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- [00:01]
A
Welcome back to the hurdle rate episode 51 for the week of March 16, 2026. I'm Tim Kotsman. I'm here with Jeff Walton, Ben Workman and Matt Cole. We have strategy coming out of the gate this morning with a bitcoin purchase of over 22,000 Bitcoin. We have oil markets swinging wildly as geopolitical tensions escalate across the Middle East. And we have digital credit products such as Stretch and SATA creating a new narrative in the bitcoin treasury space. I'm going to hand it off to Jeff to cover some Strive updates. Yeah, thanks, Tim. We've got some exciting updates here. We published this presentation last week ASST And SATA update, and we're excited to go through a bit of it with you guys today. We're going to talk through some of the updates that we've made to the SATA instrument and an ASST update at the very end. And then after this we'll, we'll dive into kind of the rest of the market and things that are evolving and things that we're seeing. So without further ado, let's just jump into this thing. Quick disclaimer if you have time, take a, take a read at this and maybe I'll pass it over to Matt for a update on Strive and everything we've got going on.
- [01:13]
B
Yeah, thanks, Jeff. So when you look at all of these updates and there's quite a bit here, right, we, we raised The SEDA dividend 25 basis points to 12.75%. We narrowed in the range of SEDA from 95 to 105 to 99 to 101, which mirrors stretch. And then we also updated guidance that we're not going to issue SEDA below 100. We bought more bitcoin. We put a portion of our cash reserves into stretch $50 million. And then we announced that our dividend reserve for SEDA was increased to 18 months and put it all together and said we could cover SEDA interest payments with our balance sheet for over 19 years at current bitcoin prices. Now that's already getting stale because bitcoin's up. So we haven't rerun the numbers there. But the point being is that look at the strength of the balance sheet here and you think about what Strive is trying to do, what Strategy is trying to do. We're a structured finance company and you really have to orient your mind in that. The most important thing for a structured finance company like Strategy or Strive, it's the success of their preferred Equity instruments. And so the success of SATA. And so we are going to, as a company still on the bitcoin standard, right. Think about bitcoin as the hurdle rate. What we need to do to get the flywheel going is peg SATA to 100 and similar to what Stretch is doing. And so I think in the old mindset pre prefs, you would think about every single transaction is what is the yield of this? And I think you need to start to update your thinking into does this improve the balance sheet strength of the company to support the product SATA that the company is selling? Because if this product is the iPhone moment that we think it is, the most important thing that a company like Strive could do is support SATA. And so we're going to take every single step that we have to take to make sure that we peg SEDA@100. And you know, our view is that risk is mispriced. You hear Jeff talk about it all the time, right. That, that the interest rate that SATA offers, that Stretch offers, it's higher than it should be because traditional finance, and take as an example, S and P, they give no credit to the bitcoin held on the balance sheet. Right now that's also the Basel framework. It's extremely punitive to bitcoin holdings. Well, that is the opportunity for people that are buyers of SATA or a product like Stretch. Right now we're going to go out there and we're going to tell the world. But the reason that this still works is because of the potential future upside that we see in bitcoin. Right. And so what you're seeing here is us taking SATA to the next level. And we think ultimately that's going to accrue really handsome and nice bitcoin yield to our common equity investors over time. But right now it's about balance sheet strength.
- [04:16]
A
Yeah, we're laser focused on credit quality of our balance sheet and establishing and building that long term track record that Matt, you talk about all the time that we need to build over time and Right. I think now we've paid, I believe it's four dividends in a row. We're on our fifth year coming up, I think as of today, fifth dividend paid and continuing to build that track record over time and grow the credit quality of the balance sheet both financially and out into the marketplace and how we are communicating to this, how we are communicating our product to the market and the credit quality of our product to the market. So yeah, it's exciting times. Great update. And let's jump into the next page. I'll take, I'll take this one, Ben, and we'll, we'll have you pop in here. So we've updated the stated range. So the previously our stated range was 95 to 105. It was a bit wider and we've updated that to 99 to 101. So we've tightened the trading range. Recognizing that our balance sheet is maturing right. We went through the process and acquired similar. Our balance sheet got much larger. We increased the notional outstanding on our perpetual preferred instrument. We've now at 427 million of SATA outstanding. And we view that our ability to update and keep that, that range tighter into the future is possible. And that is our goal, is to keep it between a 99 and 101 band. Right now it's trading a bit below, I think 97. But our communication to the market is that we also do not plan to issue new shares below $100.00. Again, that's a bit different than in the past where we, you know, our IPO, I believe was at $80. And we issued a follow on offering to retire the similar debt as a result of that acquisition that we made earlier this year. So going forward, this is our trajectory. This is where we're headed.
- [06:10]
C
Yeah, I would just add, you know, this has been kind of a blistering pace. We've been in the public markets here for seven months. And to what Matt was saying earlier, where you have to focus on building the foundation underneath your company to be able to issue your core product. And for us, that core product is SATA. And so when you see the tightening of this range now, now that we've gone through all the cleanup items, now that we've established the foundation on our balance sheet, what we want there to be is no ambiguity about what we're trying to do. And we're trying to peg this at par. We want this instrument to trade at $100. And this is one of those first steps to bring that clarity. The second thing is when we did the follow on, we also went and had conversations with our investors and we asked them what were they looking for, what would they like to see in these instruments and this update in totality. And there's several more things for us to talk about in here is about bringing that clarity into the market and making sure that everyone has a full understanding of what it is we're trying to do. The 95 to 105 range coming out of the gate was understandable. With the investors. But what they really want to see here is us pegging this thing to par, and that's exactly what we're trying to do. So we're giving guidance now on this, which says we're not sellers below $100. $100 is the target for us. And that's what we're going to be focusing on with seda.
- [07:42]
A
Just add, you know, we've seen how Stretch has performed in the market as well, and understanding that they're, you know, they're able to keep this at a really relatively tight range at a significantly larger notional outstanding. It gives us a guide to what we see is possible in the marketplace.
- [07:58]
B
Yeah. And maybe just looking at Stretch for a second, it's important to realize, I mean, they launched Stretch in July of 2025, and this last week was, and we'll get into this later, even more a banner week for Stretch. But we are, for them about getting on eight months into Stretch, right? For, for seda. We launched SEDA in, in November. So we're about four months in. So we're about, you know, four months in, kind of track record building process behind Stretch. I think one of the advantages that we'll have is that we're able to point to some of the success that Stretch has had. But I think all of these things are about building a track record. Right. When Stretch launched, strategy did not have a cash reserve. Now they, they have a cash reserve. Right. They took steps, they raised the interest rate of Stretch, did things to ultimately peg it to par. And with strive, you're seeing similar things, right. Like we've already doubled the size of SATA from our ipo. That's already been achieved. I think Stretch right now also about doubled the size of their ipo. Right. So these novel instruments, I think the market's still learning to digest them and to even digest an issue or telling you what they're going to do to protect the price of an instrument. That is a novel concept in this space. And, you know, these, these steps are steps that ultimately, I think, improve the balance sheet quality. And, and, you know, we're, we're obviously, you know, we view the risk to be mispriced, but that doesn't mean we're not going to take the steps necessary to, to peg this thing apart.
- [09:41]
A
Let's hit the next one, maybe. Ben, over to you. Digital credit treasury allocation $50 million stretch purchase this was, this was big news. We, we got the retweet from Saylor. We are viewing our balance sheet. We believe this is the modern balance sheet. Right? Let's talk through it.
- [09:59]
C
We do, yeah. I mean, I think the way that corporations are looking at managing their Treasuries is going to change as a result of these products coming into the market. And with us being directly in the space, I think it's important for us to lead that charge. And that's what we did. When you look at your balance sheet and when you look at the capital that you're holding in your treasury, we have two different sides to our balance sheet. One side is the Bitcoin holdings. That part's easy, right? That stays in Bitcoin. The other side is the cash reserves that you're holding. So whether it's reserves for dividends, reserves for operations, whatever that may be, you're holding significant cash on your balance sheet as well. And so you have to think about what is the optimal structure for how you're going to manage that portion of your Treasury. And for us, originally, that cash was being held in T bills. And that makes sense when you look at short term capital. And I think that's something that's starting to get explored more. You'd heard Saylor talk about how he kind of viewed anything that was one to four month capital should probably be in cash. Anything that's slightly beyond that could be in things like T bills. But when you get out beyond a year, now you're into that midterm and long term capital. And so as a corporation, you have to look at the way you're managing that capital as well to figure out whether you're adding or detracting value from your organization. And so what we looked at was the fact that we expect to have these dividend reserves in place on our balance sheet. We need to think about what is the best way to maximize the value of that capital to our shareholders. And for us, what you can see on this slide is that it's an absolute no brainer for us to also adopt digital credit as a part of our treasury management operations. If you take 50 million and you were to put that into treasury bills, that would yield you 1.85 million over a year at a 3.7% rate. If you take that same $50 million and you put it into stretch, it yields you $5.75 million. And so a slight change in the way that you're managing your treasury yields a positive $3.9 million to the organization. And that capital is valuable because that's things like extending the Runway on dividend payments that funds things like operations. It makes A material difference business. And this is the mindset shift that I think is coming for a lot of organizations here probably over the next year. Digital credit still in its infancy.
- [12:28]
B
Right.
- [12:29]
C
For the products that I believe corporations will use as treasury management tools, which I would put Stretch and SATA into that bucket because of that push to peg those to par. This is a material shift that corporations can make that can make a real monetary difference to their business, particularly for any corporations that are used to holding longer term capital. So we wanted to be a leader in this space. We wanted to be one of the first ones to show up and say we're changing the way we look at our cash treasury management. And because we've already underwritten the risk on digital credit for our own business, we're completely comfortable taking this position and utilizing Stretch as a core part of our treasury management. So I think this was a really large and important move for us. And the reaction in the market was overwhelmingly positive here. People seemed to really like this. We were kind of laughing when the print hit the trade tape out there. The question was how long before people spot it? Right. You're always curious how close are people paying attention to the trade tape for these instruments? And Matt, I don't remember the timing. I think it was sub one minute before you started seeing tweets out there where people were picking up on this trade. And then subsequently we saw actually another, almost identical trade hit the tape I think on the day following. So there's big trades starting to come into the space. There's a lot of attention starting to be paid to these digital credit products. And I think Saylor was right when he says that Bitcoin for corporations are the stable style of digital credit instruments. So I do believe we're going to start seeing continued adoption of these, making their ways into Treasuries.
- [14:12]
B
Yeah. And one of the things that I tried to lay out for the market for people that are newer to watching how an organization runs its balance sheet, was comparing this to the commercial paper market, which is about a $1.5 trillion market. And it's basically corporations like Apple, Google, Ford issuing, they issue short term debt into the market. But what's interesting about those companies is that they also buy the commercial paper of other issuers. And so the innovation in what we did with Stretch is taking a known and accepted and widely used source of balance sheet management on the asset and liability side for traditional corporations and apply it to the digital credit era. Right. And you think about strive as an issuer of digital credit with SATA. Well, we have a lot of assets that we're sitting in cash to manage our liabilities, primarily our interest obligations with seda. And so you're looking at those assets over the course of the next year, the course of the next 12 to 18 months and saying how do I minimize the cost on the asset side and what is the appropriate amount that I should consider into digital credit? And we thought to just start conservative and say Saylor talked about more than four months or six months, but just beyond a year. Why not put our capital beyond a year into stretch? I mean this is a short duration asset. The risk is mispriced, it pays 11.5% and you see the power of it generates an extra $3.9 million of capital for cash that we were already planning on holding. And so it materially improves the balance sheet strength ultimately. What's the right size? I mean, you know, these instruments are still evolving, but we feel very comfortable for capital that we don't need beyond for at least a year to put that into stretch as at least step one in kind of lowering the cost of capital for our company.
- [16:17]
A
Yeah, this small move increased our yield from the instrument from that $50 million by 210%. And Matt, you hit on corporations, holding other corporations. Paper. My perspective is very similar, but just in a different industry. Right, Insurance industry, they are continuously holding capital to pay out liabilities into the future. And they, they adjust their holdings based on the duration of the liabilities that are on their balance sheet. So I mean for us, we have a known liability on the horizon based on our perpetual preferred outstanding. And we can start to see a duration curve and start applying different assets along that duration curve. So for, for us, very simple balance sheet, we've got cash and cash equivalents, digital credit and Bitcoin. And that, that establishes that, that long term curve. Yeah, Low volatility, incredibly liquid. Low volatility, high yield, also liquid. And then incredibly liquid Bitcoin that sits that's powering the entire Treasury. Okay, let's go next slide. Bitcoin accumulation update. This one could be relatively quick. We now have 13,311 Bitco. We've purchased 179 Bitcoin since our last update. Our BTC yield year to date is 15%. You guys have anything else to add? Nope.
- [17:42]
C
I think that one's a simple one.
- [17:44]
A
It's simple.
- [17:44]
C
Continued strengthening of the balance sheet which overall improves the credit quality around seda. So it's just continuing to move along that framework.
- [17:52]
A
Exactly. And accumulating While many, many others are kind of stuck at the moment, which is great. Okay, SATA dividend reserve increased to 18 months. I think previously we had communicated 12 months of dividend reserve. We are now communicating that 18 months. This is on top of the $50 million stretch by we've got 12 months in cash dividend reserve and 6 months in digital credit dividend reserve extending out 18 months. Okay, I really like this one because it really visually showcases our, our balance sheet that's sitting behind our monthly dividend obligation. So we have 19 years of dividend coverage that's including cash dividend reserve, digital credit dividend reserve, and the bitcoin sitting behind the balance sheet, or bitcoin sitting on the balance sheet. And the fascinating thing here is you think about 19 years, right? Like how long is that? That's to the year 2045 from today. Think about that for a moment. To the year 2045. And you've got three incredibly liquid instruments that are protecting a monthly dividend obligation, you know, with bitcoin prices as of today to the year 2045. And that's, I think a fascinating perspective when you, when you think about, right, how is the rest of the credit market designed and structured? Right. Most of the credit market is a function of what is your future cash flows. And this is something we've talked about quite a bit over the last several episodes is as AI is evolving and changing, we're seeing companies have to evolve and get effectively one shotted with Claude or new AI every single week. It seems like there's significant risk on future cash flows as the marginal cost of doing business falls incredibly low. With the advent of AI, as these tools continue to get more and more powerful, obviously a big impact in the software market, we could see that very visually. But as robots continue to take off here, you start to conceptualize and understand that there's some risk in that market. And it's an interesting perspective looking at an asset backed balance sheet protecting a monthly dividend obligation.
- [20:17]
C
Yeah, I think this one's incredibly important. And really this is how a lot of the institutional investors are looking at these products, right? They're looking at that dividend coverage over time. How much strength is there out there on that balance sheet and to the prior slide? A lot of people might ask, well, what drove 18 months? Well, that's also coming through investor feedback. We've talked a lot over the last year, particularly through this podcast, about what is the ideal size and scale of a cash reserve. And when you look at Bitcoin's History, you see that kind of the longest bear markets you're going to see out there have been about 18 months. And so that number is not a random number.
- [20:58]
A
Right.
- [20:58]
C
That is looking at actual historical data and seeing how long do bear markets typically persist. So if you're looking at bear markets and you're looking at the moments of weakness in Bitcoin, you want to structure your balance sheet in such a way that you can ride through that without ever having to go to your Bitcoin. Right. While selling bitcoin to pay dividends is always an option, it's not what you want to do. Right. What we want to do is maintain our balance sheet filled with bitcoin, amplified to Bitcoin. And so in order to maintain that, we build in that cash buffer that's going to give the market the comfort that we're able to service these dividends through the rocky periods that we've seen in bitcoin's history. And then when you layer on top of that the additional capital that we're holding in terms of bitcoin, you see what that Runway really looks like. 19 years of dividend coverage is a very long time. And so we're incredibly proud of where our balance sheet's at right now. And I think that it shows the focus on building that strength that we've had over the last year, getting all of this in place. I mean, that's nearly two decades right now of bitcoin coverage, if not another dollar of capital comes in the door. And so I think that just shows and signals to the market that we truly are focused on building an institutional grade story here in terms of how we're going to manage our product ceta. And so we're going to continue to focus on this strength. And I think that getting to that 18 months, that was a pivotal timeframe from a lot of the institutional investors that we heard from. So we took that feedback, we heard them, we put that strength in place, and now we're ready for the growth phase here.
- [22:43]
B
Yeah. And another, I think data point to me that is interesting when you think about the 18 months of dividend reserve is actually looking at private credit. And what is the balance sheets of private credit look like? The S and P noted that at the end of last year, over 10% of companies had an interest coverage ratio of less than one times, and the average was under two times. So the average was right around 18 months of interest coverage. And so you take these, these credits that have basically just cash flows that are at substantial risk of AI and could easily fall apart in one to two years time. And you compare that versus a balance sheet company like Strive that already has 18 months of cash and cash like instruments like Stretch, but then behind that has 19 years of coverage. When you add in the bitcoin holdings and you say on a, on a risk adjusted basis, which credit is more secure? And you start to tell that story to people as private credit are putting up gates, people can't get their money out and the risk is really increasing and showing very, very clearly. And our belief is that digital credit is going to look substantially less risky. And as we go out and tell that story that they're going to see this and it's going to click and it clicks. And we're seeing this every time we go out to traditional finance investors and tell the story that they almost can't believe it. But a lot of them don't know that. And so this is a lot of balance sheet strength. To Ben's point, we're doing everything we can and we think we're in a great position to actually never even need to sell the Bitcoin. But you have to highlight this as a company to say this is what you're underwriting here. The company is saying that they're going to pay their interest. And if you're a skeptic, for whatever reason, we have 19 years of coverage. Now our belief is that through capital markets activity and through our cash reserve and stretch reserve, that we won't even need to go into the bitcoin. But it highlights the strength of the balance sheet that we've built.
- [25:01]
A
And for those listening that are unaware, interest coverage ratio is net income. It's interest relative to your net income. So how many years could your net income pay your interest? And if we think that net income is at threat that number and that certainty that underwriting that risk into the future becomes more difficult. Whereas you could think of we have 19 years of interest coverage based on our existing balance sheet today.
- [25:28]
B
Exactly. Most companies that issue in the private credit market, they have very little, little to no balance sheet. It's just relying on. On future net income.
- [25:38]
A
Exactly. Which brings us to the next slide, which is if you were a bitcoin skeptic or a bitcoin bull. So if you were a bitcoin skeptic. So what we've laid out here on this table is years of dividend coverage at various Bitcoin prices ranging from 30,000 up to 150,000 with different interest rates. Right now, SEDA currently pays 12.75% interest with a Bitcoin price at 70,000, it's 19 years of coverage. Interest coverage. If you are a bitcoin skeptic and you think bitcoin is going to fall more than 50% from here, Bitcoin's already down about, I think 40% from all time highs. If you think it's going to fall another 50% from here down to 30,000, at that point we would have nine years of interest coverage with our existing balance sheet. Now if you're, conversely, if you're a bitcoin bull and you think Bitcoin's going to 150,000, assuming nothing else changes on our balance sheet, we would then have 38 years of interest coverage. So just showing the range of outcomes and starting to think about how to underwrite this risk across different bitcoin prices into the future. And what would the future liquidity of the balance sheet look like relative to the interest obligation? Okay, I really like this slide. Dollar debasement alone covers Seita's dividend. So what does that mean? And I've brought this up with several of my friends and past colleagues just talking about the US dollar supply growth. So we've looked at the M2 money supply compound annual growth rate since 1970 and the US dollar supply has increased by 6.7%. You can look at different time frames, you can look at shorter time frames, you can look at longer time frames. It's around this, you know, 6.7 ish percent and it's pretty consistent over time. So looking at our balance sheet, what would need to be true in order for us to be able to cover our dividend and obligation with our existing balance sheet? Bitcoin would need to go up 5.8% a year for the appreciation alone to cover our dividend obligation into the future. So you think about the relative forever.
- [27:44]
B
Forever.
- [27:47]
A
Great addition, Matt.
- [27:49]
C
Forever.
- [27:50]
A
And you think about the relativity here, right? And the, the appreciation required is below the long term compound annual growth rate at which the monetary supply is being added into, into the market.
- [28:03]
C
Well, this just highlights, you know, the debasement trade, right. At a very simplistic level. So when you look at what was the value proposition around Bitcoin, at its most basic form, there's many. But at its most, most basic form, what people really identified with was a finite fixed supply relative to an asset that has no ceiling, right? They're going to print US Dollars forever. It's the way that the economies are structured. It's the way that you grow your economies. And we've seen a track record, speaking of track records, of that printing being much more significant than what people originally thought in the market. Right. When you always hear the CPI numbers that come out, it sounds like small, you know, immaterial number, 2 to 3%. But when you look back at the actual money supply growth, you realize that that growth has been much larger than that. I mean, 6.7% since 1970. And now the debt problem is bigger and it looks like more printing's on the horizon and it may need to be more significant than this. And so when you look at a business model like ours, and you look at a product like Seda, you know, backing that product with a balance sheet filled with a fixed supply asset and paying out obligations that are in US Dollars in a non fixed supply asset. This is the math that you're looking at. Right. Do you think that finite fixed supply asset can outpace the money growth? Right. What do you need from that asset? And it's pretty minimal because of the structural issues that we have out there with fiat currencies. And so I do really like this slide because it shows how little Bitcoin needs to go up.
- [29:47]
B
Right.
- [29:47]
C
This is showing that it could underperform M2 money supply growth and still pay the dividend obligations forever. Now, we don't believe that that's going to be the case. Right. The thesis around Bitcoin is likely that you're going to greatly outpace the monetary growth, but it shows how resilient we are and that we need very little to happen here to be able to fund those obligations forever.
- [30:11]
A
Yeah. For relativity, over the last eight years, Bitcoin has grown at a 43% compound annual growth rate with Bitcoin price around $70,000.
- [30:20]
B
And if you're an investor, I think you also have to look at this slide as what is your investment portfolio earning? Are you earning more or less than 6.7% per year? Because if you're earning less than 6.7% per Year, you're not keeping pace with the US dollar supply growth. And so even if CPI is running less than 6.7%, your share of the pie of the American dollar supply is actually shrinking. And that's a problem for you. And so you think about traditional fixed income investments with U.S. treasuries around 4%, you're not keeping pace with the U.S. dollar supply. And that's really a feature of the U.S. system. Right. Like they're, they're trying to issue at a cost less than the dollar supply growth. But as an investor you need to be earning more. And that's also part of the value prop of a product like Zeta is that you're earning 12.75%. And so as an investor, you can take a product that's designed to have low volatility and liquidity but offer substantially greater yields than the US dollar supply growth. And I think that as that opportunity catches on, it represents a real win win for investors of SATA, but also for the common equity investors of strive to be able to back a Bitcoin balance sheet boom.
- [31:52]
A
I'm going to pass this one over to you, Ben, to talk about Bitcoin powered credit and tax equivalent yield.
- [31:59]
C
Yeah, this shows the power of return of capital dividends, right. This has been highlighted over and over. And for a lot of investors, particularly if you're holding these instruments in a taxable account, this can be incredibly powerful because not only does the effective yield at par outpace what you've seen even in S&P 500 growth, but when you look at that on a tax equivalent basis, when you see something like 20.24%, that's very significant. And I think that this is starting to become really important out there. You've heard me talk about the fact that in our population, we have a significant portion of the population that's moving into the retirement phase of their life. These types of returns can make a material difference in a retirement portfolio that is now shifting over towards a fixed income heavy balance. You're no longer focusing on equities as much, you're shifting that to fixed income because you need that money to live off of. So when you see assets like these out there that are providing these types of tax equivalent yields, this is significant. And it's because of that return of capital tax treatment that is unique amongst these instruments. But I think what this really highlights, and you see it in the table down below, is just how much better these yields are than all these other asset classes you're seeing out there, right? A US dollar bank account where your effective yield is 0 to 4%. A money market fund which is going to be just above the Treasury's around 4%. Short term T bills, corporate commercial paper, everything is kind of in that 4% range. In order to get higher than that, you have to slide out the risk curve a little bit. And that's been highlighted recently with all the struggles that have been happening in the private credit market. So when you're reading about all the risk and the illiquidity that's out there in that market, you know for that risk, people are receiving 8% yields. Right. Better than what you're seeing in a U.S. bank account. Still not that high relative to the risk that it seems that you're taking on. So when you look at a credit instrument like SEDA offering 12.75%, it just shows how attractive this product is. And to Jeff's point earlier, with that 19 years of dividend coverage, that's from assets over already held on the balance sheet. We have the assets today. When you look at most of the corporate paper that's out there, there's disruption risk out there. And that's been getting highlighted over and over as AI has become more prevalent and as you've seen business models getting disrupted, those future cash flows are no longer as certain as they once felt. And so being able to have an instrument like SATA where you can monitor that risk in real time 365 days a year, and you can see the actual assets that are there on the balance sheet supporting that product, it just shows how different this is than everything else you're seeing out there in the market.
- [34:53]
A
Yeah, another point on liquidity, right. Just thinking about private credit, what's happening right now is the, the gates are putting up, are being put up on private credit. So there's a, there's covenants within private credit. You can only withdraw a certain amount every quarter. And once you hit that amount, basically you can't pull out any more capital. Whereas this instrument, our instrument SATA, is liquid. It's tradable on the public market. It's got a ticker next to it. There are no covenants on how much you can sell or buy on the open market, which is fundamentally different than some of these more private and opaque instruments that the, the credit market has leaned on pretty heavily in the last decade.
- [35:41]
C
And I think liquidity is one of the things people are really going to start latching onto with these instruments. I was doing some research out there and I was looking particularly in the preferred markets and what they were considering as highly liquid instruments was 5 to 15 million dollars of liquidity daily. And when you're starting to see, you know, assets like stretch out there that have had hundreds of millions of dollars of liquidity in a day, SATA on a 30 day basis is around $13 million a day already. The liquidity is becoming incredibly important. And as you see more and more of these instruments that are illiquid getting highlighted out there, it shows how valuable that characteristic is. And I think the market's going to
- [36:28]
A
really start to value that Liquidity, Totally fascinating. When looking at the other traditional bank preferred stocks. You look at J.P. morgan, Wells Fargo, bank of America, and they've got three to four billion dollars of notional outstanding on these preferred instruments. And they're trading $2 million a day. And if you have those in size at all, I mean, in order to get out of it, let's say you had $50 million or $100 million in order to get out of it, you might be 100% of the daily traded volume for months in order to transition or move that to get out of that instrument that's paying, you know, 6 or 5 to 6 to 7% effective yield, just backed by traditional banking infrastructure. So just a fascinating advancement.
- [37:15]
C
It is. And what it also plays into is how investors look at sizing their positions. And a lot of times when you look at instruments like these, what these big institutional investors want to know is that their size that they take in the instrument isn't greater than one time, the daily liquidity. They want to know that they have liquidity to be able to get in and out of that investment if they need to. And so when you start to see these instruments, and right now both SATA and Stretch have been ranging between trading 3 to 3.5% of the notional outstanding value, they're starting to see that these instruments, relative to the ones you just mentioned, Jefferson, would allow for larger positions because that liquidity is there for those larger investors to be able to move in and out of those positions if they needed that capital.
- [38:05]
A
So I think back to my past life a lot in the, in the reinsurance world, right? And like, why did reinsurance exist? Reinsurance existed to protect low liquidity, moderate duration yield instruments, right? If you had a, if you had a hurricane that comes through and hits Florida and you have a bunch of policyholder claims at the exact same time, the worst case scenario is you got to go liquidate a bunch of your preferred stocks paying you 6% or a bunch of your liquid corporate commercial paper. And that's why these reinsurance transactions, these reinsurance transactions existed. And now that these new instruments are coming out, they're significantly more liquid, I think Stretch, for example, compared to the preferred stocks. The traditional bank preferred stocks is, you know, 100x more liquid relative to market cap, which is fascinating, right? Like that completely reframes moderate duration capital management and you start to rethink like how, how do I manage liabilities into the future if I have like a more liquid instrument? And why does that more liquid instrument exist? It exists because you could calculate the relative risk 24 7, 365 and you, you can visually see, you know, the probability that I'm not going to get paid that monthly dividend. And that's just a. We are going to see, I believe we're going to see a significant change in how moderate duration capital is managed. I mean, typically, like a Treasury role at any of these large institutions is just one of the most boring roles on the planet. Right. Like you take the capital and you go buy Treasuries or, you know, you kick the, kick the capital back out in dividends to dividends or share buybacks to the shareholders. And now that perspective is changing and I think it can change because of the liquidity profile of these instruments. It's really, really fascinating.
- [39:56]
B
Yeah. One of the concepts that they teach you in finance is that of a illiquidity premium and that's priced into these instruments on this page that the private credit, as an example is that part of the return that the investors demand is because these instruments are illiquid. And it's again, it's one of those educational moments for digital credit to go out there and explain that these were intentionally built on the rails of liquidity to be able to allow for liquid transactions to take place over time with no gates allowed. And as that goes in, that will lower the cost of capital for issuers of digital credit as market participants start to price it in. And I think what's happening in private credit is going to act as an accelerant. Right. That anytime you see gates put up on capital redemptions, that raises massive alarm bells in the eyes of all the different investors that, that you can't get your capital out. And, and so it's part of that story is that these were intentionally built to be liquid instruments, right. That, that when you, when you initially talk to the, the banks, when you're like, oh, we're gonna, we're gonna build SATA as a publicly traded pref. That initially doesn't, you know, make sense to them because all the different corporations build on, on illiquid private rails. But once it's out there and people see this, I think that they're going to have a massive preference for the liquidity that's offered to them.
- [41:38]
A
All right, let's jump into last slide here, asst. Key statistics. And I'm going to pass it back over to you, Matt, just to do a quick rundown of asst.
- [41:48]
B
Yeah, so obviously we're in the market selling SATA. It's our product, it's our iPhone product. It's key to the success of the flywheel and yield generation going forward. But anybody that knows us knows that we are perpetually bullish on bitcoin, right? From a common equity perspective, all of this is being done to drive bitcoin plus returns into the future, right? That is our goal. That is the key to how we've incentivized management on a long term basis to outperform bitcoin itself. And so when we think about building asst, we want to have a very high amplification ratio, right? And our amplification ratio of 46.8% is obviously higher than strategy. It's among the highest in, in the industry. And we're working, you know, to drive our, our leverage ratio down. Right now it's 1.1%, which is kind of laughably low. But remember, we've also stated intentions to retire the last $10 million of debt from the legacy Semler transaction in the second quarter of this year. And so the goal is to ultimately drive that down to zero and have a pref only amplification structure once we're able to from a regulatory perspective. And so you look at this balance sheet and I just say this is clean. It's amplified. My view is that it's undervalued from an EVM nav perspective. But the markets have a way of fixing that. I think when, when bitcoin rips, our common equity tends to do really well. But the goal here has not changed. Right. When we started, we said bitcoin is our hurdle rate for capital deployment. And our view is that the best way to do that as a bitcoin treasury company, as a structured finance company, is by going all in on digital credit. And that's what we've done. And we're very optimistic and bullish on the success that SATA is going to be able to drive to asst over time.
- [43:57]
C
Yeah, absolutely. And you know, I think when you look at this sector in general and you look across this and you go, what would the building blocks be for a company in this space to be incredibly successful? You know, I think you need to look at a few things. First one, the foundation is that balance sheet strength, right? You need a company that has a very strong foundation under it. And that's from two different sides. That's the bitcoin out on the balance sheets, that's the reserves in place to be able to manage obligations and bring stability out there into the market. The other one that you need is liquidity in both products not just in one. So I think one of the things a lot of people overlook when they start looking around is they think that it's always price that is the indicator of what the demand is out there. And I've been pushing pretty hard recently on the fact that the demand is really highlighted through the volumes, through the liquidity of what's trading. And so while SATA has been trading incredibly well, asst. Has as well. You know, when we look at asst. And how it compares relative to the peer group, it's been doing remarkable. We'll trade between, you know, call it 35 and $50 million a day kind of over the last 30 days. And that type of liquidity is actually quite rare when you look at all the different equities in this space that are trading. And I look at liquidity in the common effectively as the momentum indicator. Right. If someone was out and executing on this strategy, and you're seeing that with strategy themselves right now, when they've got that flywheel really working, what is it that enables that company to move fast and to scale? And the X factor in that equation is the liquidity. In both of the products that they have, they're able to issue, say, it, into the market. There's a huge amount of demand. They're also able to issue their equity into the market because there's a lot of demand to maintain, you know, that balance on their balance sheet. And so when you look across the peer group, you know, one, you see very, very few dual product structures out there today. But even more rare is you don't see the liquidity profile that's going to provide that velocity going into the future. So we're very optimistic about what the future is going to look like for us here. We think that we have the right structure in place. We think we have the right product in place. We think we have the right balance sheet in place to be able to really foster the growth of our core product. And SATA, which we think to your point, Matt, is going to drive value into our common equity in a way that, you know, we all expect as bitcoin bulls. So we're very excited about what we've got here, the foundation that we've built and how we're going to be able to scale that into the future.
- [46:46]
A
Completely agree, Absolutely. It's fascinating. We've created two pure expressions of the underlying asset that's held on our balance sheet. We've got amplified bitcoin trading at a high volume, and then we've got low volatility. Bitcoin in SATA. So we've got ASST and SATA and they almost provide a barbell like view of low volume and high volume. And it's fascinating watching them trade relative to each other. But just to hit on your point, Ben, on liquidity, we've got the statistic up here on the slide, right? We've traded on average 47 million on our common stock, the average of 10 peers combined. And we got the peers down there on the bottom, excluding MSTR, is about 2.2 million of average daily trading volume. So the trading volume of our common stock is roughly 21 times higher than the trading volume of the 10 peers combined. And these are peers that also are holding a significant amount of bitcoin held on balance sheet. So it's fascinating looking the relativity, looking at the liquidity profile, looking at the instruments, and I think we have the cleanest balance sheet in the space. Right? We've got a 1.1% leverage ratio. We don't have any convertible. We've got $10 million of convertible debt left outstanding. That makes up that 1.1% leverage ratio. We don't have any, you know, margin calls or margin requirements. And we have this, you know, powerful balance sheet sitting behind our perpetual preferred equity.
- [48:16]
C
Yeah, the market has a way of telling you where you stand. I think it's one thing you can have any, any beliefs that you want, but the market ultimately is the decider. And so when you see the separation in liquidity between companies that have digital credit products versus those that don't, you know, the market's sending a pretty clear message there. And you know, I think what's really encouraging here is that on these days where we're starting to see bitcoin move a little bit, you know, the demand out there explodes in all the products, right? You're seeing the liquidity expand really quickly. So it's clear that the market is hungry for that next move up in bitcoin. And with what we've been seeing out there, with all the momentum that you saw with strategy, you know, buying 22,000 plus Bitcoin in a week, 75% of that coming from the issuance and stretch, it's clear digital credit is going to have a significant impact out there. And the market's, you know, starting to see that.
- [49:17]
A
Absolutely, absolutely. Well, that's all we've got on the presentation. Appreciate everybody's time. Maybe we'll shift over and hit on the strategy buy. I mean, Ben, you hit on it, right? $1.1 billion raised last week from Stretch, Incredible liquidity. We saw big volumes across the, across the entire week. And Saylor's talked about, I'm going to buy a billion dollars in a month and I'm going to buy a billion dollars a week and eventually I'll be buying a billion dollars a day. And we are seeing that kind of fast track here as the interest in this instrument continues to grow. But it seems like there's big buyers out there that are interested in 11.5% yield or this perpetual preferred equity backed by a stalwart balance sheet of bitcoin.
- [50:01]
C
Yeah, and listen, last week, it's kind of a unique week out of the monthly period. When you think about Stretch, what was it that drove that demand during that time period? What you were up against was the record date. So people were placing or getting their allocations prior to that record date so that they qualify for the next dividend. And so the last day that you could buy Stretch was on Thursday, which I think they traded something like $700 million of volume in Stretch on Thursday. And so it shows, you know, there is some, some cycles that are happening here within these products, particularly as you move in. You know, you kind of see those two weeks leading into the record date where you really see the growth in, in the liquidity of those products. But what's even potentially more interesting is what happens on the ex dividend date.
- [50:55]
A
Right.
- [50:55]
C
The first day where you wouldn't get the dividend. And what we saw once again was a shallower drawdown. And so what you would typically see in the past was as soon as you got past that record date, people would go and they would sell. They're already going to get the dividend. They don't have to hold the product anymore. And so you were seeing these drawdowns in the price. And with each month that goes by, you're seeing those drawdowns shallow. Right. They're going much lower or they're staying, it's staying much higher than it typically would have. And that's showing that what you're building here is long term demand. This product has a very unique characteristic, same with SATA, which is they have that high and attractive yield. And so if you're going to sell the instrument, you have to ask yourself, what am I moving it to? Right. Where am I getting an incremental benefit beyond what I'm having here? And as we talked about earlier, you know, with something like SATA, where you have a 20% plus effective yield on a tax basis, that's unique and those instruments are ones people tend to like to hold. And I think you're starting to see that now. People are starting to understand. They're understanding the structure of these products, they're understanding the stability and the mechanisms that are driving that price stability. And they're understanding the risk profile and what that looks like. And when you really dive into that, you start to feel much more secure in your holdings. And so it's not an instrument that you're going to trade with. People are trading with the common equities. Right. That's the amplified volatility of bitcoin. That is a trading instrument for a lot of people where they really like that outsize volatility relative to bitcoin. But this one, these products are valued for that cash flow component. And so I think you're going to continue to see that. You're also probably seeing the arbitrage happen where people know that the actions are going to be taken if they need to bring that price back up to par. And so the market participants are stepping in now, and maybe what they're doing is, you know, anticipating those dividends and just buying in when they can get a discount instead of waiting for that dividend to get paid out. Because you do have to take an action because there's not drip on a lot of these for a lot of the brokerages. And so there's unique market dynamics that are at play that we're going to be able to continue to watch, you know, as more and more of these dividends are getting paid out. But it's clear that the demand is there, even post that record date.
- [53:14]
B
Yeah. The thing that stood out the most to me was you think about all the capital markets activities that strategy's done so far in 2026 prior to this week. And they had generated a yield from all those activities of 1.2% prior to this week. And I think after this buy this week, it went from 1.2% to 3.4%. So over a 2% increase in yield in one week. And so why is all this work being done to support stretch on the common side? It's because of how important getting that flywheel going is. You saw what one banner week could do. Over 2% yield to the common equity investors in one week. And it's just massively powerful. I mean, it's fun to do moon math with the size of these buys. I mean, 22,000 Bitcoin, you did that for a year straight. It's over a million bitcoin. So we're talking about a Nakamoto here for strategy. If they can keep this pace in a year. So maybe this will be the year that we get to celebrate strategies 1 millionth bitcoin buy, which I think would just be a banner buy and something to celebrate for sure.
- [54:27]
A
These balance sheets are incredibly anti fragile, as we've been pointing out. Just the ability to pay dividends into the future. The liquidity profile that's sitting behind them. I mean this instrument stretches eight months old. What is it? And the price of Bitcoin is down 40% off all time high. And they're issuing a billion dollars on this instrument. And you know, historically everybody's dunked on Saylor for always buying the top. And here we are buying a billion. Here they are buying a billion dollars in a week after the bitcoin price is down 40% and accumulating 20,000 bitcoin in a week. I mean, going back to past bear markets, I think 20, 22, I think they accumulated 10,000 Bitcoin in the entire year. Now they've doubled that in a week in a bear market off 40 to 50% off all time highs. And where can this go? Right? The total addressable market for fixed income. I mean if you include real estate, I mean 300, $400 trillion potentially of total addressable market that may be interested in something like this. And so you think about the scale. Stretch has got $5 billion outstanding. It could 100x and it's $500 billion relative to a 3 or $400 trillion total addressable market. So I think there's a lot of room to grow here into the market for both Stretch and seda. And I think there's significant interest and thinking about just the trading dynamics that they've created with Stretch too. And Ben, hitting your point on how these things are trading after the ex dividend date, it's so fascinating, right, because after the ex dividend date, folks are selling because they want to rotate and get paid the dividend and go move to something else. But that attracts arbitrageurs who, who know that there's going to be demand leading up to the next record date, the next month. Right? So they know that there's a spread that they can capture to bring that from, you know, whatever that is, 99, 99, 99.90 up to 100, they can capture that spread. And worst case scenario is they're holding an instrument that pays 11.5% yield payable monthly. And you look at the relativity there, I think like the s and P500 over the last 15 years has printed 13% yield annually. So you're 150 bips off of the S&P500 on a credit instrument that sits senior in the capital stack, backed by 50 years of dividend coverage based on a bitcoin balance sheet. The relativity of this instrument and these instruments relative to the rest of the market, I think, is just the interest and the attention on these things will continue to grow as the trading dynamics and people recognize the relativities here.
- [57:27]
C
Yeah, I think a lot of people would ask themselves, well, who's going to dive in for half a percent gain? Right. Who's looking for half a percent capital appreciation? And I think what a lot of investors, and particularly the ones that are out on Twitter, don't understand is that for a lot of large portfolios, those are the small trades that can create that alpha at the end of the year.
- [57:50]
B
Right.
- [57:50]
C
If their portfolios can be in all these other investments most of the year, and then 12 times a year they step over and capture this half a percent gain that's meaningful in a large portfolio. And if you can do it in a liquid instrument, that's really important. So, you know, I think there's going to be a lot of dynamics that are going to show themselves, you know, over the next year that's going to contribute to the compression and really pegging that instrument as close to par as it's going to get because you are going to have those larger portfolios that step in and see an opportunity because of that history of how these instruments have traded with them, knowing the structure of the instruments and how the company is going to react in order to support the instrument. And it's going to create that opportunity for some of those bigger capital allocators to come in and capture those small inefficiencies in the market. And if you have to hold it for two weeks and you capture your half a percent gain, that's pretty good in a large portfolio.
- [58:46]
A
I think that's all we got. Big week. A lot of big weeks on the horizon and look forward to getting back out there and chatting with people about this. Things are evolving. Capital world is moving quickly. Absolutely. Thank you everyone for listening and watching the hurdle rate. Episode 51 A digital credit treasury for Jeff Walton, Matt Cole and Ben Workman. I'm Tim Kotsman and we will see you back here next week on the Hurdle.