Opinion: STRK is a value at $95 (downside protection, upside potential, with 12.5% yield)

[u/xaviemb]

TLDR; At $95 STRK has a 1:10 conversion at $35 to MSTR as well as $60 of STRK's price supporting a perpetual dividend of $8 annually (12.5% yield).

At a current price of $95, STRK offers exposure to MSTR through a 1:10 conversion ratio, which means roughly $35 of STRK’s value is tied to MSTR shares. The remaining $60 of STRK’s price supports a perpetual dividend that pays $8 annually, equating to a 12.5% yield. Essentially, investing in STRK is a two part opportunity.

It provides a muted exposure to MSTR’s price movements with a delta of about 0.36... meaning STRK gains or loses about 36 cents for every $1 change in MSTR. This creates downside protection, as you lose less if MSTR declines, while still capturing upside gains. As MSTR’s price falls, STRK’s losses slow down even further, and as MSTR approaches $1,000, STRK’s sensitivity to MSTR price changes will approach a full 1:1 ratio, maximizing upside participation.

Meanwhile the portion of STRK not linked to MSTR shares generates a steady annual dividend of 12.5%, providing income while you hold it. Overall, if MSTR’s price continues to rise, STRK becomes an attractive option, offering growing upside exposure with less downside risk and a healthy dividend yield on the side.

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[u/gentlegiant80]

I bought 10 shares of STRK at $97. It really is a bargain. Dividends and a chance to take part in MSTR’s growth is a great deal.

[u/BakedGoods]

won't STRK generally hold $100 over the long run? in that sense, if you held STRK through to MSTR hitting $1000, you miss out on the 285% gain in MSTR (as of today's price), right?

[u/xaviemb → u/BakedGoods]

STRK will always hold these two parts, but one will drawf the other when MSTR moves past the $100 strike.

Right at $1,000 ... you have to assume STRK will have $100ish for the conversion part, but will still be paying the $8 annual dividend, which might be worth $60 still to the market, or significantly more (at $80 for that part, it's a 10% coupon)

So yes, if we assume MSTR goes through approximately a 200% return between now and $1,000 ... STRK will go through probably close to a 100% return or $180 a share. But from that point forward, you will see the conversion part take over... so if (when) MSTR reaches $10,000 then $1,000 of STRK will be that part and it still might get a small $50-80 for the div, which would represent just 1% of the total share price. Still something.

The other two trade-off to consider are that STRK is higher in the liquidation, so it's technically always going to be safer than MSTR in that regard. It also cannot vote...

Where STRK will benefits over MSTR is if MSTRs growth is slower forward, or if you're afraid of BTC pullingb ack and MSTR drastically. STRK will always maintain a portion of value paying that div of $8 annually... so unless you see the market accepting higher than 12.5% annually for this product... you can be sure STRK won't go below $70, even if MSTR dropped to $100 or lower in price.

To summarize though... STRK gives up half the upside, to protect a lot of the downside of MSTR, by comparison. It's unique in the prefs because it actually has a portion that can go up indefinitely. After $1,000 it basically will gain 1:1 (percentage) with MSTR shares. It's just muted till then, with downside protection and a div...

[u/hot_honey_harvester → u/xaviemb]

how did you arrive at "$35"? 1/10 of current price of mstr?

[u/brianobush → u/BakedGoods]

You are not considering the value of the dividentds long term. They are forever.

[u/haze_from_deadlock → u/BakedGoods]

The price is determined by the market, the dividend is always $8 per year. It is not at all anticipated to remain at $100.

[u/xaviemb → u/[deleted]]

The div payment is fixed in USD... the BTC raised from it can compound (if BTC continues higher because of inflation in fiat).

Here is an overly simplified view... if I borrowed $120,000 by selling 1000 shares of STRF today, I could buy a BTC... that BTC would go up 30% annually... but the div payment is fixed at $10 annually. So in 10 years your BTC is worth 13.7x but you've paid 1x in divs ... if you roll those div payments into the selling of the STRF to cover it, you never even need to sell a single BTC to cover this. At every point where you're selling STRF to cover a div, you're locking in a fixed rate div... while letting the larger piece in BTC continue to compound. The compounding pile of BTC runs away from the dived div payment. After 20 years, even if BTC only groes 8% annually and you're paying a 10% div on covering it... you're going to end up with a significant amount of BTC and a shrinking div obligation that you never had to sell BTC to cover.

The sustainability of this model is that MSTR is agreeing to pay roughly 8-10% annually forever on money raised now to buy BTC, which is (conservatively) going to compound at 30% annually (give or take 15%)... if you look at the math, the fixed div, vs the compounding BTC means the div payment is getting smaller and smaller every year, not compounding. While the BTC compounds in USD value.

Whats really fascinating about this model if selling fiat (debt) which inflates and become less costly over time because of that... and securing BTC (hard asset that goes up as inflation continues)... you're basically using fiat against itself... and capturing the gap between a hard asset and one that inflates. MSTR is basically taking advantage of fiat having to inflate... when BTC does the opposite.

[u/Horror-Water77]

Yield is 8 something percent, not 12.5%

[u/Horror-Water77 → u/[deleted]]

There is no part of STRK "linked" or not linked to shares. You're buying a covertible preferred that pays a dividend, that's it

[u/elidevious]

Your math is wrong.

STRK is 8% APY divided at $100 stock price. At the current price of $95 its yielding 8.4%.

Don’t believe me, look at the Strategy website: https://www.strategy.com/strk

[u/xaviemb → u/elidevious]

You need to read what you linked. You are making the mistake of viewing STRK as only being a div product... which it isn't.

STRK also has a call option to give you 1/10th of a share if (when) MSTR goes past $1000... if you value that as less than $35 you're probably not looking at STRK, but STRD or STRF instead.

[u/JuxtaposeLife → u/xaviemb]

Keep up the good work, those who care to learn how these products work benefit greatly from your posts.

You have so much patience to explain these things.

[u/askacanadian → u/xaviemb]

Okay but the yield is still only 9% something not 12%

[u/yogicflame → u/askacanadian]

Subtract 35 dollars from STRK for the 1/10 of the present value of MSTR share to get the real value of the dividend portion. Strk is in effect two products in one.

[u/xaviemb → u/askacanadian]

If you're investing in these things, you really should understand them... If you dn't understand the key difference between STRK and STRF/STRC/STRD, you should read up more on them.

[u/BlightedErgot32 → u/elidevious]

this sub is so dumb i swear, who is downvoting you, you have -2 as i type this

[u/azdcaz → u/BlightedErgot32]

People don’t like being called dumb, especially dumb people.

[u/xaviemb → u/azdcaz]

Life lesson for you three... this one is free:

When you walk into a room and everyone seems smarter than you, and that makes you upset instead of curious... so you call them dumb and cling to the only other person in the room who also looks emotionally confused, even angry by by the logic everyone else is following... that you can't seem to grasp... this is a sign of the unintelligent mind protecting itself with reptile emotions...

the solution: if you don't understand something, research it until you do. If you feel the need to emotionally cling to your irrational stance... you're actively chosing to not be educated.

[u/azdcaz → u/xaviemb]

Life lesson to you. Improve reading comprehension, because I didn’t call anyone dumb.

[u/elidevious → u/BlightedErgot32]

Haha You’re -4 now

[u/BlightedErgot32 → u/elidevious]

hey at least your original comment is now at -1, woohoo!!

[u/JKimRX]

Perhaps I’m misunderstanding STRK, but isn’t the likelihood of STRK reaching $1000 extremely low? Wouldn’t Saylor continue to issue shares to generate cash anytime price goes above $100 to first, minimize excess dividend payouts and secondly, acquire more BTC

[u/xaviemb → u/JKimRX]

You're thinking of STRC... STRK has a part that will always track (or be valued) at 1/10th MSTR... which is why STRK is currently $95... $35 of it is 10% MSTR share, and the rest is the $60 producing the $8 annual dividend.