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THE MICHAEL SAYLOR TRAP: Why He Just Sold 7,000 Bitcoin!
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The world's most aggressive corporate Bitcoin buyer hasn't purchased a single Bitcoin in eight weeks—and SEC filings reveal MicroStrategy has actually been selling. In today's Wall Street Truthbomb, Chief Investment Officer Mark Malek breaks down the mechanics behind MicroStrategy's latest 8-K filing and exposes how a massive preferred dividend obligation is reversing the company's famous flywheel.
Mark examines the shadow data in corporate filings, showing how MicroStrategy generated just $9.85 Million in operating cash flow in the first half of the year against roughly $1.74 Billion in annualized preferred dividend and interest obligations. Discover why the company sold 3.5 million shares last week to fund preferred dividends and buybacks rather than Bitcoin, what a 12% variable rate on its Stretch preferred stock means for common equity dilution, and the exact MSCI index rules that could trigger billions in forced passive selling.
CHAPTERS: The 8-Week Pause: Why MicroStrategy Sold 7,000 Bitcoin Inside This Morning's 8-K: Where $333.7M in Equity Dilution Actually Went The Reverse Flywheel: Selling Common Stock to Pay Senior Claims Shadow Data: $20M Operating Cash vs. $1.74B Annual Dividend Bill The Preferred Debt Stack: 5 Series, $15.2B, and the 12% Stretch Reset The Vanishing NAV Premium: Common Stock Trading at 2/3 of Bitcoin Value The MSCI Delisting Threat: Why the Proposed Rule Targets Holding Companies Today's Wall Street Truthbomb: When a Balance Sheet Isn't an Operating Business
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Truthbombs videos are for informational and educational purposes only. The views expressed by Mark Malek or guests are their own and do not necessarily reflect those of Siebert Financial. These videos do not constitute investment advice, an offer to sell, or a solicitation to buy any securities. Past performance is not indicative of future results. Listeners and viewers should consult a qualified financial professional before making any investment decisions.
The most famous Bitcoin buyer on earth hasn't bought a Bitcoin in eight weeks. Guess what? He's been selling them. By the end of this video, you're going to understand exactly what broke inside Michael Saylor's machine, why a company that generated $10 million of operating cash this year owes $1.7 billion in dividends. And why the index rule that could finish it off has nothing to do with crypto at all. My friends, there's this bank branch on Broadway that I walk past most mornings with a laminated card in the window and it advertises its CD rates. I'm sure you've seen cards like this all over the place. And every time I see it, I think about the fact that just a few blocks away, you can buy a security paying 12% marketed as short duration high-yield credit issued by a software company whose entire business brings in about $20 million of operating cash a year. Guys, you know I say this all the time. There's no free launch on Wall Street. That spread, well, it's not generosity. That spread, my friends, is a price. Here's what everybody is saying right now. Sailor has paused. Bitcoin is soft. It's sitting around $63,000. It's down about 28% of the year. And he's being patient. He's waiting for his spot. Meanwhile, MSCI might kick MicroStrategy out of its indexes because index providers don't like crypto. Two separate stories, both annoying. Neither, well, neither is actually fatal. That's the surface. And almost every piece of it is, well, pretty much wrong. Start with a pause, because it's not a pause. The last time MicroStrategy bought Bitcoin was the week ending June 21st. That is eight weeks ago, right after my birthday. I wish I could turn the clock back, but I can't. And in three of those eight weeks, the company did not just sit still. It actually, my friends, sold. Nearly 7,000 Bitcoin went out the door. Holdings went from about 847,000 down to just over 840,000. A man who built a brand on never selling has been selling for a month and a half. We're about to get into the meat of this thing, but if you like this type of content, please click like and subscribe. It's important to be in the know. And my friends, this is exactly how you do it. Okay. Now let me take you inside the filing because this is all public and almost nobody reads this stuff. This morning, MicroStrategy filed its weekly 8K with the SEC. Last week it sold roughly 3.5 million shares of its own common stock and raised 333.7 million bucks. And then it told you exactly where every dollar went. 52.4 million of it went to pay preferred dividends. 132.2 million went to buy it back to buy back its own preferred securities. And 149.1 million went into the dollar reserve. And those three together, add those three together, excuse me, and you get $333.7 million. Every single dollar. Not one penny bought Bitcoin. Understand what you just watched. The flywheel didn't stall, the flywheel reversed. The original machine was pretty simple. Sell stock above the value of the Bitcoin behind it, buy more Bitcoin. Bitcoin, uh Bitcoin per share goes up, the stock goes up, sell more stock. That is accretion. That's a fancy word. That is the whole thesis. What is running now is the machine actually in reverse. The company is diluting common shareholders to pay a claim that sits above them. If you own the common, your ownership is being shaved down every single week. And the money is going to somebody else's dividends. Now, here's the shadow data, which you know I love. This is the number that makes the whole thing make sense. And it's sitting in the company's own quarterly filing right there in front of us. In the first half of this year, MicroStrategy's operations generated net cash of 9.85 million. That's the software business. That's the actual company. Roughly $20 million a year if you annualize it. Now look at the other side of the ledger. MicroStrategy's own disclosure puts its annual interest and preferred dividend obligation at roughly $1.74 billion. The convertible bonds barely matter. Most of them carry coupons near zero. So call it $1.7 billion a year in preferred dividends alone. $20 million in, $1.7 billion with a B out. That's not a liquidity problem. That is a structural one. The operating business covers about 1% of the obligation. Every other dollar has to come from selling stock, selling Bitcoin, or draining the cash pile. And the company is currently doing, well, all three. There are five separate series of preferred stocks stacked on top of the common, $15.2 billion of them total. The big one is called Stretch. It pays a variable rate that resets every month to keep it trading near par. And it is currently set at 12%. $10.3 billion of notional at 12% is about $1.2 billion a year. I did the math, so you don't have to. That one security is 72% of the entire dividend burden. And here's the mechanism nobody is spelling out for you right now. That rate resets. If the market gets nervous about microstrategy, the price of stretch slips below par and the rate has to go up to pull it back, which makes the dividend bill, well, bigger, which means more stock gets sold to pay it, which makes the market more nervous. That's not a death spiral yet, but it is the blueprint for one. I can tell you that. And the company spent $132.2 million last week buying that security back in the open market. No shocker there. Ask yourself why a company short on cash spends cash defending the price of its own preferred shares. Let me be fair here. This is not a company in a corner tomorrow. The dollar reserve is $4.8 billion. MicroStrategy itself says that it's roughly 2.8 years of dividends and interest. It has time. What it does not have is a way out that does not involve selling something. And the market has already pretty much done the math. MicroStrategy holds just over 840,000 Bitcoin at an average cost of just over $75,000 each. At today's price, that stake is worth about $53 billion against a purchase price of about $63 billion. That is roughly a $10 billion paper loss. I did that math, so you don't have to do it, but I'm sure you know exactly what that looks like. The common stock closed Friday at $93.04, market cap of around $36 billion. So the common equity is valued at about two-thirds of the Bitcoin that the company actually owns. The premium that made the whole flywheel work is pretty much gone. Bitcoin is down about 28% this year. MicroStrategy stock is down about 39%. You're not getting a Bitcoin proxy. You're getting the levered leftovers after the preferred gets paid. Now, let me show you the part that actually decides this. MSCI has opened a consultation that could remove strategy, micro strategy from its global indexes. And every headline is framing it as the index industry versus crypto. My friends, it is not. Go read the actual document. I did. So you don't have to, but I encourage you to read it yourself. The proposed test never mentions Bitcoin. And ask one question first. Are more than half your assets operating assets? If yes, you're fine. If no, well, you got to uh you go to a second screen with five financial flags. How little you spend, how little you operate, whether your operating cash flow is negative, how much of your value is just marked to market holdings, and how dependent are you on raising outside capital? Trip four of the five, and you are out. That's the rule. That is asset class neutral by design. And here's the proof. It's in MSCI's own table. When they simulated the rule, they listed the companies it would delete. MicroStrategy was one, Metaplanet was another. And the third was Yellowcake, a British company whose entire business is sitting on a pile of uranium. That can't be too comfortable. Uranium, not crypto. The index industry is not writing a crypto rule. It is writing a rule that says a balance sheet is not a business. And it is writing it that way on purpose because MSCI already tried the crypto specific version last October and back down in January. This is round two. And round two is built so it cannot be argued with on the grounds that killed, well, round one. The calendar's tight, feedback closes at the end of September. The decision is expected by the middle of October. Implementation could come at the November index review. And on the money, ignore the $10 to $15 billion outflow number floating around social media. It came from an advocacy campaign last December, and it covers 39 different companies. The actual sell side estimate worth knowing came from JP Morgan last November. About $2.8 billion of the forced passive selling from MSCI alone, roughly $8.8 billion in the other index providers follow. And that is the real risk, not MSCI by itself. Strategy, uh MicroStrategy is still sitting on the Nasdaq 100. If the argument that holding a company is not an operating company becomes industry standard, the foreseller is not a hedge fund with a thesis. It is every passive fund on earth that has no choice and no opinion. So what do you watch? Well, watch the stretch rate reset at the start of next month. That you know, that one I told you about before. If that 12% goes higher, the dividend bill grows, the share sales grow with it. And you will know the market has started pricing the thing the filings already say out loud. So your truth bomb for today is this seller's not pausing, he's paying. And the company that promised it would never sell a Bitcoin is now selling both its stock and its coins to cover a dividend bill eight 85 times bigger than the business that rests underneath it. Join me every day for Wall Street Truth Bombs, where I drop them right here before the market figures them out.
