Is Michael Saylor Trapped? STRC Explained | Adam Livingston

**Adam Livingston** (0:02)
I think that the market is trying to find a villain right now, and Saylor is that guy. Like, he'll be the hero in the bull markets, and then in the bear markets, you know, he'll be villainized by a lot of the community. I do think that they did make a misstep when they used that cash reserve to pay off that $1.38 billion of convertible debt. You have to think of how the market is pricing the risk of the instrument. And that's simply what it is. It's just the simple fact that right now, if you go to their transparent information, you can see that right now, the effective yield is probably slightly over 13%.
So really, at the end of the day, it's simply the market signaling to strategy, hey, in order to essentially buy STRECH, if we want to take our money, buy your equity, then we need to be compensated above 13% right now to take on that added risk.

**Danny Knowles** (0:51)
All right, let's do it. Adam Livingston, thank you for coming on the show, man.
This was a bit of a last-minute one. STRECH has been having a real tough time for the last week or so, and I thought you were the right guy to get on the call and figure out if Saylor is trapped in this trade, but welcome to the show, man.

**Adam Livingston** (1:07)
Thank you, Danny. I've been a long-time fan of the show, so thank you so much for having me. You texted me last night at close to midnight my time. I have a new kid at home. She's about seven weeks old, and I thought, will I get some sleep? Will I be sleep-deprived? Can I even articulate my thoughts? But we're going to give it a go, so thanks for the invite, man. I'm a huge fan.

**Danny Knowles** (1:25)
No, thank you for pulling this out of the bag. That's impressive. With a seven-week-old at home, I don't know if I'd have said yes to that, but thank you for coming on the show. So I want to start with the stretch thing. It's trading at like 88, just under $89 right now, way below what's meant to be par.
How big a deal is this? Is this an existential threat to stretch?

**Adam Livingston** (1:48)
It depends on how you define existential threat, of course, but in my opinion, no. Ultimately, it's an equity. It's a credit-hybrid equity thing. It's a credit-like instrument and equity wrapper. So you have to think of how the market is pricing the risk of the instrument. And that's simply what it is. It's just the simple fact that right now, if you go to strategy.com and you go to their transparent information, you can see that right now, the effective yield is probably slightly over 13%. So really at the end of the day, it's simply the market signaling to strategy, hey, in order to essentially buy stretch, if we want to take our money, buy your equity, then we need to be compensated above 13% right now to take on that added risk. So what a lot of people do fail to understand though is that there is no stable coin peg. I do see a lot of fud about this peg that's broken. And to be fair, I do think there is somewhat accuracy with the term because they have something that they call the par stability mechanic, I think is the actual phrase that they use. And at the end of the day, it's simply that, hey, we're going to raise the dividend based on our volume weighted average price guidance every single month. If there's too much volume, if the VWAP below a certain price, then we'll be more than happy to raise the dividend. I expect that we'll see that. And then on top of that, once the stock actually trades at $100 or above above that par value, on the other end, you have strategy there issuing more shares into the market. So I think a lot of people forget that if that ATM at the market facility wasn't in place, then the effective yield would actually be driven down a lot more because of the demand. So there is a par stability mechanic, but I do think there's a lot of people that don't understand whether or not it's like a stable coin TeraLuna peg. I think that there's lots of comparisons made.
But no, I don't see anything wrong with it. It's just the market saying, hey, we want an additional percent to be compensated for holding this thing.

**Danny Knowles** (3:46)
So, I mean, it's not the first time that it's traded below that par value of $100.