The $60 Billion Bitcoin Bet | Strategy CEO Phong Le

Phong Le, CEO of Strategy, joins the show to break down exactly how the world’s biggest Bitcoin treasury company works. The Bitcoin-backed credit markets, the preferreds, the leverage, and how Strategy keeps buying Bitcoin in bull and bear markets.

We dig into how MicroStrategy pivoted during 2020, how Phong and Michael Saylor built the Bitcoin treasury model from scratch, and why Strategy believes Bitcoin is still radically undervalued. Phong explains Strike, Strife, Stride, and Stretch, how these preferreds create Bitcoin yield, why they work even when price is down, and how Strategy thinks about dilution, MNAV premiums, and raising billions without selling sats.

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Phong Le: https://www.linkedin.com/in/phong-le-b53520

Episode Transcript

(00:00):
You're questioning, you know, what's happening in the world.

(00:05):
You're questioning the role of government.
It was a dark time and searching for something that brought a little bit of light was, it
was easy.
People are trying to do mental gymnastics as if the policy scheme is extremely dilutive.
I raise a billion dollars of strife.
Day one, there is zero dilution to the shareholder.

(00:25):
I turn around and I buy a billion dollars worth of Bitcoin that is 100% accretive. Just like we were turning people on to Bitcoin-backed debt, now we're turning people on to Bitcoin-backed credit and we're just getting started.
I think for the foreseeable future, we're still talking 50-40% annualized returns over a four or five year period.

(00:46):
Non-sovereign has limited supply.
People in Australia, people in the US, people in Ukraine, people in Turkey, people in Argentina, people in Vietnam and South Korea.
Everyone likes Bitcoin.
Welcome to Australia, Fon.
Thank you for having me.
Well, I've been talking to your team about doing this show for a little while.

(01:09):
The plan was for me to go out to DC and do it.
And then this fell into our lap.
I know.
Why not do it while you're here?
And you're here on a very important day.
Do you know that?
No, I didn't.
Today is the start of the ashes.
Okay, which is?
One of the biggest sporting events in the world.
It's where England play Australia in the cricket.
They do five tests.
So five games.
Yeah.
Each game is five days long.

(01:30):
Oh, wow.
Over the next two months.
It's a big deal.
I need to get into cricket.
I like sports in general.
yeah what's your sport uh so i growing up in the u.s american football basketball you can tell from
my stature i played a lot of basketball i actually did play a lot of basketball i still play basketball
every sunday morning i get together with a bunch of guys nice and uh and that's my game yeah cricket

(01:55):
is a funny one it's one of the hardest sports i think to explain especially to an american where
it takes five days to play and it can still end in a draw like it's the most english game of all
time, I think. Well, you know, the funny thing is, so, you know, my parents were immigrants to
the U.S. My mom likes sports. She never could figure out how baseball works. She's like,
football, I get it. You know, you go to one end zone, you go to the other end zone, basketball,

(02:18):
you throw the ball in the hoop, soccer, you kick. Baseball, you explain to somebody, four balls,
three strikes, you run around a diamond, only one direction, not the other direction.
Somebody throws, it doesn't make any sense. So cricket probably feels the same way.
Yeah, I think cricket is very similar.
But this is not a cricket podcast.
We're here to talk about Bitcoin and strategy.
I'm really interested in your background

(02:39):
because I know you've been at strategy for quite some time.
Took the CEO role a few years ago now.
But what got you here?
What were you doing before this?
I was, so most folks know at this point in time,
originally MicroStrategy was a data and analytics software company.
We still are a data analytics software company.
Part of the reason I'm here in Sydney is I'm joining some of our software colleagues because we have quite a few big customers in this region.

(03:07):
And so my background is software engineering.
My undergrad was in engineering, and I'm a data software analytics person, just like Mike was.
That's how I joined MicroStrategy in 2015 as CFO, intersection of technology and finance, undergrad in engineering, business school.

(03:29):
And so you think about engineering and finance, and you go to data and analytics, but you can also pretty quickly go to Bitcoin.
And when, so that was going to be one of my questions is, were you into Bitcoin before Michael came presumably to the board and announced the initial plan in 2020?

(03:50):
I was aware of Bitcoin and not deep in it at all.
And I still remember it was March of 2020.
Michael brought me into his office.
And this is right after COVID.
Nobody could go to the office and they let people start going again.
And he's like, Fong, I have something really important to talk to you about.
And he's like, I don't want you to jump to any conclusions.

(04:13):
I don't want you to just let me tell you, what do you know about Bitcoin?
I said, not much.
And he said, I think we should consider it.
And he said, now, here are a bunch of things for you to go watch and read.
and once you've done that, why don't we get back together
in a few days and tell me what you think.
And that was the beginning.
And so when you went off, he's almost like giving you your homework,

(04:33):
you went off and read these books and listened to whatever.
What was your kind of gut instinct
of this being a good idea for the company or not?
Well, so before we even went into what to do with it,
I just thought it was fascinating, right?
Like this whole idea of, you know, again, being a software guy,
decentralized computing. Fascinating. Blockchain, fascinating. Store value, I didn't even sort of

(05:01):
quite go there yet. It's just really the technology, the white paper. And it was, you know, I wasn't
staying up until four in the morning watching, you know, videos, but I was consuming five,
six hours a day. And the more I, you know, and there wasn't a lot of great content in 2020.
Like people forget. Hey, we were around. You guys are around, right? But there,

(05:22):
Like now you can literally find tens of thousands of hours of content.
Back then, there was no mainstream, right?
It's not like the Wall Street Journal was writing about it.
It's not like Morgan Stanley had a report you could pick up.
It was just a bunch of random people.
And so it was absolutely, and this was right in the midst of COVID too.

(05:48):
So you're questioning what's happening in the world. You're questioning the role of government. You're questioning, you know, back then, I would say in March, not many people had made a conclusion that this is a reason to shut down the NBA or to close down offices and buildings or not.

(06:09):
And so it was a dark time and searching for something that brought a little bit of light.
It was easy.
It was easy to find something that was interesting to read about and learn about it.
Yeah.
And so I'm interested what happened from that sort of initial conversation to then making the move to doing everything that strategy has done since then.

(06:32):
Because I know in the early days, Michael would talk about the cash you had on the balance sheet and it just being a melting ice cube.
So was the initial thing to just turn that cash that you sat on into Bitcoin before doing everything you've done since?
Yeah, the initial thing was absolutely think about it as just a buy and hold Bitcoin strategy using excess cash from the software business. So we had about $600 million at that point in time on our balance sheet. And in addition, we were generating anywhere between $75 and $100 million of excess cash from our software business a year.

(07:09):
and you could imagine going from,
call it $600, $700 million
and then another $100 million a year,
that would have taken us a lot of time
to accumulate the Bitcoin that we have.
We put about, I think, $45 billion
into Bitcoin at this point in time.
But at that point in time,

(07:29):
in August of 2020,
the idea that we were going to lever the company,
go to convertible notes,
secured notes,
Bitcoin-backed debt and then prefers was not something that was on the table.
I do remember, though, that we talked about it for a month or so, and Michael showed me this

(07:52):
model he built in Excel that projected if we bought Bitcoin and Bitcoin went up a certain amount
and we traded at a certain premium to NAV, what the stock price of strategy could have been,
looking three, four, five years out.
So we built the model.
I played around with it.
We made some adjustments to the assumptions.

(08:13):
And, you know, if we were to look at that model now,
we would have broken the model.
To the upside.
To the upside.
That's amazing.
And I remember we had a couple of laughs.
I was like, oh, well, that would be nice.
It's funny because I remember that time
because it was maybe just before Block announced
that they were buying Bitcoin.

(08:33):
Obviously, Tesla bought Bitcoin.
space exports um there was a couple other sort of edge cases i think rougher and uh mass mutual i
think was the other one around that time that but i expected this to be like a corporate gold rush
to a bitcoin and it took quite a few years for that to actually play out did you expect once you

(08:54):
made the initial announcement this would move much quicker than it has done yeah so we made our
announcement August 10th of 2020. Square, now Block, made their announcement a couple months
later. Tesla, I think, in March or April of 2021. At the same time, Elon said that SpaceX had done

(09:15):
the same. Overstock did this in 2012, so kudos to them. And we ran our first Bitcoin for corporations.
I think that might have been May of 2021.
And we had thousands of people show up online.
This was virtual, of course.

(09:35):
And when that occurred, I remember thinking to myself, the floodgates have opened.
And interestingly, off the back of that, I probably talked to, in the course of six months after Bitcoin and for Corporations,
two to three dozen public company treasurers, CFOs, CEOs.

(09:56):
And so I figure I'm talking to them all.
And I remember talking to our team, talking to Mike and saying,
I talked to this person, this person, this person.
They all said they're interested.
And the year went along, 2021, Bitcoin goes up to, I think,
67,000 at some point in 2021 at the end of the year.

(10:17):
and I figure everybody just missed the boat.
And why didn't everybody announce like we did?
So yeah, I thought the floodgates were going to open
and they didn't in 2021.
It was a little disappointing.
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Yeah, and then I guess with the FTX stuff that happened that year,
that will have put people off for a couple of years
while they kind of reassess.
And then, I mean, everything you've said so far,

(12:58):
I want to get to in more detail,
but the way that this has now evolved
is like strategy has an underlying business that makes money.
It's obviously become more and more about the Bitcoin side of the business.
But a lot of the companies that are doing this kind of pure play treasury thing
don't really have an underlying business.
Has it surprised you the type of companies that have come along

(13:19):
putting Bitcoin on the balance sheet?
It has.
And the underlying business by itself isn't necessarily required,
but it brings a lot of advantages.
We've been a public company since 1998.
We're a well-known seasoned issuer,
which means that we can add an ATM
without regulatory approval from the SEC.

(13:42):
We have a finance team.
So we have, in our software business,
in our total business today,
we have about 1,500 employees.
10 focused on Bitcoin, 1490 on software.
Within that 1490,
we have a team that creates websites,
you know, that manages our website.
So creatingstrategy.com,
we just had people who could do that, right?

(14:02):
We have a finance team of about 100 people.
They know how to file SEC reports.
They know how to talk to analysts and investors.
They understand the capital markets.
We have a legal team of about 35 people.
They understand, again, sort of governance, SEC reporting.
We've been creating products since the 1990s, right?

(14:26):
Our prefers are common.
They're products, right?
And so we know how to market them.
We know how to distribute them.
So the advantage of having the operating company,
one is the already there since 1998, right?
22 years of being a public company, established,

(14:47):
knows how to file SEC reports.
So all the corporate governance exist.
Yeah, all the processes are in place.
Everything runs.
And we have people who can do all these things,
finance, legal people.
Mike's been a public company CEO since 1998.
I've been a public company CFO since 2015.
So the contrast with what we have,
the operating company is useful, right?

(15:09):
But all of the processes and the people and the expertise.
And now you look at some of these Bitcoin treasury companies,
they don't necessarily have all of that, right?
And so there's clearly a contrast of maturity and capability
and ability to execute
that some of these Bitcoin treasury companies don't have.
So Semler Scientific, who was the second one, they had an established business, right?

(15:34):
Eric Semler is an established entrepreneur.
And so there's maturity there.
Yeah. And the interesting thing, sort of going back to those companies that followed you initially,
block aside, most of those companies have not treated Bitcoin in the same way that you have.
Like, obviously, Tesla sold some, Ruffa, I think, sold some of theirs.
Like, for a few of them, it was a trade, whereas this is something you've built your business around.

(15:57):
But I'm interested to know sort of how important the underlying company is now, because you're obviously CEO. You have to, I guess, wear two hats where you have the Bitcoin side of the business and you have the actual operating side of the business. Like, how important is it that you retain that?
So of the 10 or so people that work on Bitcoin, I would say there's probably three that straddle.

(16:21):
Myself, our CFO, and our general counsel.
Everybody else is focused on Bitcoin.
There's a couple of interesting attributes of our operating business.
One is we're characterized as an operating company as opposed to a financial company.
Now, because we have Bitcoin on our balance sheet as a commodity, that's still okay, not a security.

(16:42):
But that helps structurally.
The other thing that we stumbled upon more recently is we have negative taxable earnings and profits.
Our software business, although generating and operating profit because of some of the other characteristics of it, equity, stock-based comp, we have negative taxable earnings and profits.

(17:05):
Because of that, our preferreds and the dividends we pay on our preferreds are return of capital.
What that means is if you own our prefers for most jurisdictions around the world, because we're not paying the dividends out of profits, we're paying the dividends out of our capital, it's tax deferred until they sell the underlying.

(17:28):
It's a huge deal, right?
So normal dividends are taxed, I call it a 15-20% tax rate, capital gains in the U.S.
and that's at a federal level.
You add state and local taxes on top of that,
it get as high as 20, 25%.

(17:48):
And then you take,
if you have a money market or ordinary income, right?
Like your compensation for your job,
that's taxed in anywhere between 30 to 40%,
call it 30 to 37% at a federal level.
You add all the taxes on top of that,
you might be paying 40, 50%.
You live in New York City, 55% tax rates.
Okay.

(18:10):
what we have in our preferreds paying 10.5% like a stretch, all that taxes differ. Meaning you only
have to pay the taxes if you sell the underlying. If you hold the underlying, you're getting 10.5%,
but on a tax equivalent basis, that's 17, 20, 23%. It's quite magical. And that's partially because

(18:31):
we have this underlying operating business that generates negative taxable E&P.
That is interesting. So I do want to get into the preferreds. But just before we do that,
Um, in 2022, is that when you became CEO?
Uh, 2022 was when I became CEO, August.
Okay.
So when, when Michael came to you, he was gonna step down as CEO,
go to executive chairman.

(18:51):
Yeah.
Um, what did you think?
Because for me, obviously from the outside looking in, it seems like
there probably very few CEO roles that would come under more scrutiny than this Because what you doing is so novel people don understand it yet Like everyone watching you and either waiting
for you to succeed or fail, I guess.

(19:12):
Yeah. Look, I'm a pretty ambitious guy, right? And so being the CEO of one of the
most interesting, if not the most interesting company in the world is an ambitious position
in a vicious role.
This is, you know,
most public companies
have a succession planning process.
So it's not like August 2022,

(19:34):
he comes to me and says,
hey, Fong, guess what?
I'm going to step down.
Tomorrow you're going to be the CEO
and I'm going to be executive chairman.
Right?
And this is something
we've been talking about
for multiple years prior to this
and the board too.
And it's part of a thoughtful
succession planning process.
and you know it made sense michael wanted to spend 100 of his time focus on bitcoin strategy

(20:00):
bitcoin advocacy and our bitcoin treasury business and i had been working and running
the software business i was already president running the day-to-day of the software business
so it made logical sense to have that delineation of responsibilities now the reality is not not
really that much changed day to day. Day to day, I was already running the software business. I was

(20:27):
already executing on the Bitcoin strategy. And Mike was the evangelist and the one who established
our Bitcoin strategy. So from July 2022 to September 2022, not that much changed. The irony
of it all, of course, was this was during the middle of Bitcoin winter 2022. And people were

(20:48):
like, oh, you know, Michael stepped down as CEO.
It must be because Bitcoin's not doing well
and our stock was, no, it had nothing to do with that.
This was just part of the succession planning process.
But I mean, it's a hell of a role to step into,
especially at that time.
Obviously, the company in the following year
has done really well.
And maybe it'd be worth going through
what's happened from that very initial purchase

(21:10):
to like the convertible notes that you did
and now into the preferreds.
Like, how have you thought about that whole process?
Yeah, so once we launched our strategy in August 2020, our equity started trade up, initially up to, I think at that point in time, and this was pre-split, I'll use the post-split numbers. We started off at about $12, and we saw our equity value go up to north of $600, $700. Actually, I think it was $200, $300 in December. So it was already doing well, 2-3x.

(21:41):
And so once we knew the strategy was working, we wanted to access capital. And that's where the convertible bond market is fairly easy to access. You can decide one day that you want to raise money and do it in two, three days.

(22:01):
because the people who are part of that process,
you know, primarily hedge funds,
and some are along only,
they literally can get a call a day
and deploy hundreds of millions of dollars of capital.
And convertible bonds were primarily used
for high growth companies, tech companies,
at that point in time, biotech companies would access it

(22:22):
because as long as the stock, you know, had appreciation,
the potential for appreciation, you can get pretty good terms.
And so we went into that market
and it was pretty quick, easy money.
And we did our first in December of 2020.
It was around $600 million.
And then we did our second in Q1 of 2021

(22:43):
and it was $1.05 billion.
And that one, we got 0% interest rates and up 50.
And we started to really aggressively go after that market,
the convertible bond market.
That was what we were aware of at that point in time.
And then we did a securitized note, securitized by the software company. And then we did a Bitcoin-backed loan with Silvergate. And throughout this process, as we started to learn how the capital markets work, we realized that the convertible bond market, although flush with capital, is really a small illiquid.

(23:25):
illiquid. The bonds don't really trade after the market every single day. Retail doesn't have
access to it. You have to be a qualified institutional buyer. And of course, what do
these hedge funds do? They buy your bond and they go short your equity. Yeah, just hedge out the
risk. Yeah, which creates some volatility, but it's not great for the long-term equity holders.

(23:48):
Now, if you turn around and you buy an asset that's appreciating at 50%, it's good for everybody.
but the pricing and the spreads were quite wide.
And so, and, you know, the duration risk still exists, right?
Even if you pace it out four, five, six, seven, eight years,
there's duration risk in terms of
when these things are going to mature.
And so we did that for two, three years.

(24:10):
We ended up being a monster in the convertible bond market, right?
I believe last year, 2024,
we were something in the range of 35%
of the entire convertible bond market in the U.S., right?
We were the biggest player.
And in an illiquid market with very few buyers,

(24:30):
with no access to retail,
if you're 36% of the market,
you've essentially tapped out the market.
And we needed more access to capital
in a liquid market where retail can get in.
And that's where we found these preferreds.
And preferreds are called hybrids.

(24:51):
They're technically equities, but they pay out a coupon that looks like debt.
And we started that this year.
I mean, it really wasn't that long ago, January of this year, and we raised around $7 billion
from that.
And we're just like we were turning people on to Bitcoin-backed debt.
Now we're turning people on to Bitcoin-backed credit, and we're just getting started.

(25:12):
So was Strike the first preferred you did?
Strike was the first.
And the reason we did Strike first is it was a convertible preferred.
So we seeded that with the convertible bondholders.
They're like, hey, I love buying anything that has microstrategy behind it.
And so if you give us a convertible preferred in January this year, we consider entering it.

(25:35):
And when we started this in January this year, all the banks said, you can't do this.
It's not going to work.
The preferreds are a very different type of market.
And we just sort of went along.
but we had to seed it with a lot of these hedge funds
who were typically purchasing our convertibles.
So that's why we did it as convertible preferred,
is it looked more like some of our convertible bonds that we had before.

(26:01):
Okay, can you explain the preferreds to me
and the reason you've done each of the four of them?
Because I'm no expert in this at all.
Obviously, it started with Strike, Stretch is the most recent one.
And people talk about you building out sort of a yield curve on Bitcoin with this.
Will you explain that to me?
Yeah, so we started with Strike.
And it was an 8% coupon with upside where you can convert strike one for 10 into equity.

(26:27):
And so that's the first.
And it has governance rights and it's cumulative.
And what that means is, with a preferred note, the way dividends are paid is the board or yields are paid is the board has to approve it.
right? And so in this particular case, if the board says, hey, you know, we're not going to pay

(26:48):
the dividend, it's cumulative just means that you keep adding on. Next quarter, you owe two,
you know, you owe two quarters of dividend and on and on. And then there's penalties on top of that,
right? If we don't pay, then we have to pay a certain percentage on top of that. And there's
governance rights. If we don't pay for a full year, then we have to add board seats. That's how a
traditional preferred works, right? And in this case, it was convertible, right? So then after that,

(27:12):
we said, well, why don't we launch something that is more senior, right?
Strife.
And I don't actually remember off the top of my head if we did Strife or Strife next.
But we said, let's do something that's more senior than that.
Doesn't have the convertible aspect with it, but we're going to pay 10%.
And it sits on top of Strife.
And what if we launch something that's more junior?

(27:34):
And so something that's more senior to Strife, Strife looks like an investment-grade bond.
right uh and so like a triple a investment grade has all this bitcoin behind it that's the idea
and there are people who can buy convertible prefers there are people who buy investment
grade and then below investment grade is what people call high yield or jump bonds right and

(27:57):
so that's what stride was at the bottom so we have strife strike stride strife is investment grade
strike is convertible
and stride
is a jump on
and that one pays 10%
also but it's not cumulative
no governance rights we can suspend
payments at any time

(28:18):
which we wouldn't do by the way
we wouldn't suspend payments but that one then
trades what happens is these are all
$100 par instruments
and as it trades at 100
it's 10% yield if it
trades down to 80 the yield goes up
If it trades up, the yield goes down.
So it's a self-correcting instrument.
So with these three, before Stretch came along,

(28:41):
who are the people that they're almost targeted at?
Who are the likely buyers of those three preferreds?
Yeah, so what's interesting is
when you launch instruments in the market,
you want enough institutional capital.
The banks are like, okay, I can sort of guarantee
this thing is going to work
if the institutions are interested.
What you can do with preferreds,

(29:01):
it's basically an IPO, right?
It's unlike a convertible where it's 144A listed, qualified institutional buyers only.
When you launch a preferred, it's like an IPO.
It is an IPO.
And what you do in an IPO is you launch it to the institutional customers or market, but you're also launching it to retail at the same time.

(29:23):
Retail distributed is through a Fidelity or Morgan Stanley Wealth Management.
it, right? You always see, like when you see an IPO and if you sit on the retail side,
you always wonder who are these people who get to buy the IPO and get the pop, right? Like somebody,
somebody, you'll see a new company launches an IPO and they say they're pricing it at 80

(29:44):
and it pops to 140. Well, who's, who's getting in at 80 because normal person can only buy at 140.
So the people who get at 80 are the institutions distributed through the underwriters, the banks,
and then these banks get to go to their wealth management teams
and they get to go to the high net worth individuals
that they're managing wealth for
and they're saying, hey, you want to participate in this IPO.

(30:06):
You can get it at 80 and I think it's going to pop to 140.
And so that's basically what's happening with our preferred IPOs
is we might price one at 80.
We just did our most recent one, Stream.
Price it at 80, in theory it pops to 100
because most of these instruments, the par value is 100.
Now Stream actually should be pricing even higher in that
because the returns, the yields, right?

(30:31):
Like corporate treasury, the treasury yields
in Europe are lower than they are in the US, right?
So if you're paying 10%, it should price higher.
But that's basically what's happening
is we're putting these instruments out in the market
as an IPO.
And then once you IPO two, three days later,
then it's just trades in the NASDAQ.
And part of the innovation here

(30:51):
is we're marketing these products.
in that we're giving them a cool four-letter ticker, right?
Strikes, Strikes, giving them some cool names to it,
making it very easy to find on the NASDAQ.
Now Robinhood listed them too.
And we've opened up the Preferreds,
which were originally a pretty sleepy,

(31:12):
also somewhat illiquid market.
And we're creating them into a retail market.
The first one that we did, Strike, in January,
if I remember correctly,
had about 10-12% participation of retail.
And then the most recent one we did,
not counting the European one, Stretch,

(31:33):
had over 25% participation of retail.
So retail now is learning about these instruments
they're getting in, which is, you know,
that's what we've done, right?
We've securitized Bitcoin.
We taught people about a Bitcoin treasury company,
MSTR, the common.
And we opened that up,
opened up the eyes to retail, and we're doing the same thing with the preferred market.

(31:56):
And you said that you had almost tapped out the conversable market. How big is this one?
How big is the preferred market? It's really just as big as the total equity market,
right? Again, because these are retail listed trades, sorry, these are listed on the NASDAQ,
anybody can access it. And so it's really, you know, if you want to compare it,

(32:19):
depends on what you compare it to, right? Like if you strike, because it's convertible to equity,
looks more like an equity, right? Strife stride looks more like a bond. And then stretch, which
is the most recent one, looks more like a money market, right? Because your principle is meant to
be, we design it so that the price stays relatively flat around $100. And that last one is a bigger

(32:48):
market, like money markets are about a $30 trillion market size, right? And it's not a
money market, let's be clear, but it behaves like that. If you have short-term money that you want
to return at this point in time, 10.5%, right? You can park it in a stretch for a period of time.
And then when you finally need it, you can take it out and you can pay for your kid's tuition,

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on all past types the website is mina.b.tc and use code wbd for 10 off so i think the preferreds
really interesting because a lot of the treasury companies now, especially these sort of pure play

(36:08):
treasury companies that are coming out, are doing the things that you were doing a few years ago.
And you've kind of innovated in this preferred market, but it's also brought with it some
skeptics about it. So I think one of the issues is, I think this number's correct, tell me if I'm
wrong, that your interest that you have to pay out annually is about $650 million, is that right?

(36:29):
It's up to, with the seasoning of Stretch and the growth of Stretch and with the launch of Stream, it's closer to $750 to $800 million a year.
Okay. And so I did a show recently with Lynn Alden and Andy Constant, who were sort of debating on this. And I think one of the issues that especially some of these sort of TradFi people have is, where does that money come from? And like, in my understanding, and tell me where I'm wrong here, it's either you issue more preferreds, or you have more preferreds, you dilute the common shareholder, or you could potentially sell Bitcoin, although I know you've said you don't plan to do that. Is that correct?

(37:06):
That's correct. And selling equity at a premium to MNAV would be the primary way we pay for the dividend on our preferreds. And there's a little bit of people are trying to do mental gymnastics as to what that means is that the policy scheme is extremely dilutive.

(37:27):
You start with the basis that when we as a company are trading at a premium to MNAV,
let's do simple math.
Let's say we're trading at 2x MNAV, right?
And we raise a billion dollars from our common, right, through the ATM.
And I think people are pretty comfortable with that at this point, right?
When we're trading at 2x premium MNAV, right, and we raise a billion dollars,

(37:50):
that means essentially half of that billion, 500 million, is dilutive to our shareholders.
and $500 million is accretive in terms of Bitcoin yield.
You getting million not more Bitcoin that you didn have before when we sell equity and pay for it So that good right That pretty good 2XMNAB 50 of that is accretive Now let turn that around and do that

(38:13):
Let's talk about doing that as a preferred.
Let's just choose strife as a simple one, right?
Pays at a 10% dividend.
I raise a billion dollars of strife.
Day one, there is zero dilution to the shareholder, right?
Because these are preferred hybrids.
They're not common equity, zero dilution.
I turn around and I buy a billion dollars worth of Bitcoin that is 100% accretive versus 50% accretive. And at the end of the year, if I have to issue $100 million of equity to pay for that dividend, then that's my dilution right there.

(38:48):
In year one, my dilution is $100 million versus when I issue just common equity to buy Bitcoin is $500 million.
It'll take over the course of five years for that to be as dilutive as just issuing a billion dollars of equity.
And during that five years, what do you get?

(39:10):
You get the gain in Bitcoin or whatever you think it is.
So it is anytime you can issue a preferred, it is significantly more creative than just issuing common equity.
That's what we figured out.
That's what the math says.
If you believe that the reason you buy a Bitcoin treasury company is for Bitcoin yield.
Bitcoin yield is non-dilutive appreciation of Bitcoin.

(39:36):
Because I know that over the last few years, strategy has kind of delevered the balance sheet in a lot of ways.
But one of the things you can't control is the MNAV because that's just up to the market.
And so I think right now you're about roughly 1.2x MNAV.
Actually, first of all, do you think that there's a natural gravity to go back towards one?

(39:57):
I don't think so.
I think as long as we can generate Bitcoin yield, right?
1x MNAV means you're basically an ETF.
Yeah.
It means that somebody puts money in, you buy Bitcoin, and if somebody puts a billion dollars in, you buy a billion dollars of Bitcoin, now you're worth a billion dollars more.
But if you can lever and provide Bitcoin yield, more Bitcoin per share, then you should trade above MNF for as long as somebody thinks that you can do that for.

(40:28):
right that that's that to me is the primary difference is one you value at the underlying
bitcoin because when you put a billion dollars in you get a billion dollars of bitcoin the other
is you're trading at a premium at mnav because you're providing bitcoin yield right like if i
you know if i told you i was going to give you ten dollars and all you could do is just hold that

(40:51):
ten dollars that ten dollars is worth ten dollars and i tell you i'm going to give you ten dollars
and you can go invest it, right?
And you can get 10% a year.
Next year is $11.
Don't you think it's worth $11?
Or if your cost of capital is 5%
and I told you you could get 10%,

(41:13):
then that $10 is worth $10.5, right?
But if I told you all you can do with that $10 is,
Danny, you got to put it in your pocket
and you can't do a thing with it, that's $10.
That's the difference is you can invest this
into something, right?
Isn't that how most public equities are treated, right?
Meaning it's a future,
it's basically discounting all the future cash flows.

(41:36):
And if you think a company can appreciate over time
or increase the cash flows, right?
If you create a great product, right?
And you invest in that product
and you invest in capital behind that product.
And all of a sudden that product is returning 20, 30% growth.
It's worth more than if you buy a product
that's generating 10% growth.
That makes total sense, yes.

(41:57):
But like, obviously, strategy is far and away the biggest of any of these.
I think you have nearly 650,000 Bitcoin.
That's right.
You're huge.
Is there a scale that plays into this where, are the days of sort of 4XM now behind you,
do you think?
Well, I would say I go back to using traditional company analogies, right?

(42:21):
Is a company that is 10 times the size of another company, right?
Like, is a Microsoft, right, versus a Salesforce, versus a Snowflake, right?
Is that scale, right, worth something, right?
And I would say yes, right?

(42:42):
Like, it's what, you know, you can go all the way to an extreme, and you can take a monopoly, right?
A legal monopoly is worth more than a duopoly, than a triopoly.
Yeah.
Right. And so, yeah, scale matters, right? That's why some of the biggest companies in the world,
that's why you have, I mean, that's why you have the Mag7. These are super scale technology

(43:06):
companies. And in many cases, they're worth more, more of a multiple revenue, more multiple of
earnings than a subscale company.
And so we could actually flip the other way to how I was suggesting. Because it's funny,
I've been quite skeptical of some of these treasury companies. And whenever I have the
conversation, I quite purposely have strategy to one side, because I feel like just with being the

(43:27):
first mover, how quickly you've got to 650,000 Bitcoin, I don't think you can compare that to
XYZ treasury company who has 1,000 Bitcoin on their balance sheets or whatever. But I'm interested
to know, is there any world where you would ever sell Bitcoin? Because let's say we're entering a
market now. Who knows if we are? Who knows what that bear market might look like if we are?

(43:48):
But if your MNAV does go below one again, and you obviously still have these interest payments,
would selling Bitcoin ever be an option?
Yeah. So back to your point on the other Bitcoin treasury companies for a minute.
You could make an argument that in the US, there is no second best, right? What's unique about a
of MetaPlanet or SmarterWeb, as a couple of examples, or Orange, is they have regulatory

(44:14):
access to markets.
If we wanted to tomorrow, you know, Stream, if you looked, we launched Stream, we launched
it to institutional and currently don't have retail access.
Once we list it, we do, but we couldn't launch it in retail because of regulatory access
in Europe, right?
If I wanted to launch a preferred in Japan, it might take me one or two years to do so.

(44:36):
So in the US, you might argue that some of the other options, unless they do something unique, are just smaller scale versions of us. But if you go around the world, there could be a strategy in every region because it's hard for us as a US public company to access those.
That's interesting that you say that, though, because this is another thing that I have pushed back against when I've spoken to other people. Just from the perspective of, like, I live here in Australia. If I want to buy exposure to a Bitcoin treasury company, I can still do that with microstrategies.

(45:08):
That's right.
And so where does that sort of jurisdictional arbitrage actually benefit these companies and other jurisdictions?
Yeah, it depends on the country.
So part of the reason MetaPlanet has been so successful is you're a Japanese investor, institutional or retail.
Yes, you can buy offshore.
There's different taxation rules.
There's different money transfer rules.

(45:29):
So it's much easier as a Japanese resident to buy a Japanese equity or a Japanese bond.
That's not true in many other places.
but there's places where those jurisdictions are quite unique.
So your other question.
Will you ever sell Bitcoin under any circumstance?
We can sell Bitcoin, and we would sell Bitcoin

(45:52):
if we needed to fund our dividend payments below 1XMF.
And that would be, by definition,
if BTC yield is our north star,
right and that's sort of what what what our key our primary kpi is just like earnings per share
might be an important kpi for a traditional company then under 1x mnav it's more creative

(46:15):
to btc yield to sell our bitcoin uh to to pay the dividends and so we would do it in that case
now that said right as we speak we have to look at liability management are there ways that we can
raise capital above MNAV to pay for things below MNAV. So the things that we think pretty long and
hard about, just like in 2022, during Bitcoin winter, we thought long and hard about what to

(46:39):
do with our secured loan, our Bitcoin back loan. We decided to buy back our Bitcoin back loan at
80 cents on the dollar. We're pretty nimble. That was silver again. That was silver again. Yeah.
And so now, as we're looking at Bitcoin winter, as we see our MNAV compressing, my hope is our
that doesn't go below one.
But if we did and we didn't have other access to capital,

(47:03):
we would sell Bitcoin.
But that would almost be a last resort.
That would be a last resort.
And I think there's the mathematical side of me
that says that would be absolutely the right thing to do.
And there's the emotional side of me,
the market side of me that says,
we don't want to really be the company that's selling Bitcoin.
Generally speaking for me, the mathematical side wins.

(47:26):
Because I guess from a narrative perspective, if you did sell Bitcoin, I wonder if that then makes it harder to grow MNAV in the future.
Because the idea of you being this sort of treasure chest that sucks up all the Bitcoin and never lets it go is gone.
Yeah, so to the extent that MNAV is all around accretion of BTC yield, then it shouldn't.

(47:49):
To the extent that MNAV is a market sentiment of, you know, we're the original Bitcoin treasury company.
We have the most Bitcoin.
Us selling Bitcoin wouldn't be good for the ecosystem, wouldn't be good for the narrative.
That'd be negative.
But here's another good reason to sell Bitcoin, right?
Like, I can, if I was to sell high basis Bitcoin and we bought Bitcoin at every price, right, for a loss,

(48:15):
I could take that capital loss and I could offset it against other capital gains.
So there are tax reasons to why we might want to sell high basis point or high basis Bitcoin.
And that would be a very obvious one.
Yeah, I guess the challenge with that is convincing, even if it makes total sense,

(48:35):
convincing the market that it makes total sense is maybe a different thing.
Because it seems like the market has decided that the way these companies are valued is based off their MNAV.
Do you think that is too simplistic?
If you impute into MNAV a combination of the Bitcoin yield potential and sentiment,

(48:58):
and this is, I guess, the valuation of all public companies,
are a combination of, call it a discounted cash flow,
or some multiple to earnings, or some multiple to revenue,
and sentiment.
Do I like the management team?
Do I trust the team?
Do I think that they have a business that is durable?

(49:20):
Do I think they have good liability management, right?
Do they have access to strong markets?
To the extent that all of that is subjective,
then yeah, I think there's a subjectivity to MNAV,
which is why not selling Bitcoin,
I think helps with that subjective feeling
about the company.
Yeah, I totally agree with that.
But there's also, you know,

(49:40):
you got to balance these things, right?
because we also have large, sophisticated institutional investors that say,
Phong, Mike, and the board, don't be subjective.
Don't be emotional.
Run this thing purely mathematically.
Yeah.
And I guess then it's trading off who are the most valuable to your company
in terms of whether it's the retail that might be emotional about you doing
something like that and the institutional investors

(50:01):
who are obviously giving you more money who want you to be analytical about it.
Yeah.
And it's there's not a right or wrong answer.
It's not like we like we like all classes of shareholders.
Yeah.
Right.
And, you know, that's, I guess, that's the fun part of running a public company.
So one of the interesting things that's happened over the last few months is a lot of these
treasury companies are now trading at a discount.
Yeah.

(50:22):
As a company that buys as much Bitcoin as you possibly can, would there ever be a world
where you would look to acquire these companies when they're trading below a 1x MNAV because
you're essentially buying Bitcoin at a discount if you did that?
Yeah. So the mathematical side of me, just like I would sell Bitcoin below 1xMNav, says that companies are fairly valued by the market. And so if somebody is trading below 1xMNav, there's some sentiment, but there's also market knowledge about that that's valuing that company at that price for a reason.

(50:58):
It could be belief in the executive team.
It could be belief in the business model.
It could be belief in the market that they're in.
And so, you know, the market is large and liquid.
They must know something if something's trading at 0.75 XM NAV.
And we could go do our due diligence.
We could go figure it out.
Maybe we're missing something and the market isn't.

(51:18):
So that would be a pure market view of most companies are trading at a fair value.
The other piece is an acquisition, right?
And again, I've been in the software industry a long time.
Acquisitions are hard, right?
Like there are companies that are machines at it,
like an Oracle, right?
It's a machine at tech acquisition,

(51:39):
and they have hundreds of people
that are part of a corp dev team.
They bring them in.
They ask them a thousand due diligence questions,
and they ask their banks to do it,
and they ask their lawyers to do it.
Then they write up a term sheet
that gives them all the outs and gives them all the...
And that's a machine.
We've got 10 people.
We don't have a machine to do a Bitcoin treasury company acquisition.

(52:00):
Could we do it?
Probably.
Would it distract us from just buying Bitcoin?
Probably.
Like buying and holding Bitcoin is extraordinarily simple.
That's why we have 10 people doing it.
It's not easy, but it's simple.
It was hard the first time and hard the second time.
It gets easier.
And now we get to the hundredth time.
It gets a lot easier, right?
We have a machine.

(52:21):
We can buy and hold Bitcoin.
I would have to create a new machine.
Right. To identify a Bitcoin treasury company that's trading at a discount to its MNAV, figure out why, figure out what the risk is, understand if we should buy it, figure out where they've custody the Bitcoin, decide if they have good agreements. It's quite complex. Could we do it? Yeah. Should we do it? Maybe. But right now, that's not our strategy.

(52:46):
Fair enough.
Because I do, I understand what you're saying about if it's, you know, the market society
and they don't have enough faith in the executive team, like things like that, if that Bitcoin
was coming under your control, I think you could.
It would just immediately pop, maybe.
But then I do understand it may be an expensive distraction to do that rather than just do
what you're doing.
Yeah.
And you could be just wrong.
Think about all the tech acquisitions in the last 20 years that everyone thought was a

(53:10):
good idea until it wasn't.
Yeah. Like AOL Time Warner. At that point in time, everyone thought that was a great merger and then ended up not being one.
Right. A huge distraction. It led to the downfall of AOL and Time for that matter.
And then Warner split off. So there are a lot of acquisitions that look good on paper and are misexecuted.
There are a lot of acquisitions that look good on paper and just weren't.

(53:34):
Right. So you see it as maybe just too much risk.
There's no point when you can just go out to the market and buy Bitcoin.
I think that's a much easier thing to do for us.
Fair enough.
Okay.
Can I ask you about one of the other criticisms
that came up in this interview?
I did this debate.
Yeah.
It was around having Bitcoin upside down as earnings

(53:56):
in your reports.
Yeah.
I understand that that's just the way the accounting works,
but do you see that as an issue,
that Bitcoin appreciating a value goes in as earnings
when it's maybe not traditionally
what you think of as earnings?
Not really.
I mean, we advocated for that, right?
Like the original accounting treatment of Bitcoin,
because there was no accounting treatment,

(54:16):
was to treat it in the worst way possible,
which is intangible asset accounting.
Intangible asset accounting is there
for things that you can't really value easily.
It's not a liquid market.
Art could be an intangible asset,
which means that every year you go
and you test it for impairment,
is that art worth less?
Who knows, right?
And you appraise it
and then you write it down,
but you can never write it up until you sell it.

(54:38):
And that's what Bitcoin was treated like before 2023,
where we worked with FASB,
we worked with the big four to get it changed.
So we changed the fair value.
We changed the fair value from your,
what do you want to know?
What's the company worth?
It's worth the Bitcoin it has on its balance sheet

(54:58):
times the price at that point in time.
And so if it goes up, we show positive earnings.
If it goes down, we show negative earnings.
And I think that's a very reasonable treatment.
I don't think people should get excited every quarter where it goes up because Bitcoin went up 20%,
because the next quarter might go down because Bitcoin went down 30%.
There's a whole debate of whether I think quarterly earnings make sense at all.

(55:21):
You want to know what our net asset value, you can go look on our website and it updates every 15 seconds.
Who needs quarterly earnings when you look at it every 15 seconds?
So what you do is you just look at the Bitcoin on our balance sheet,
you see what it's worth and you know what the company is worth at any point in time. I think
that's reasonable. You say, does it get treated as income? Yeah, to the extent that you report

(55:41):
quarterly earnings, every quarter is either treated as positive or negative income. So the
fault I would put to that is not the fact that it's fair value. It's the fact that we have a
quarterly earnings system and you're evaluating every quarter, whether it went up or down,
and what happens to our income. That's fair. And I guess it's just another
case of this being like a novel business model that people have to understand how it works and

(56:03):
It's different to a normal tech company.
Yeah, and again, I wouldn't get excited by the quarterly fluctuations.
It's your Bitcoin, right?
It goes up and down.
But I would get excited if you look at it annually in a couple years out
and you see it accreting over time.
That's what Bitcoin does.
And so now Bitcoin price is down quite a lot.

(56:23):
How are you approaching the next 12 months?
Does anything change if we are potentially in a bear market or a sideway?
Whatever you can describe this as.
Yeah, there's a couple of things that are interesting, right? Like access to the capital markets in a bear market are not the same, right? Like we raised in 2024, which was an amazing bull market, about $22 billion of capital. This year, we're almost a $20 billion company where the first three quarters of the year was a bull market.

(56:52):
If we have a bear market next year and it goes through all of 2026, we're likely not going to raise $20 billion of capital.
If stretch seasons, that could be interesting.
That was the reason we created these preferred products is that in theory their performance is not as tied to Bitcoin price going up or down so that we can raise capital in a bear market And even that said right you know

(57:20):
it'd be harder to raise equity in a bear market or when MNAV is at one, two versus when it's sitting
at two or sitting at three. So I go back to, it's probably not much different if you're an oil
company and you're making decisions on how much oil to mine, how much equipment to put in the

(57:42):
ground, how much prospecting you want to do, your decision is very different when oil is $50 a
barrel versus $200 a barrel, right? And when it's 50 bucks a barrel or even less than that, you just
sort of sit and wait and you see the market play out and you make sure that you have good liability
management, you have a strong balance sheet, you know, pops two, $300 a barrel, you put your foot

(58:06):
in the accelerator and you go, go, go. Right. And you have to be prepared for both. And I think what
we've done in five years, if we created a Bitcoin treasury company that issues Bitcoin backed
securities, that's prepared, well prepared for a bull market and a bear market, because they're
going to happen. Yeah, a hundred percent they're going to happen. And I do think the structure of

(58:29):
might be slightly different, but there's going to be periods of this. When it comes to the preferreds,
in the US you've got the four at the moment. Is there a gap in that where you think something
else needs to be created or are you happy with the four at the moment? I think there could be
mid-duration instruments. Right now we have something that's a very short duration in terms

(58:51):
of stretch and we have longer 10, 15 year Macaulay duration instruments that are strife, stride and
strike? Could you have something in between? You could. All that said, I don't think we need that
right now. What we need, again, we're only 11 months into launching the preferreds, right?
Like this is not, these instruments haven't been out there for five years. So it's time to season

(59:13):
the market in these instruments. Even the question you asked earlier, how do we pay for the dividends?
Right? There are a lot of folks out there who don't believe that even though we have,
$60 billion, $65 billion worth of Bitcoin
that we can pay $800 million a year worth of dividends.
Yeah.
Right?
And so the more we pay the dividends

(59:33):
out of all of our instruments every quarter,
that's seasoning the market to realize
that even in a bear market,
we're going to pay these dividends.
When we do that, they start to price up.
We can then use the ATM to raise more money.
But it took us to go through a bear market
where they're common.
And when we came out the end of that bear market in 2023,

(59:57):
people were like, oh, here's a company
that can withstand a bear market
with just a levered Bitcoin strategy.
Now we can prove that we can withstand a bear market.
In this case, and it hardens the company.
Yeah, I think that makes total sense to me.
Because like you say,
last time Bitcoin went through a bear market,
the question was like,

(01:00:17):
is there a point where strategy gets liquidated
and you have to start selling Bitcoin.
And once that didn't happen,
everyone gained confidence in it.
And maybe it does take something similar
in these preferreds
before people have full confidence in them
and willing to get more and more money into that.
Yeah, you remember a lot of our investors today
didn't even know what strategy was.
So a microstrategy at that point in time in 2022.

(01:00:40):
And you remember the narrative back then.
What was going to happen in the company?
Is there going to be a marginal?
Yeah, our stock went all the way back down
to where it started.
It was at about $16.
And we were trading, I think it was 0.8 MNav.
And everyone was just ready for the company to implode.

(01:01:00):
And we didn't do that at all.
We hardened.
We got stronger.
The test of you, the test of our management skills,
but the test of an individual, the test of a good team,
I don't know cricket, but I'm guessing the teams are tested
when they're not doing well.
right like no team wins all the time right and and so we were tested at that point in time and

(01:01:24):
i think we did pretty well in 2022 if this is the beginning of a bear market in 2025 we have another
test are we going to pay our dividends or not uh and i sit here and say we're going to pay the
dividends and when people see that they're going to we're going to pass the test and we're going to
come out of this and the next bull market will shoot back up again right because people understand

(01:01:45):
that we know how to run a Bitcoin treasury company
and a Bitcoin credit company.
Yeah, it's going to be an interesting few years.
It's funny, like, when we started this conversation,
you talked about the model that Michael had given you
in the early days, and you said that broke the upside.
And like Michael says, all your models will be broken.
Yeah.
But you will obviously have to model Bitcoin price appreciation

(01:02:06):
in some way to have confidence in what you're doing at the company.
Like, where do you see Bitcoin going over the next few years?
Yeah, so I think Michael said it's going to go up 21% for the next 21 years, and I think that's a reasonable model. I think as long as Bitcoin is performing better than the S&P 500, as an example, which has been going up 14%, 15% a year, and if it's double that and it's going up 30% a year, then we're going to win.

(01:02:32):
If it's going up 20% a year, we're going to win.
If it's going up 18% a year, we're going to win.
I think for the foreseeable future,
we're still talking 50%, 40% annualized returns
over a four or five year period, right?
And that gets back to the fundamentals of Bitcoin, right?
All the reasons why we enjoyed,
all the reasons why in 2020, when I discovered this thing,

(01:02:55):
I was like, this is extraordinary.
It's amazing technology.
It's an amazing store of value asset.
right it's non-sovereign and has limited supply uh and you know people in australia people in the
u.s people in ukraine people in turkey people in argentina people in vietnam and south korea

(01:03:17):
like everyone likes bitcoin right and so you have to go back to like i don't really know what the
returns are going to be but you go back to is it a good product right and and if you believe it's a
good product and you believe there are people that want the product, right? And you believe
there's a limited supply, right? Then it's going to work, right? Like when Apple came out with the

(01:03:40):
iPhone or when Netflix came out, you know, with streaming, heck, when Netflix came out with DVDs
that you get in the mail two days later, you can hold them onto them for as long as you want.
It's a good product. What was the size of Netflix? Did I know that Netflix was going to become a
streaming video company? No, but you knew it was a great product. When the internet came out,
Like I was in the 1980s, I was on BBSs and like doing dial up before AOL existed and downloading like whatever it is, little video games.

(01:04:10):
And I was like, this is the greatest thing ever.
I knew it was a good product.
Did I sit there at the age of 14 and say, hey, you know, what's the value of this thing?
How much are BBSs going to go up and the ability to communicate with people over a phone line?
No, I just knew it was a great product.
And that's what I would say about Bitcoin.
This is just a great product.
Yeah.
Yeah. You brought up the S&P there. I've had Jeff Walton on the show a couple of times. I think he's

(01:04:34):
great. And he's been constantly tweeting about when is strategy going to be added to the S&P.
You obviously, I believe you already qualify for it.
That's right.
What is it that's holding that back? And do you think that'll happen?
There's a little bit of a, if you think about these indexes, right? S&P 500, NASDAQ, MSCI,

(01:04:56):
et cetera, et cetera. S&P 500, they're basically public companies, right? MSCI is a public company.
They have customers. Who are their customers? Their customers are primarily the large asset
managers. So who are buying these products? BlackRock, Vanguard, and similar light companies,

(01:05:18):
If you're Vanguard, you are the largest customer of S&P index.
You're the largest customer of the MSCI.
So guess who gets to decide indirectly what gets into these indexes?
Vanguard.
And so does Vanguard want us in these indexes?

(01:05:40):
Because then you become a competitor to their ETF products.
They're also happening to one of our largest shareholders.
It's an interesting, extremely circular system.
But Vanguard's on the record that says,
hey, you know, I'm not a big fan of Bitcoin,
even though they're our largest shareholder
through these passive funds, right?
And so that has to be broken and unlocked somehow.

(01:06:03):
And, you know, it's not too much different than today, right?
NVIDIA goes and invests in OpenAI
and OpenAI goes and buys NVIDIA chips.
Is that good or bad?
There's questions about that, right?
Here you have Vanguard buying S&P products,
and S&P decides what goes in that product
and turns around and sells it to Vanguard.

(01:06:23):
It's a circular system.
And the way you break these circular systems is retail.
Because who's actually the customer of the S&P in Vanguard?
It's the people who are putting money into it.
It's not Vanguard's money, it's our money.
You're my money, it's retirement money.
And so this is why retail is amazing.

(01:06:44):
Because institutions are there, but their customers are retail.
If retail goes out and tells Vanguard, hey, you should have Bitcoin-backed products, then Vanguard will go tell S&P, hey, you should let strategy into the S&P 500.
I'm not sure that's exactly how it works.
That's why I love the NASDAQ 100.
It's not subjective.

(01:07:05):
Market cap, top 100 in the NASDAQ.
Transparent.
Everybody can see it.
That's why I love Bitcoin.
Then you have these subjective products like the S&P 500 index. Now, do I think they should add us? I think they should. Will they? I think there will need to be some lobbying from retail from us and others to get there. Or they might just add us.

(01:07:30):
Right. Again, I don't really know. It's a black box process.
But what I know is in these black box processes where you have parties taking retail money and making decisions without transparency, I don't love that.
Yeah, no, I agree with that.
And I mean, it seems like a matter of when, not if, like at some point, I'm sure it will happen.
What difference does that make to your business?

(01:07:53):
Like the passive flows that come in through the S&P, like how much difference do you think that would make?
I think it's pretty significant because these passive flows, again, what I find humorous is these passive flows are ultimately retail money.
It's retail money controlled by institutions, so therefore it's considered institutional money, but it really isn't.

(01:08:13):
It's retail money.
And just like in the U.S., if you don't like the government, you show up to vote.
if you don't like what the indexes are doing,
you write a letter, you comment, you let them know.
That's how we got the FASB accounting change
is there is an open process where the SEC,

(01:08:36):
or in this case FASB, solicits comments,
and we flooded them with 500 or so letters,
and they're used to getting like 20, right?
There are open comment windows periods
for companies like the MSCI.
I think there is one for the SEC.
If retail wants us, wants Bitcoin-backed companies to be part of these indexes, the best thing for you to do is we'll give you the email addresses of the folks.

(01:09:00):
Send them emails. Let them know.
That's the great thing about America.
That's the great thing about retail.
We're a democracy when it comes to voting.
And ultimately, retail are the ones who create and make the money.
They just have to show up and say, hey, you should add strategy.
Apply enough pressure and things might change.
Yeah.
Fong, this has been amazing.

(01:09:22):
I want to ask you one more question before we close out,
which we did touch on a little bit earlier.
As I said, like strategy,
far and away the biggest of these treasury companies.
In the US specifically,
for getting the kind of jurisdictional arbitrage play,
how many do you think the market can support
and how many do you think will survive?

(01:09:44):
There's different kinds of treasury companies
or Bitcoin companies.
There are the Teslas who decide, and now Figma is another one who decides 5%, 10% of your treasury should be in Bitcoin.
And I think for the health of Bitcoin, the health for corporate treasuries, and the health of the monetary system, companies should be putting Bitcoin on their balance sheet.

(01:10:11):
Absolutely.
5%, 10%, 15%, right?
And I think that is much more important than how many Bitcoin treasury companies there are. And so the question really isn't, should we have one, should we have five, should we have 10 Bitcoin treasury companies? The question is, how do you take 4,000 public companies in the U.S. and have them all holding Bitcoin in some way, shape, or form?

(01:10:34):
and I think that will start to happen.
You're starting to see it happen.
I think over the next five, 10 years,
you'll see all the companies at some point in time
either holding Bitcoin or holding one of our preferreds.
Why wouldn't you hold a stretch instead of a treasury
if you believe that those dividends
are going to get paid over the course of time?
So I think that's going to be the interesting wave

(01:10:58):
as Bitcoin legitimizes.
It's like you don't really want the U.S. government
to hold all of their treasury in Bitcoin,
but you want some of it in Bitcoin, right?
And if all the governments around the world
hold some of their treasury in Bitcoin,
that's more important than one country
holding all of their treasury in Bitcoin.
I think it's also,
that's probably a more healthy scenario
for Bitcoin as well,

(01:11:18):
rather than everyone doing sort of levered plays on it.
Just buying it with a portion of your cash balance.
Why do you think we've not seen much of that?
Like, just to pick a huge company with loads of cash,
like Apple,
they could very easily put a tiny percentage
of their cash into Bitcoin.
Yeah.
Do you think they're worried about shareholders
seeing that as a negative

(01:11:40):
and their share price dropping on it?
Which I don't think would happen.
But I'm trying to figure out
what happens in the boardrooms
and why they're not deciding to do this.
Well, from a corporate governance perspective,
back to how a public company works,
there are things that the executive team,
the CEO can do.
And there are things that you require the board to do.
Like tomorrow, I can go hire 20 people.

(01:12:01):
don't need the board approval, right?
But I can't put gold on my balance sheet tomorrow
without getting board approval, right?
Because it has to be part of your investment policy.
And by definition, investment policy
is a board-level decision.
Boards aren't made to move fast.
Corporations at the CEO and below level
are made to move fast.

(01:12:21):
So the biggest reason
is you need an investment policy change.
You have to go to the board
and there might be nine people,
there might be 12 people.
And in many cases, it goes down to a board vote.
But if you have one board member that thinks it's a bad idea, they're going to politic behind.
The way a board, the CEO doesn't need a vote.

(01:12:43):
I don't go sit with my eight members of my executive team and I say, hey, can you all vote if you want 20 people to be out of the organization?
I just do it.
The board is a voting process.
And voting processes, just like the U.S. Senate or the U.S. House, are slow.
By definition, the executive branch, the president, can make changes for the most part with executive branch decisions.

(01:13:07):
But when you go to a vote, it creates inertia and it's slow.
An investment policy change, adding Bitcoin, even 1% of it or 2% of it to Apple's balance sheet, has to go to the board for a vote.
And there is absolutely, when you go to the board, there's inertia.
There's prejudices.
I mean, I challenge anyone to go look at the MAG7 board composition.

(01:13:32):
Go look at Apple's board.
Go look at Meta's board.
Go look at Google's board.
Brilliant people.
But are they change agents?
Are they ones that are going to sit and say, hey, I'm 70.
I'm going to retire from this board in two years, and I'm going to vote for change.
Or are they going to say, I'm 70.
I'm going to retire from this board in two years.
I don't really want to have to do too much work.

(01:13:54):
Yeah.
Yeah, that's the challenge.
And that's why we were able to do it,
because we were a control company, founder-led.
That's why Tesla was able to do it.
If you start with founder-led companies,
it'll change over time, though, when it becomes...
I think one of the big changes that we're going to see
in the next year are large banks.

(01:14:15):
Morgan Stanley, Citibank, maybe J.P. Morgan,
a TD bank, some large Bank of America.
as they start to offer Bitcoin services,
Bitcoin custody, right?
Bitcoin exchange, you can buy Bitcoin,
you can get yield on your Bitcoin,
you can lend against your Bitcoin.
When the big banking establishment legitimizes Bitcoin,

(01:14:38):
then I think some of these boards are going to say,
okay, well, you know,
if Morgan Stanley is custodying Bitcoin,
then all of a sudden, if I buy Bitcoin,
I don't have to hold it with Coinbase or Anchorage.
And those are great companies,
but they're not Morgan Stanley or JP Morgan or Citibank.
The risk profile is totally different.
That makes sense.
And I wonder if it's, again,

(01:14:58):
like the start of the conversation we were saying,
we were surprised that more corporates
didn't follow you in this more quickly
if we did this in four years' time,
if we were to talk about Apple owning Bitcoin.
I think we will.
I think we will.
I think all the banks are going to offer Bitcoin-backed services
and they're already all wanting to participate
in the stablecoin market, right?
And as the digital economy, digital currencies

(01:15:20):
become mainstream,
then five years from now,
it's not a big deal
if I'm on the board of Apple
to say,
hey,
no problem.
Take 2% of your
corporate treasury
and put it in Bitcoin.
I think that'll be
a game changer.
Well,
I will see you in four years
to do that podcast then.
Yeah.
I've really enjoyed this.
Thank you for,
well,
I'm surprised we did it in Australia,

(01:15:41):
but I'm glad we did.
I know.
What a nice chance.
Exactly.
And we,
you can go watch The Ashes now.
That will really send you to sleep with your jet lag.
But I appreciate the time.
Thank you very much for doing this, and I will see you soon.
Yeah, it was good seeing you in person.
Thank you.