A few weeks ago, MicroStrategy (MSTR) founder Michael Saylor was boasting about a breakthrough in financial engineering.
A black hole of non-dilutive, dividend-yielding preferred shares could suck in dollars from fixed income investors and allow the company to accrete vast quantities of bitcoin (BTC) for shareholders on a dilution-adjusted basis.
A tool of ideal torque to raise capital for BTC purchases without diluting common shareholders, Saylor sang the praises of three preferred series: Strike (STRK), Strife (STRF), and Stride (STRD).
All of them attracted some capital for MicroStrategy’s 597,325 BTC treasury that now exceeds 3% of BTC’s circulating supply.
Fans of Saylor thought demand would continue to grow. However, it wouldn’t be long before the arc of reality bent away from Saylor’s event horizon.
Saylor goes back to the ATM
Indeed, MicroStrategy’s latest Securities and Exchange Commission filing discloses that the company has already returned to its old strategy of dumping common stock and directly diluting its shareholders.
Via these at-the-market (ATM) offerings, the company sold 1.3 million MSTR from June 23-29 to raise $519.5 million.
Even if all of this money goes directly to buy BTC, shareholders are directly diluted from these ATMs and therefore experience no immediate benefit.
Read more: Michael Saylor will pay 18% dividends to buy bitcoin if he has to
In contrast, the company admitted that during the same period, it only managed to sell $28.9 million worth of STRK and $29.7 million worth of STRF.
In other words, only 10% of the $578.1 million raise was preferred shares.
Saylor’s non-dilutive black hole of preferreds, if it even exists, didn’t manage to suck in much matter. Indeed, 90% of the raise was a common ATM.
Read more: Michael Saylor’s Strategy makes up metrics to explain MSTR dilution
Even Saylor’s preferreds require cash payouts
In summary, 10% of the capital raised from the latest reporting period, June 23-29, will require future cash (dividend) payments from the company, and 90% directly diluted common shareholders.
A moderator of Irresponsibly Long MSTR, an X community of self-proclaimed recklessness, tried to explain away the dismal percentage. In his view, the ATM “aligns with their capital structure” and “should have been expected” to service dividend payments.
Josh Mandell, a skeptic of Saylor’s ability to continue attracting demand for exotic financial products like STRK, STRF, and STRD, fired back at that characterization, noting the enormous size of the ATM relative to the modest dividend obligation.
He spoke plainly to the Saylor apologist, “you MIGHT be just full of s**t” and “are confusing people with lies.”
