1/ Explaining the MSTR BTC bonds thread 👇👇:
2/ In December MSTR issues $650M 2025 convertible unsecured notes with a $400/sh conversion price. MSTR is unlevered, and makes ~$80M in EBITDA. So the notes are basically a loan for BTC with shared upside, and collateralized by both BTC and the MSTR biz at ~50% LTV. Nice trade!
3/ BTC and MSTR promptly rip higher, putting the conversion deep in the money and the converts which sold for $100 in Dec trade up to $320 by February - everyone looks like genius
4/ FOMO kicks in hard! MSTR goes out and issues $1050M 2027 convertible notes at conversion price of $1400/sh with zero coupon! This paper is tragically worse than the original convertible given the conversion strike and dilution of original notes, and impairment of collateral
5/ Now MSTR has $1.7bn of senior capital in front of the common, so the converts is likely not covered by the value of the biz on a LTV, and is more and more a straight BTC loan.
6/ At this point, original converts still trading north of 140 as the strike is in the money, but the second round of converts trade at 70 since the strike is deep OTM, there is no coupon and much less collateral coverage - FOMO chasers getting screwed for doing a bad deal
7/ Now MSTR looks to reload, the problem is they can't do these cheeky converts after the second one flopped. The only way they get new money is if it comes in at the front of the capital stack, SENIOR SECURED in the actual MSTR business which primes all the other debt and equity
8/ So converts wake up realizing their key underlying collateral (the MSTR biz ex BTC purchases) is getting sold out from under them, their strike price effectively increased by $400M, at the same time that BTC and MSTR are selling off.
9/ If MSTR can pull off these senior secured notes, I expect both common & converts to trade off substantially further. The 2025 converts will go out of money causing a massive selloff. Whoever looked like a genius in February is about to go under water if they don't cash out

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More from @TheLastBearSta1

8 Jun
TLDR: MSTR offering today is a lesson in getting PRIMED. Once the 2025 converts go out of the money (which they will), the notes will drop from 135 now to ~70 as they will be forced to price as a zero coupon with a ~7% rate. This is the easiest short in the world.
Math: Current MSTR share price implies $53k BTC price. The conversion on the 2025s implies a $48k BTC price. If the conversion is not in the money, those notes will price as an (almost) zero coupon bond with a ~5% yield. That is 40% down from its current price.
*Not investment advice* (most of us can't short converts anyway)

For a neutral trade, you could short / buy puts on $MSTR paired with long BTC to squeeze the arbitrage.

For directional exposure deep OTM puts could print on further BTC breakdown
Read 4 tweets
1 Jun
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The Robotaxi Repo - Part 2: A theory of how Tesla utilizes lease accounting and Robotaxis to turn collateralized borrowings into sales and achieve paper profitability. $TSLA $TSLAQ (1/25)
Disclaimer: I have no claim of actual knowledge, all information is sourced from public information. This is not investment advice and all opinions are my own. (2/25)
The Robotaxi Repo Theory: Tesla overstated S/X sales in 2018 using new lease accounting methods, however this led to large 1Q19 writeoff. To avoid further writeoffs, TSLA declares cars appreciating assets in 2Q19, allowing collateralized borrowing to be considered sales. (3/25)
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The Robotaxi Repo: How Lease Accounting and Robotaxis allowed Tesla to turn collateralized borrowings into sales, overstate revenues by billions and achieve paper profitability. $TSLA $TSLAQ (1/13)
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