1 billion of U .S. dollar assets $69 billion bitcoin reserve 46 years of dividend and interest payments between our U .S. dollar assets and our bitcoin reserve look we recognize that stretch had a pretty significant dislocation at the end of June the price went down to about $75 what I'd say is the The company is committed to taking actions, and we took actions to get it back within its target range.
Not only did we get it back within its target range, we got it back to nearly par, $99.99. We're committed to continuing to drive the instrument to trade at a range that we think is equivalent to what we think the product is valued at. What do we do? We introduce a new capital framework. We raise the dividend rate to 12%. We went to semi-monthly dividend payments now to daily dividend payments. And we increased the U .S.
dollar assets and we started buying some stretch back. Interestingly, we started to understand a little bit more the investor base behind stretch. In the past, we've talked about 80 % retail, 20 % institutional ownership as a 3.1726. But what we realized that part of this retail looks a lot more like an institutional long-time holder than a retail, potentially, fast money investor. High net worth individuals, meaning folks with over $1 million in stretch, represent 24 % of the total stretch investment base.
And what we've seen happen over the course of the last six months, institutional increase from 21 % to 23%, nearly doubled their holdings. But probably more interesting is the high net worth individuals increase from 24 % to 29 % and more than doubling their holdings. And it's important for us to look at that and it's important for us to understand that market because we think that's where potential growth is and very solid growth is. Speaking of institutional holders, we are now the largest holding and the largest preferred ETF in the world by BlackRock.
We represent 3.49 % of PFF. If we look at Vanex, the sixth largest preferred index in the world or ETF in the world, we're also the largest there at 7.58 % of the weight of the total index. Mike will talk more about this. People are building on top of Stretch. So the ecosystem are not just owners of stretch. It's not just ETFs, but it's an entire ecosystem of companies in the DeFi space, stable coins, in the tokenization space, funds and ETPs, cash and yield accounts and corporate treasuries who are building at top of stretch.
And this is our market, right? The market obviously includes retail, but high net worth individuals, institutions like this are going to build products on top of Stretch and will cause it to grow from $8.5 billion to tens of billions, if not hundreds of billions over time. That's our objective. By growing Stretch, we'll be able to grow MSTR and the cycle, the virtuous cycle continues. use uh as Andrew said thank you to all the folks who voted positively to move uh stretch to daily dividends uh the calendar day accrual here is a pretty big deal right people will start to realize the benefits as digital credit and digital transformation of capital markets occurs we think that's going
to start happening this year right Bitcoin already trades 24 7 we see equities moving in that direction you're going to start seeing the nasdaq move to seven day trading towards the end of this year tokenization is going to accelerate that even faster especially in the us with uh with innovation exemptions that have been put forth by the sec we expect that market to grow very fast too and what are you going to build on top of what are your tokenized uh securities uh some of them may partner with or build on top of uh products like stretch Last thing I'll leave it with before I hand it over to Michael is Strategy World.
2027 is going to be back in Orlando next year, March 29th, April 1st. And I invite everybody to join us there. We're going to have an awesome time. We'll run our Strategy Software Conference alongside our Bitcoin for Corporations Conference, alongside the True North Conference. And it'll be a great time. So we'll speak to you before then at our 2026 Q4 earnings call. But go ahead and register. And I hope to see you all in person. And with that, I will hand it over to Michael Seiler.

Michael Saylor (Executive) [0:48:20]
Thank you, Phong. And I want to thank all of our shareholders for being with us today. I'm going to say a few words about Bitcoin and digital capital and the way the ecosystem is evolving. so we feel like we're entering a bull market uh we bounced off the 200 week moving average uh bitcoin's dominance is growing institutional demand is back the banks are embracing bitcoin uh we feel like uh digital credit and banking credit could absorb all the new supply and And strategy is leading on chain.
We're the most tokenized company in the digital assets ecosystem. This chart tells the story. Bitcoin is traded above a 21 % premium for 78 % of its history. So we look at the 200-week moving average as the base of support. And we've gone through about a one-year bear market. we would think that we should see two or three years of a bull market at this point we're only about you know less than 24 months 18 months or so from the next halving the halving will be a big deal but there are a lot of other factors that are driving this one thing that's very auspicious for bitcoin is that bitcoin market cap dominance is growing consistently through this
cycle it's about 67% of the market cap of all the crypto capital asset assets in the world and so bitcoin is two-thirds everything else is the last third it's pretty clear that bitcoin is the digital capital network the dominant digital capital network in the world it will not be displaced and that's an important thing we can build upon The structural catalyst for Bitcoin adoption, fiscal debasement, the money supply is going to expand, bank adoption, digital credit, capital flows from institutions, tokenization, the AI disruption, which ultimately is going to drive capital into Bitcoin.
And as I mentioned, the Bitcoin halving coming up in 2028. here you can see uh the capital flows and and uh capital returned to bitcoin etfs in q3 to the tune of about uh 6.3 $1 billion of inflows uh we thought that was very auspicious uh this chart structurally tells a story and uh the story it tells is that is that the government is running deficit financing and that being the case the money supply is going to have to expand sometime in the coming few years um there's uh there's no reasonable opportunity to do anything other than than monetize the debt so we have uh cheaper cheaper sovereign debt that's going to be refinanced at a higher interest rate
either the interest rates have to come down or the balance sheet of the fed has to expand we don't know when this will happen or how it'll happen but this chart illustrates that it's going to need to happen in the aftermath of the stall of the clarity bill in dc we got favorable regulations favorable guidance coming out of treasury the sec and the cftc the treasury guidance was very positive for digital currency the sec guidance was very positive for digital securities and the cftc guidance was very positive for digital derivatives and digital commodities and digital exchanges so this is all very digital assets positive news and it's all happened just this quarter we track banking adoption very closely we look
at all the major banks and the degree to which they custody uh crypto assets the degree to which they extend credit whether or not they deal with bitcoin derivatives or wrap bitcoin or the actual native bitcoin and whether they underwrite it and also their stance on it and uh the stance of the banks has just turned positive and has been consistently getting better if you look at this chart we can see we're at 9% banking adoption december 2020 23 we are 24% in december of 25 we're now at 34% um we'll continue to track this but uh the banks have all the money And this is a monetary revolution.
And the most important thing for Bitcoin success is that it be legitimized as a capital asset by the financial institutions of the world and that we create credit on top of it. If we take a look at the major banks, we can see very positive moves by Morgan Stanley, Citigroup, Deutsche Bank, Standard Charter, Banco Santander. lots of broader digital assets momentum across the board as it relates to stable coins tokenized securities and the like this has the effect of de-risking the asset class accelerating institutional adoption of the asset class sending a signal to conservative and traditional investors that it's okay to allocate to the asset class and uh and all of those things are just very positive for bitcoin
so how much capital do we need um in order to drive the bitcoin price each week there's about $256 million of natural bitcoin produced by bitcoin miners available for sale uh you know it's 450 bitcoin a day works out to about $37 million a day if you have $37 million you can buy it all after the halving coming around april of 2028 that 37 million a day of supply will become $18 million of supply that means that right now $13 billion a year buys all the bitcoin produced uh in a in uh a matter of less than two years 6.7 billion would buy all the bitcoin produced so if you imagine the impact on
a commodity price if you knew that the production of oil was going to be cut in half or the production of gold was going to be cut in half or soybeans or natural gas or anything that would create a price shock um if you look at the amount of um of bitcoin that's produced you know and you and you consider that number um $260 million a week and then you consider that u .s banks are creating $17 billion of credit in the same time period the banks are creating incredible amounts of credit largely this asset class has been unbanked for its history and you can see that as it permeates the banking system as the banks create credit
then that's the equivalent of buying that much or taking that much bitcoin out of production and so ultimately the creation of bank credit is what drives the prices of equities up bank credit drives the prices of real estate up bank credit It drives the prices of sports team franchises up and trophy assets like paintings. If the bank will lend against it, the prices will appreciate. When you have to pay cash, that depresses prices. And so the main cycle driver here is going to be the creation of bank credit.
And you can see the order of magnitude here. and it just doesn't take that much credit in order to absorb the entire natural supply, then the price has to move up in order to find a willing seller at a higher price. As I'd said, tokenization is accelerating. Strategy is the most tokenized company on chain. We didn't do anything for this to happen. this happened because we just happen to have securities that are ideal for tokenizing right either amplified bitcoin or or digital credit um both of those are correlated to bitcoin but uh you can you can trade them one way or the other against the bitcoin 24 7 365 so so uh these are very valuable in the defy ecosystem
and the digital asset system and of course One thing that DeFi does very well is it creates leverage and it allows you to, say, lever something 2x or 3x or 4x under very flexible credit terms. The thing that you would want to lever would be a stable, highly liquid, low volatility, high yielding instrument like digital credit. uh levering um tokenized money markets at the cost of tokenized money markets doesn't really provide you much of a effective yield but if something pays 8 9 10 11 12 percent and you can borrow money at 4% and you start to put one two three or four turns on it then you can create digital income and so digital credit's a building block
for digital income and you know by using anywhere from 2 to 4x leverage and using stable coins and the global marketplace you can see how you could create a fund that pays 5% 10% 15% or 20% and yen euros pounds or dollars as you like and you can just program up and program it down And so clearly tokenization is interesting and the market is very innovative and we expect to be participants in it.
This gives you another snapshot and explains why tokenization is so powerful. When you tokenize a security, it starts to trade 24-7, 365. it also starts to trade globally it's trading in singapore or hong kong or asia or africa or south america it also becomes programmable and so you can tranche it slice it amplify it de-amplify it the settlement goes from t plus one to nearly instantaneous you can apply your artificial intelligence your agentic finance to it agents want to do a thousand things in the weekend whereas your bank doesn't want to do anything on the weekend and generally high speed trading in a trad fi world is is moving money around once or twice a week uh and
of course in the tokenized world that might be once or twice an hour and who knows it might become faster than that you can also it's also possible to compose very interesting different products so product innovation accelerates uh tranching risk creating yield converting currency hedging um you know plugging into perpetuals all of these things are interesting and a lot of traditional finance markets you can't innovate at all it's just literally not allowed to create many of these financial products in other cases it would take six months to to three years to get approval to issue the product and so trad fi markets are are crippled and conventional and slow and inefficient and they're also beset with all sorts of capital
controls that slow down the motion of money. And the tokenized markets, to say this stuff happens 10x as fast is probably an understatement. Innovation can happen 100x to 1 ,000x as fast and the money can move 1 ,000x, orders of magnitude quicker. And of course, what does this mean? It means the tokenized economy is delivering better financial products. Who in Japan is getting an offer of 15 % yield in yen? Nobody, right? You can deliver better financial products with different characteristics, orders of magnitude quicker, and you can make them easier to deliver.
And so we actually think that the nexus of innovation is going to be in the tokenized economy. and we think a lot about how do we optimize our securities to be ideal for tokenizing. One obvious thing is you make it pay a daily dividend because people can actually take action every day of the year, including holidays and the tokenized economy. They can't in the TradFi economy. Why does on-chain capital gravitate toward us? Well, stable coins offer 0 % yield.
STRC, right, has a par value of $100. It is targeted to be stable versus the dollar, and it is 12 % dividend. And, of course, Bitcoin holders are seeking upside, but tokenized MSTRs amplified Bitcoin. a lot of people ask about ai um anyone that's used it know that it's disruptive and transformational to just about everything in the world it's eroding moats so ai will erode moats what moats will clearly it writes software faster it delivers services better it creates media it's going to provide legal consultation education services it's uh it transforms services it transforms operation it trans it transforms uh the products themselves it makes the products better more intelligent it changes the nexus where you deliver products lots of
industries are affected some are extremely affected on the other hand what is it that the robots and the bots can't create um they're not very good at creating land they're not very good at creating an acre in palm beach uh they're not very good at creating commodities uh especially scarce commodities and um of course the scarcest of all commodities is bitcoin bitcoin is the greatest of commodities and it is the great the great and the only digital scarcity so as the market evolves and absorbs ai what you can expect is lots of companies are going to get dematerialized and demonetized and degraded by ai lots of products and services will be transformed many will go away there will be magical
products that will emerge self-driving cars intelligent robots you'll see websites someone will probably figure out how to provide you know medical legal accounting financial advice to a billion people for the call a little bit more than the cost of the compute so lots of things will transform lots of wealth will be created but that wealth has to flow somewhere it's going to flow into trophy assets trophy real estate uh products that you can't manufacture with a robot or a bot and of course if i do want to transfer and transfer for and preserve capital move it across time and space then the best way to do it is with digital capital and that's what bitcoin is so we see
bitcoin as the winner uh we see lots of chaos and and uh disruption everywhere else in the economy but ultimately the world will be wealthier uh there will be explosion in productivity and the quality of living of the consumer should increase over time. There'll just be massive disruption in careers, products, services, corporations as we get there. This chart really shows a very important idea. if you're buying semiconductors that provide intelligence they're 650 times cheaper this year than they were three years ago so there's a so semiconductors are a depreciating asset we learned this in the bitcoin mining business where it turned out to be a much better idea to buy $1 billion of bitcoin than $1 billion of
bitcoin mining rigs and that's because there's a massive, a very rapid depreciation cycle on hardware to provide any particular service, whether it's security or intelligence. So digital intelligence is going to increase abundance, but it's not going to increase the amount of Bitcoin. Bitcoin is scarce. Lots of other things. Intelligent is not going to be scarce. Anything that you can create with intelligence is not going to be scarce it's going to be quite abundant and so it makes sense uh to capitalize a company on bitcoin the appreciating asset not the bitcoin mining rig the depreciated asset it makes sense to capitalize on on something scarce if and not something which is depreciating And so I think that the market will start
to realize that this is why, for example, digital credit backed by Bitcoin is a much better idea than private credit backed by high performance compute data centers. Because you can see the hardware in the data center is depreciating. It's a very competitive market. It's going to continue to be competitive. And on the other hand, Bitcoin is going to become less competitive. There's only 900 ,000 Bitcoin left to come in the next 100 years. And so even as we exponentially increase the availability of intelligence and everything related to it, we're going to exponentially decrease the availability of digital capital and everything related to it is just going to appreciate.
um people ask about uh quantum computing are we ready for it are we ready for for uh for ai hacks and the like um the answer is the industry takes all these things very seriously uh we have a bitcoin security consortium it has uh the major holders and the major the major businesses providing economic products and services related to bitcoin in it companies like coinbase like anchorage like fidelity like galaxy like block stream like block like blackrock like arc um we meet regularly we support bitcoin related security research you know we coordinate and our focus is on making sure that we contribute to the stability and the security of the overall protocol we'll continue to do that there have been
dozens and dozens of things people have been concerned about with regard to the network over the past 15 years over the coming 10 or 15 years I'm sure there'll be another few dozen things that will pop up as they pop up. Some of them are real. Some of them are just FUD. And as they evolve in consensus forms, that it makes sense to address them, then we're ready and able to do so. And I think this is functioning in order to provide comfort to any Bitcoin investor that all the companies in this industry take security seriously and we're engaged and coordinating.
future outlook bitcoin is 10 basis points of the world's capital assets you can see it's uh it's the minimum is a tenth of a percent we expect over time that it will grow to be a percent and then it may grow to be a few percent but you can see um bitcoin only needs to be a few percent of the world's assets to be extraordinarily successful and the thing that's going to drive that growth is institutional adoption bitcoin legitimate the legitimization of the asset class the creation of credit the creation of equity and other instruments on top of bitcoin the applications of Bitcoin.
We're headed toward 100 trillion dollar industry. That's where we think we'll get to. And $100 1 trillion when we get there may still only be single digits of global wealth uh and so it'll be a part of the capital structure of the world but 100 trillion is a lot of money um you know what are the applications bitcoin is digital capital digital equity built on top of it is the second application digital credit instruments as we've talked about is a third application digital debt debt instruments based on bitcoin a fourth application.
Digital currency, stable digital assets that are backed by Bitcoin will be a fifth application. Digital money, something that's a stable currency equivalent that's paying you yield is another major application. Digital derivatives, perpetual futures, crypto derivatives, you know, all flavors of options and perpetual contracts, another application. And then digital collateral, the capital that we embed into our robots, that we embed into our agents, that we embed into exchanges, that we use as financial infrastructure for all digital commerce.
All of these are very compelling applications and they all require digital capital and therefore Bitcoin in order to function effectively. I think it's reasonable to consider two other industries when we look at the way the Bitcoin industry will grow. If we start with oil, the oil industry had a first application. It was kerosene and people use kerosene for light. The original application of oil was reading lamps at night and it provided a utilitarian value to the middle class such that they could afford light at night.
Because before that, you're looking at whale oil, and whale oil was obscenely expensive compared to kerosene. Eventually, though, that light application was displaced by electricity. It was obsolescent, and the oil industry moved on to gasoline and then fuel oil and then heating oil, jet fuels. of course and of course it it fueled cars that didn't exist when it was invented it fueled planes that didn't exist when we first discovered kerosene and then we saw plastics and fertilizer and asphalt and then we had lubricants and synthetic and then we had fabrics nylon and polyester and lycra and then it then it became a feedstock to pharmaceuticals and cosmetics and even food and coatings and so if you think about all the
applications of oil they're everywhere all around us and they all started with kerosene and the entire industry was a bunch of very innovative companies that figure out how to crack a barrel of oil into all of those different things and sell it to all of those different downstream manufacturers or service providers now we take electricity it's a similar story the first application was the electric light bulb that was the killer app but eventually electricity drove motors and factories and refrigerators and air conditioners and radio and television and telephones and computers and internet data centers electric vehicles and of course now it's ai it thinks for us and when they started with the light bulb nobody ever thought that eventually we
would have star link and and the ai's will be thinking for us but but it's a very logical evolution and we look at bitcoin the first application was peer-to-peer cash okay how do i buy a pizza with 10,000 bitcoin or buy two pizzas with 10,000 bitcoin but it's a mistake to think that the industry stays mired in that one first use case that would be like electricity just sticking with light bulbs and oil sticking with kerosene right what we see evolving is digital capital digital equity digital credit digital debt digital currency digital money that creates digital income you know you want 20% and yen euros pounds dollars pick your currency digital derivatives a 10x perpetual
right digital collateral how how do i actually put this collateral into my prediction market exchange into my commodities exchange how do i you know it's it's an ideal collateral to to fuel every financial application in the world now digital identity you can use bitcoin to create digital identity with public private key pairs digital authentication follows next and then digital commerce and so bitcoin is the basis of a whole set of digital applications great ideas outgrow their first use case we won't be 100 trillion dollar industry based upon swapping bitcoin for pizza we will become 100 trillion dollar industry based upon hundreds or thousands of products created by thousands of companies all to solve a different problem in the
world of digital finance and digital commerce and we're very enthusiastic to be part of that, but we expect many other companies to follow in our footsteps. And that takes us to Bitcoin treasury companies. There are four issuers of digital credit right now. They've issued 13 securities that are all based on Bitcoin. Those BTC treasury companies, like Strive, like Metaplanet, like SmarterWeb, those treasury companies have acquired 220 ,000 Bitcoin this year. That works out to 165 % of all the Bitcoin mined this year.
So the BTC treasury companies are buying 1.6 Bitcoin for every Bitcoin created by a Bitcoin miner. You see a supply shock forming. It's right here in front of our eyes. As the BTC treasury industry grows, their demand for Bitcoin grows. That drives up the price of the Bitcoin, driving up the value of their reserves, improving their credit, improving their equity, allowing them to raise more capital, buying more Bitcoin, growing the industry, allowing them to create new innovative products.
like SATA, like SATS, like MORE, like Stretch Paying Daily. There will be a continual set of new products. Those products will serve new investor bases. They will broaden the investor base. That attracts liquidity. That legitimizes the industry. That will legitimize digital credit. That will legitimize digital equity. That will legitimize digital capital. we're not competitors we're cooperators we're all cooperating in a virtuous cycle you know in a virtuous relationship in order to strengthen digital capital digital credit digital equity and every other digital product or service that is backed by bitcoin and i laid out a dozen there will be hundreds of thousands we're very early on in this industry's development you can see if you look at this graph of issuers
uh multiple issuers just make the category more investable there are a lot of uh investors they can only have up to 5% exposure in one issue or 2% or 1% so if there are three issuers they'll have 15 exposure but But if there's one issuer, they'll have 5 % exposure. So we need multiple companies in order to diversify the risk, in order to allow all of the capital investors to comply with their mandates and manage risk per their risk models.
And so issuers are critical to growing the industry, but also issuers create innovations. The issuers, like, we're not in a position to create a digital credit instrument in pounds, but SmarterWeb is. You know, we weren't in a position to create a daily dividend, but Strive was. And so new issuers will, you know, will be able to do different things. MetaPlanet is creating new innovative instruments for the Japanese market. We're not in a position to do that.
So all of us are working together in order to grow the global market. And as securities begin to get tokenized, then that will make it easier for all of the global players to participate in other markets and to innovate in a more rapid fashion. I see this is very auspicious for the space. We can expect that AI is going to continue to push the boundary. It's pushing the boundaries of mathematics. It's pushing the boundaries of physics.
It'll push the boundaries of finance. We have designed all of our major credit instruments using AI. AI is critical for investors to understand them. It's critical to the models for pricing them. It's critical to solving the product design, the securities, the legal issues, etc. I think that the growth of AI is very auspicious to the growth of digital finance. And we just see this as a big plus for the industry in general. so at this point we have instruments for every time horizon um what I would say is if you don't need your money for four years and you're an equity investor and you believe in digital credit or you want amplified bitcoin exposure or you have to buy an
equity instrument you would buy digital equity like MSTR if you don't need your money for four years and you want to to invest in something without counterparty risk, you would buy digital capital. You'll buy the Bitcoin. If you're willing or you need to buy it in an exchange traded wrapper, you'll buy an ETF like Ibit. That's fine. There are many people that are credit investors. And if you're a credit investor and you have a long time horizon, like more than four years, maybe you want to put a piece of credit in a retirement portfolio or a trust, a family trust, and you want to hold it for 30 years.
Well, then we have instruments like STRF, Stream, STRK, STRD, Sats. All of these are long duration perpetual credit instruments. They'll pay you a fixed dividend at par, whatever that dividend is 10 % or the like. And you can lock in that yield for a decade or 20 years or 30 years. And that makes total sense if you've got that time horizon and you don't need the money back in the next few months or few years. You will probably absorb a bit more volatility in order to get that duration.
but it's like holding a 20 or 30 year bond, a government bond, as opposed to holding a one month or three month T-bill. And so those perpetual instruments meet a need in the market. If you don't, if you, if you have money to invest for four months to four years, we would say you're a treasury credit or shorter duration digital credit investor. And there are instruments like STRC, what we offer, or SATA, what Strive offers.
and that's for a shorter duration investor um if strc you know falls off of par or breaks below par then the company is going to use all of its capital and its best efforts to return it to par as soon as it can and i don't think we would ever represent for example that we could do it in four days or four weeks because that might be pushing the edge of the envelope but you can see that here in four months we've shown that we can and we think that that it's a general reasonable expectation that the company will return strc to par within four months if it were to lose uh or fall below par and out of our
trading range and we would do that by buying it back we would do it by adjusting our cash balances we would do it by adjusting our capital structure um etc whatever we needed to do that we thought was rational at the time. Now, if you need your money back in the next four months, maybe you have money and you want to invest it to get some yield, but you need it back in five days, you're a money market investor.
And we would recommend that you put your money in a money market. Right now, money markets pay SOFR or something like that. We don't have a digital credit product that is for people that want to invest money for zero to four months, but partners are generating and innovating. And in the digital asset space, people are creating digital money type instruments. And over time, I expect that Bitcoin treasury companies will create digital money type instruments that will meet this need.
And so that's an opportunity for all of us that we're very enthusiastic about. What are we? Well, we are emerging as the central bank of the crypto economy. At this point, we're the best capitalized public entity in the crypto space. we have about $74 billion of capital right now that would put us 56 against as the 56 largest central bank in the world and we're moving up these rankings at a rapid rate we will continue to grow and our job is to bridge the trad fi market with the defi market the bitcoin the BTC market with the fiat USD type market.
And so we're, we will, and we expect that we will bridge the gap between Bitcoin and stable coins, between, between capital and credit, between TradFi and DeFi. And, and we will work to strip volatility from Bitcoin for people that don't want vol. and we will amplify volatility for derivatives traders or equity investors that want more vol. We will extract yield. We will manage risk. And we will convert currencies, right? Converting BTC into a USD instrument or a euro instrument or something similar.
So it's a very powerful business. We think that if you want to do this, you need a tower of capital, in this case, $74 billion. We think it's a very defensible moat. If someone wanted to invest $100 billion or $200 billion, or maybe even more than that in order to compete with us, they would have to buy that much Bitcoin. And if someone went into the market and tried to buy $200 billion of Bitcoin right now, it's quite likely that our credit spreads would compress, demand for our credit would explode, our equity premiums would expand, demand for our equity would explode, the price of Bitcoin would appreciate, our reserves would appreciate, and our overall company would grow faster than they
could buy Bitcoin, probably much faster. So it's very difficult for anyone else to displace us in this position because we've established this large defensible Bitcoin holding. We intend to use those reserves, substantial BTC reserves and substantial USD reserves, in order to create the digital credit, which bridges all the global markets, the global credit markets, all the currency markets with the crypto markets, with other forms of capital and with the traditional finance markets. We think it's a great business opportunity.
It needs to be done. And you can already see, based upon our success raising capital in the TradFi market and our success tokenizing our securities in the DeFi markets, that we're making great progress toward this ultimate vision. And with that, we're ready for Q &A and we look forward to answering your questions. Thank you for staying with us.

CJ (Chaitanya Jain) (Investor Relations) [1:29:00]
Thank you, Michael. I'd like to welcome all our Q &A guests and invite them to come on video.
We look forward to hearing your questions. We'll go one at a time. I'll call your names and you can direct your questions to the management team. For the first question, I would like to invite Andrew Hott, Director and FinTech Analyst at BTIG.

Andrew Hott (BTIG) [1:29:24]
Hi, thanks for taking my question and good work this quarter. So slide 26 frames the stronger balance sheet today compared to the previous bull market. And Phong, you talked about the balance sheet enabling strategy to take better advantage of a bull market with increased optionality.
So I would love to hear what exercising that optionality looks like. and what are the key differences in how you plan to manage the business in the next bull market versus the prior ones? Thanks.

Phong Le (CEO) [1:29:54]
Well, I can start and I'm sure some others can join in. The big difference is one, our Bitcoin balance is almost seven times larger, is fully unencumbered. We have US dollar balance and all of those things allow us to issue digital credit, which we weren't able to do before.
Before, we were relying on primarily leverage through convertible bonds. We've talked at length why we think that is inferior. One is there's just a limit to the size of the market of convertible notes. It's a less liquid market. It's over the counter, which means retail can't participate. Amplifying the company through perpetual preferreds as far as superior and now we're able to do that on the back of nearly $70 billion of value of bitcoin which means that if we wanted to we could raise 10 20 30 billion dollars through perpetual preferreds which if we pay 10 11 out at and bitcoin goes up 30 40 that creates amplification for the company and it grows the equity so that's the big
difference is We're a much larger company, and we have now a new strategy, which is digital credit. And Mike mentioned that's just issuing digital credit ourselves. Then there will be companies in the DeFi space and the TradFi space building products on top of digital credit. No one's building products on top of our convertible nets. Now we've got DeFi. We've got traditional finance companies that over time will issue stable coins. They'll produce returns, putting digital credit behind it.
So I think the opportunity is pretty tremendous over the course of the next one, two, three years.

Michael Saylor (Executive) [1:31:42]
Yeah. And the point I'd make is you need a lot of capital in order to create a lot of credit. And so if you have a lot of capital, like we could create 10, 20, $30 billion of digital credit right now with our existing capital structure without raising any more equity capital and without Bitcoin appreciating. So we have a lot of credit capacity on the balance sheet now.
And of course, we can create different types of credit. Are you creating BTC5 rated credit, BTC2 rated credit, right? The amount of risk in the credit and the amount of volatility in the credit is important to various types of investors. So one type of credit we're very interested in is digital money. How do you create zero volatility digital credit? And of course, you need a lot of capital to create zero volatility digital credit. You need a lot of capital to create of all five.
And so we think that we are using our capital as a very powerful asset. And we're positioned for the next bull run. but the company's optionality is quite powerful now because we don't have to rely upon Bitcoin to do the heavy lifting or the equity to do the lifting. We could use our balance sheet to do the heavy lifting right now. And that means we can meet a certain credit obligation or we can sell a certain type of credit to a credit investor, or we can create new forms of credit with different volatility and risk profile profiles and different liquidity profiles as well that will also tap in and activate new markets and so we're excited about that.

CJ (Chaitanya Jain) (Investor Relations) [1:33:33]
Thank you Andrew. Next I'd like to invite King Oye, founder and CEO of Treasury.

King Oye (Treasury) [1:33:38]
Thanks guys and thanks for being on the call. I have two questions if I may, one about equity and one about credits. it. On the equity side, you sold more than 5 billion of equity this quarter through ATM. And the majority of that went into raising the cash balance and into buying back SCRC. And it was clearly needed to stabilize the capital structure, which you've done.
Now that is the case, I would love to get maybe some guidance or a ladder even about how you think about where the equity ATM is accretive. So where you would really switch it on again to buy Bitcoin. And on the other hand, if the MNAV stays sort of where it is or lower, where at which point it would make sense to actually sell SCRC, assuming it goes by par again, to buy back actually MSTR itself.
And then on the credit side, if I may, clearly you've done a great job over the quarter stabilizing SCRC, bringing it back very close to par, you know, ascend below par. And actually it surprised me a little bit why it hasn't been a bit stronger we're given, the buybacks you've done, the cash you've raised. And I was wondering from your conversations with credit investors, institutional investors, what is it that would make them really buy this in size?
Is it the coupon? Is it the cash balance? Is it some structural features? What would make that happen? And what would get this to 100 billion or 1 trillion dollar kind of asset, right? Is there sort of a key feature that will allow it to happen from where we're sitting now?

Phong Le (CEO) [1:35:11]
I can start. And you put like five questions in there, King, so I'll try to get to all of them. The first question, what takes Stretch to stabilize at par?
And why didn't it happen faster? First, I'll say is Stretch went from a $2.5 billion IPO to $10.5 billion in the course of about eight months uh you might be able to argue that we overcharged it right and we brought in some capital that wasn't uh the most healthy uh and so i think it overcharged uh it you know dislocated from power went down to $75 uh money exited uh money looking for a creative principle you know growth entered and we had to go through a cycling of the instrument and so it That ended up taking from June to now about four months to do.
I think we'll be at Paris to get power pretty closely. But I don't think four months is unreasonable and an instrument that grew that fast. So that's one. Two, you know, how do we want to buy Bitcoin? The primary way to acquire Bitcoin is by issuing digital credit, STRC or other instruments that start to grow over time or other digital credit instruments. And when we raise $1 billion, $2 billion a month on a stretch, I think one thing we'll likely do this time is we'll put some of that into the U .S.
dollar reserve. We'll use the remaining to buy Bitcoin. And then the idea would be to issue equity above 1XM NAV or greater to pay the dividends and interest on the digital credit. right but the primary way to buy Bitcoin is by issuing digital credit put into Bitcoin pay 12% dividend and get the returns on Bitcoin of 30 40 percent um will we use MSTR to uh will we issue MSTR to buy Bitcoin uh perhaps right if the MNAV starts to expand uh aggressively and we see an opportunity but the primary way to create bitcoin to the company to create amplification and increase bitcoin brochero is going to be through digital credit

CJ (Chaitanya Jain) (Investor Relations) [1:37:27]
thank you thank you king next i'd
like to invite alex thorn managing director and head of research at galaxy

Alex Thorn (Galaxy) [1:37:34]
yeah thanks cj and thank you michael Phong and andrew for having me on here i also wanted to ask about your digital credit instruments you know strc and strf have traded back towards their face value certainly to some extent with the help from your buybacks and your cash forward i think very prudent but strd and strk are still trading around 70 and in europe str e is below 80 and it barely trades at all what are your plans for these other prefs and that aren't trading back to face value and for the one in europe are you planning to push to get it uplisted to a major
exchange

Phong Le (CEO) [1:38:12]
we'd like them all to trade strong uh the focus right now is getting stretched back to par i think we're close to that uh by the way once it gets to par and maybe to add add to my answer to king's question i think that will create a lot of confidence in the instrument uh when they see something that dislocated and came back to par within four months and actually shows the resilience of the instrument on a go forward basis.
The other thing is I do think the calendar day daily dividends will help, right? We've been told by some large institutions that want to invest large pools of capital that are currently undeployed, where they might put it into a T-bill earning 400 basis points, and they can put it into something like this and earn 12%. I think all of those types of things will grow stretch, right? And so that's priority number one. get stretched apart grow stretch so that we can buy bitcoin amplify the stock uh and create the common uh so that's sort of priority one i do think as that happens the stock goes up and as bitcoin starts to grow again that the other instruments that
you're talking about you know STRD STRK will start to grow stream will start to grow right those are ones that are more sensitive to bitcoin price STRK uh uh stretch is less sensitive to bitcoin price um so i i'm we're not dismissing those products we're focusing on stretch and then those other instruments will start to grow over time and you know we have when you think about our buyback capability it's not just limited to stretch right we could consider if the price stays dislocated on those looking at those two.
And then stream is the euro listed one is a little bit of a challenge, right? Because it's currently on a unregulated exchange in Europe, which means that it can't trade with retail. And so we need to find a way to improve and correct that product over time. So we haven't forgotten about it. But the European regulatory environment, as many probably know in the capital markets, is not nearly as easy to work with as the U .S.
regulatory environment.

Michael Saylor (Executive) [1:40:24]
I think that there's one other point worth making, Alex, which is all of those instruments dislocated when STRC dislocated. So they all recovered to a pretty similar level. I think they were all up like about 30%. So the recovery of STRC actually was correlated or led or it either dragged or it was comparable to the recovery of STRF, STRD and STRK when it happened. So they all benefited from what we're doing. Right now, our focus is make sure that STRC trades well.
But then to Phong's point, we think we're entering a new regime. So once we get into a stable point of equilibrium and then we migrate them all to daily dividends, then I think that people will probably start to give all the other credit instruments a look or more of a look. And, you know, we're optimistic about their future. They do all represent optionality for us. and so and also they all represent a good tokenizing opportunity for us and so as they get tokenized and as the market becomes more fluid you know we think that that they could appreciate in value

CJ (Chaitanya Jain) (Investor Relations) [1:41:51]
awesome thank you Phong thank you michael thank you alex next i'd like to invite pete christensen director of digital
assets and fintech services research at city

Pete Christensen (Citi) [1:42:03]
thank you good evening great to be on the call again uh michael i question is as you scale for as a business scales further you're not just allocating capital onto bitcoin but you're also increase increasingly creating new financial claims uh against bitcoin i'm just curious how How do you think about the risk that the strategy success accelerates the financialization of Bitcoin itself, introducing leverage, duration, counterparty, exposure into an asset that historically has derived much of its appeal from having none of these characteristics?
Just curious your views there.

Michael Saylor (Executive) [1:42:44]
I think I ran an analysis on institutional adoption of Bitcoin and it was like 12.2 % or 12 % or something between the Bitcoin treasury companies and the ETF issuers. And if you roll the clock back about five years, it was like 3 % or 4%. So institutional adoption has moved from like 3 % marched up to 12%. But that means 88 % of this is still either retail or native crypto.
I think it's de-risking the industry to go toward greater institutional adoption because that legitimizes the asset. that it's a it's a good thing for the asset that black rock holds some of it you know and that and every time an institution becomes engaged whether it's morgan stanley or wells fargo or charles schwab or and or anytime there's a company like ours i think that de-risks the asset because those institutions are all regulated compliant public audited you know they they represent hundreds of millions of beneficiaries, right?
Rippling through every institution in the world. So the way I look at it is, you know, if 95 % of the asset was retail, not in institutions, then you don't have a lot of strong institutional benefactors and patrons. and of course it's the institutions that represent bitcoin in washington dc and they represent it in brussels and it's the institutions that actually solve the legal issues the accounting issues uh it's the institutions that finance uh the more difficult uh development and they the institutions are financing all the security issues it's the institutions that have access to the frontier models and they can actually do cybersecurity checks with the frontier models.
Right. So so I think actually. It's a good thing, right, for institutional growth to progress. And and so I don't see it representing a risk at all. If anything, it's it's expanding the capital in the ecosystem. It's creating a constant bid. By the way, it's it's damping vol. The volatility of the asset was about 80 85 when we got into this industry in 2020 and institutional adoption was 4% and today the volatility is 40 institutional adoption is 12 and it doesn't take a rocket scientist to figure out like how do you damn volatility well one way you damn volatility is is uh there's an entire options market that formed on ibid like 30 billion dollar options market so
if you want to go and damp the volatility and and sell the volatility and and strip the upside and and then strip the downside then you then you need mature derivatives markets and so the the mature derivatives markets only exist they exist because coinbase is bringing the crypto derivatives market to the us as an advocate they bought there a bit they exist because blackrock advocated for IBIT and then all of the derivatives on top of IBIT only exists because of BlackRock and they exist because MSTR created a very large regulated derivatives market in MSTR stocks and its equity.
So I think that the institutional actors, both the funds, and then there are all the digital exchanges right and and the more digital exchanges that you know if schwab trades bitcoin that's good for bitcoin if coinbase gets bigger that's good for bitcoin right and you know what you want is lots of big companies that are very active and they're very big regulated public companies in every market, right? You want them in Japan, you want them in Europe, you want banks, exchanges, brokers, corporations, and funds, all of them to be handling the asset.
They all solve a different problem. They create legitimacy. They solve the compliance issue. I'm an investor and I live in the UK and I have money in a retirement account And the only way to buy Bitcoin is by buying micro strategy stock in the year 2020, because that's literally the only legal, practical way to do it. Right. So we're we're all creating bridges to Bitcoin. And a very complicated world, you know, where there's a lot of capital that's stranded and, you know, we're solving probably like the accounting problem.
You know, there's so many different issues that have to be solved. and no one company can do it all, but a retail investor normally struggles to solve these problems. And so I think the asset class is growing up, and it's a good thing. And what it means is the vol will fall, the capital and liquidity will increase, the price will go up, the size of the industry will go up, and the number of beneficiaries will expand, And the number of companies participate will expand and the products and services will expand.
And those are all good things. That's what you want. It's, you know, it's kind of like saying, well, an electricity business, I'm really concerned, Mr. Edison, that other companies also want to create electric motors or use electricity. or I'm really concerned, Mr. Rockefeller, that other people want to actually build petrochemical products that use oil. Doesn't that bother you? We only want, you know, retail people to have barrels of oil in the backyard. And of course, no industry is going to grow until you have thousands of companies that are doing very intricate things to add value to the base product.

Scott Melker (Analyst) [1:49:15]
the base product is bitcoin you know and you know it's like oil got financialized electricity got financialized and bitcoin's getting financialized and and uh it's not a bad thing it's a good thing right and it'll turn out to be a great thing so you know i look forward to that thanks so much very thoughtful

CJ (Chaitanya Jain) (Investor Relations) [1:49:38]
thank you pete for the last question i'd like to invite scott melker also known as the wolf of all streets. Thanks, CJ.
Thank you, everybody. So, Michael, you made a very compelling case earlier for 24 seven global programmable instance settlement on MSTR, STRC via tokenization. But in your own slide that presented that it basically said these tokens are issued by third parties and not by strategy. So there's also an irony, obviously, which is that effectively none of these products right now are even available to Americans. They're generally only available offshore. sure, and they don't actually pay the cash dividend like STRC does.
They generally rebase or reinvest in the underlying asset. And to continue on, today, it's being reported that NASDAQ is actually urging companies not to participate in tokenization. So with all that in mind, and knowing that we have a constant pendulum swing of a regulatory environment, do you have plans for strategy to issue its own tokenized MSCR and preferreds chain open to u .s investors with dividends paid on chain and if so what would allow you to do that and when

Michael Saylor (Executive) [1:50:47]
well you know it's it's an evolving industry and i would say we're kind of like year one or years somewhere between year zero and year one especially in the u .s and and we want to do everything we possibly
can to support the industry so it's we have been active participants in the offshore token tokenization world you know supporting companies like apex and saturn and and cheering them on and enthusiastically watching what's happening there um in the us you know that's an evolving situation where the protocols are evolving the platforms are evolving the compliance rules are evolving it's not clear to me that it's that that every issue has been settle right as as you rightly perceive so you know our view is is there probably isn't a single uh path there's not like a single uh token token standard you know there there are going to be ecosystems that build on bnb on ethereum on solana on on various open
chains like that there are going to be systems that probably evolve around more proprietary networks or closed networks, you know, or compliant networks. And there'll be flavors of compliance that'll have more KYC and less flexibility. And there'll probably be some walled garden token systems where you can tokenize it, but you can't take custody of it and you can't move it outside of the system. My view, of course, is that the promise of tokenization is creating a free market in credit and custody and collaboration and composition and in a completely free market.
But you know, you and I both know not everyone shares the same view of the benefits of a free market and where they draw the line on constraints. I think the short of it is you're going to have institutions like us, like BlackRock. Larry Fink's been a major advocate for tokenization. Like he's literally been giving speeches every year for, you know, he's been a he's been on the forefront of this. There are going to be institutions like us and BlackRock, and we're going to be advocating for the most powerful progressive tokenization rules on a global basis and especially in the U .S.
I think that there's not going to be one particular platform or one particular approach. We're going to work with everybody as best we can. And then I think the market is going to pick a set of approaches it likes, but it will be a hybrid process where it'll be a dialogue or a dance between the regulators. And you'll see TradFi. There's a TradFi view, which is more conservative. There is a digital assets view, which is more progressive.
There are going to be progressive regulators. in certain jurisdictions and there are going to be less progressive or regressive regulators in other jurisdictions, we're going to be enthusiastically working to polish our securities or to structure our securities to make them the best products we can possibly create. I can't tell you what kind of digital assets initiatives we'll take now before we take them. but I think you can be sure that we're studying the entire market, you know, in every way.
And we're asking the question, what do we, what do we need to do? What kind of securities do we need to create that are optimal for token to be tokenized? Can we change existing securities to make them better for being tokenized? How can we support digital exchanges and, and innovators? I mean, there's a whole industry of innovators, right? There are the people that are tranching risk, the people that are creating tokens, the people that are trading them, there are the exchanges, the custodians.
We're talking to all of them, and we're trying to figure out how we can best be constructive and supportive in a responsible fashion. If I knew the answer, I would give it to you. But I think that as soon as we have concrete offerings for U .S. investors, you'll find out from us. And meanwhile, this is one of those things where you grind the AI really hard and you have to find what's the right legal solution, the right compliance solution, the right practical solution, and the right economic solution.
And then you have to figure out how to do it without fragmenting liquidity or creating fragility or new types of risk, right, or layered risk. And that makes it complicated. So we're enthusiastic and we're optimistic, but I really think the elephant in the room here clearly is that the U .S. capital markets have not converged on a tokenizing standard and a set of norms yet. And the market participants are all working their way through that. But I would also say the next 12 months, I think we'll probably see a set of standards evolve and a framework and a structure.
And when it happens, it'll happen pretty quickly. Thank you, Scott. That concludes the Q &A. I'd like to thank all the guests for the questions and all the attendees for joining in live. I believe we had over 50 ,000 people across various live streams. I'll now turn the call over to Fung for any closing remarks. Thank you CJ. Thank you to the guests who joined us today with your thoughtful questions. Thank you Andrew for your service to the company over the last four and a half years and thank you to everyone that joined us this evening for our Q3 earnings call.
I look forward to seeing everybody again in about three months and take care.