The Truth: Microstrategy & Michael Saylor's 0% Bitcoin.

can you believe micro strategy just

raised $3 billion in debt and they pay

0% in interest you might be thinking to

yourself that's stupid who would give

micro strategy money with 0% interest

well $3 billion worth of people did and

in this video you're going to learn why

people have so much faith in micro

strategy we're going to go through the

worst case scenario and why that worst

case scenario might not be coming as

soon as some people think you're going

to learn a whole lot about how the

financial system works buckle up

subscribe hey everyone me Kevin here we

need to talk about micro strategy

because what's going on with Bitcoin and

micro strategy is remarkable but a lot

of folks were expecting myself included

that Bitcoin was going to hit 100,000

this weekend I thought we were going to

get to our 102k level but we topped out

at about

995 on Friday and now we're sitting at

around

96,000 now obvious ly that sounds like a

lot I mean that's $4,000 of a swing

almost right three and a half uh but it

really only represents like a 3 and a

half to 4% swing it's like sort of like

the daily fluctuation of any normal

stock it's not a big deal but a lot of

folks are wondering what's going on with

micro strategy and how does that

particular stock boom is it a

fundamentals thing is it a long-term

thing is it like what because after all

micro strategy in the last year is up

71% 711 yeah that's pretty crazy a year

ago today November 24th they were

selling for about 52 bucks right now

they're selling for

$421 per share which is literally down

18% from the peak 3 days ago this is

crazy okay 3 days ago this was selling

for about $115 more per share at roughly

$535 now it's at$

421 although who knows maybe it'll

Skyrocket again when the Market opens up

for Black Friday or or you'll get a

Black Friday discount sale who knows but

a lot of folks are wondering like Kevin

what is actually going on here like what

do they actually have on their balance

sheet so that's the first thing I did is

I went over to their last filing and you

have to do some adjusting here because

it we believe that they hold about

252,000 Bitcoin

before their actual Bond offering that

they just did so that does make things a

little bit more complicated because when

you look at their balance sheet you

don't want to take digital assets for

that $6.8 billion and assume that 6.8 is

still worth 6.8 if you divide that 6.8

billion do by 252,000 Bitcoin they spent

basically their cost basis is somewhere

around $27,000 per Bitcoin this means

you actually have to

multiply how much they say they have on

their balance sheet of 6 .8 billion in

digital assets by about three and a half

to get to today's pricing which means

they actually have closer to 24 billion

dollar of

Bitcoin it's a lot like I'm like dang

man you know we just did this um you

know robotics uh and and Ai and space

exploration VC uh we've got uh TBD but I

think we might be closing that within

the next two weeks and we've still got

some slots we've already raised over 7

figures for it if you want to learn more

about that go to roboh hack. a but I

believe that's going to close in about

10 days it'll be about a week before the

house hack offering but anyway uh you

can learn about that I'll just link it

down below or it's roboh hack. a but

what's remarkable here think about this

for a moment is they show this on the

balance sheet at a cost of $27,000 why

because in order for them to increase

what's on their balance sheet and show

it to you correctly they'd have to take

a gain but if you take a gain you have

to pay tax on it so that's the cool

thing about having appreciating assets

is you don't actually have to pay the

taxes on it right anyway so so I mean

they've got $24 billion uh of of Bitcoin

that's why I was joking I'm like oh you

know we just raised seven figures for

the VC and I'm like oh this is so cool

raiseed seven figures for the VC and

then I'm like bro they just raised $3

billion and what are they doing with it

I buy Bitcoin wait so they they don't

have to go like deal with tenants and

toilets or like interview robotics

companies or like deal with startups or

other people nah this my Bitcoin man and

I'm

like

damn why I got freaking easy okay I want

put I don't want to you know Michael

sailor has been working at this company

micro strategy for you know uh a quarter

of a century or more so I'm not trying

to discredit work but it just it's kind

of like all right all right anyway so so

y'all got 24 billies you just raised

another three billies and what are you

going to do with that three billies well

you're literally going to buy Bitcoin

with it well you say and General

Corporate purposes and you're filing on

it they're going to buy

Bitcoin okay got it so let's now say

they have $27 billion in assets how much

debt do they have uh well they've got uh

on their balance sheet long-term debt uh

and current liabilities all that good

stuff got about seven s and a half some

of these are deferred tax liabilities

and otherwise so not that big of a deal

let's just go ahead and say 7 and A2 now

including the 3 billion more that they

just raised here okay cool so you've got

27 billion in total assets minus 7.5

billions of debt puts us about 20

billies of actual Equity so then I look

at what's the stock trading for and that

is about uh $85 billion so that means

they are trading for about 4 and a half

times how much Bitcoin they have and

then this is where we have to look and

say okay well I mean their valuation

shouldn't only be the book Book value

like an actual operating real estate

company for example like Invitation

Homes you know they don't do wedge deals

but they trade for like two 2.2 times

book so you know you take 100,000 let's

say as a house uh $50,000 of debt okay

you got 50 of equity they'll trade for

100,000 because there's actually like an

operating company that could go buy more

real estate in otherwi and that's like

your bare minimum on an asset company

right that's not even big growth at like

an Invitation Homes but they're trading

here at about 4 and A2 times book uh you

know super micro was trading for less

than two times book as an AI play last

week that's why I bought the crap out of

it I'm like less than two P times book

that's a freaking steal for an air

related no guarantees so I'm seeing them

I'm like all right okay y'all trading

for like four times so what do you do

then because maybe maybe y'all do

something that that I don't know makes a

lot of money uh and so I went over to

their income statement and the first

thing I noticed is that revenues have

basically been declining you know the

could be for a while I mean not just the

last three months last nine months but

the kesc letter put a great little chart

out and they show just declining

revenues for for their products for a

while that's not to say that their

products aren't worthy but usually when

you have a company that is taking a net

loss mostly because their operating

expenses well exceed their gross profit

by well a lot now some of it it's

because they take impairment charges but

even if you didn't take the impairment

charges you'd still be losing money

because you're spending more money on

the operations for this you know

software company that you have than

you're actually making and growth is

declining so you're a money losing

company where growth is declining that

makes it really really hard for you to

get multiple in software like companies

will be okay like markets rather will

let your stock Skyrocket if you're

losing money if you have growth you know

like a snowflake oh my God growth you

now people pay for growth even if you're

losing money uh which is also blows my

mind as to why pelaton stock is doing

decently in the last few months because

they they're losing money and they

really don't have growth I think people

just look and they're like oh it's less

than $10 for Paton I have a paleton bye

like that's sort of like the due

diligence that exists out there anyway

so uh all right so so we're trading for

four and a half times book we don't

really have a rationale to give this

thing you know an acceleration here in

valuation for the fundamental business

because well it's losing money and it's

declining in growth so why do we have a

bond offering of $3 billion and how does

this actually work like who would buy a

bond offering for micro strategy and

what does this potentially mean if

things go oopsy dupsies well first of

all they're issuing a $3 billion Bond

offering with a 0% interest rate that's

crazy to me a 0% interest rate uh and

it's due in

2029 and it will not convert unless the

stock is trading for more than

$672 40 per

share okay wait a minute this seems a

little weird help me understand this

Kevin so if I buy $11,000 of micro

strategy bonds they're going to pay me

$0 correct they're going to pay you

0 okay so what do I get out of it well

well if micro strategy goes to let's say

$1,000 a share in the future your $1,000

will convert into shares at

672 that's a 55% premium from where we

sit today and then you'll get the

difference so you'll get that upside

that extra you know 30 40% or whatever

you would get that upside so it's almost

like a call option and that's why

they're not paying you any interest now

what's kind of weird weird about it is

if you try to buy a call option instead

you start realizing the because the

volatility is so high the premiums are

even more overpriced so even though

you're paying a 55% premium on a bond

you'd be paying way more probably like a

70 to 100% premium on long-term call

options that don't even go out to 2029

so people are thinking hey let me park

money into these Bitcoin bonds basically

uh and you get a few benefits number one

they're preferred so if the company

micro strategy goes bankrupt the first

debt that gets paid back not the

shareholders it's the bond holders so

the bond holders are going to get paid

back first if micro strategy goes

bankrupt okay got it so you got

liquidation preference so imagine that

liquidation preference on basically an

option so if the company like doesn't

trade for over $672 in the future

technically micro strategy needs to pay

these Bond holders back

so they'll give them the cash back

they'll refinance they'll do some new

bonds whatever or sell some stock

whatever they need to do so if they do

that then really what they're do because

these are convertible bonds really what

they're doing is they're saying hey do

you want a call option on bitcoin you

start making money after $672 if it's

less than that you get your money back

if we go bankrupt you get first priority

you get your money getting your money

back and if we go to $22,000 a share or

whatever you get all of the difference

between 672 and

2000 okay for a lot of people that

actually makes sense cuz you're kind of

wondering like who would buy these bonds

at a 55% premium why well that's why

because it's basically a call option

that doesn't have Theta Decay and it has

liquidation preference okay wait a

minute that's actually when you put it

that way kind of interesting yes it is

and not only do you have that longer

expiration time frame but you can buy it

in a 401k or something else else so

convertible bonds are actually very

interesting because of these features

that they have they're very complicated

to understand and I'm about to go

through how things could actually go

wrong with a convertible Bond but I want

to mention this is the similar structure

that we Ed for house hack except we made

it even more desirable for our investors

when people invest in house hack they

get over at house.com they get a 5%

coupon and we pay that out monthly so

every month you get a check for 5% you

know divided by 12 obviously for the

year uh of what you invested said

house.com and rather than telling you

you get the upside of the stock at a 55%

premium like micro strategy trading you

know for 400 something now and and it

doesn't actually uh convert to shares

until 672 and some date in the future

we're basically saying hey we'll give

you today's valuation no premium and the

low end of today's valuation too so in

other words we think our hope is that a

house hack which isn't public obviously

can IPO at some point in the future and

you get all of that upside and you got

paid a yield so that's just something to

when you're thinking about micro

strategy compare because the pros and

cons are actually similar with the fact

though that micro strategy charges you a

55% premium although they do have a much

more volatile asset Bitcoin that they're

buying we're raising bonds to go buy

real estate that basically yields us you

know depending on the real estate we buy

probably in average average of 4 to 5%

something like that we use that uh and

we get a good deal wedge deals which

helps us pay out a yield and that lets

us grow our asset base which lets us

grow the company and become a really

awesome part uh of uh frankly what we

want to be is America's best landlord

create the best homes and then uh

eventually uh turn those back over to

the community not just helping people

with rentals in the meantime but but

long-term ownership too so where does

Micro strategy go bad well micro

strategy could potentially go bad if the

valuation of Bitcoin fell dramatically

now the problem with Bitcoin uh and and

some people see it as a feature so I

just want to be transparent here I'm not

taking sides I just want to be clear the

problem with Bitcoin is that um because

it's an asset class that does well when

it does well it does poorly when it does

poorly now I know that sounds like a duh

but I want you to think about this for a

moment when Real Estate is rented out as

a comparison this is very important when

Real Estate is rented out and the market

Falls as long as the tenants still

paying rent it doesn't matter as long as

you're in your portfolio 90% of your

tenants are still paying rent or 95% are

still paying rent it doesn't matter what

the market value is like your rent is

not predicated on the market value of

the real estate with Bitcoin what

sustains Bitcoin is not rent or company

earnings which does have benefits you

know you don't get sometimes the

volatility what sustains the price of

Bitcoin is Bitcoin being bought so on

the upswing as companies like micro

strategy take $33 billion and go buy

more Bitcoin you push Bitcoin up more

which then induces more people to buy

Bitcoin in fact we have had greater

flows into Bitcoin related funds thanks

KC letter again uh you know just this

last week than we had going into

GameStop during the GameStop Euphoria

which is is crazy

okay yes many call it a bubble some even

call it a Ponzi because you're taking

this money that you've raised and now

you're buying more except you're

accelerating the value of what you're

buying which again is also different

from buying real estate like you buying

a house in a neighborhood and there are

10,000 other homes is it is it going to

jack up the prices of all these homes

whereas when you're taking $3 billion

dollar of Bitcoin you're probably eating

up all the sell order book basically and

you're driving it up

more so the issue is once Bitcoin starts

falling we don't know when that will be

it could hit 250,000 first to get a

million for I have no idea okay but once

it starts actually sustainably

falling it becomes very hard to sell and

I don't mean like putting it in an order

to sell I mean sell to people it's very

difficult to sell a retired couple hey

uh you know only 1% of the world owns

Bitcoin and you should too before

everybody else gets in want to buy some

Bitcoin and like I usually the only due

diligence that's done here by the way is

uh they look at the chart all right well

what's the performance been over the

last year

it's doubled oh yes I'll buy some okay

now how does it work well it's down 30%

over the last year but don't worry it's

just class it'll go back up yeah we're

going to think on that

one it's like what selling something

that goes up is easy you don't want to

be the person telling somebody that

something that's going up is going to go

down because nobody wants to hear that

because that means people are losing

money but what happens when it actually

does go down well then it becomes nearly

impossible to

sell uh to to new people to get inflows

because the recent history is bad this

then does the opposite of creating the

order book of fomo which we have now

which is people are only buying at

higher and higher prices because they

want to be part of the game it creates

the order book of fear which is micro

strategy can't raise money anymore

people are selling and now you have this

sort of self sustained decline obviously

that's you know just Bitcoin as an asset

class if uh a fall in Bitcoin is

conjoined with a fall in the stock

market well we could create a recession

but that's really a topic for a

different video we don't want to get so

broad here the point is once you

actually get a sustained correction

again it does you are going to slow down

your adoption of Bitcoin and that is

going to substantially reduce the

volatility of options and micro strategy

stock or whatever that might be a better

time to consider buying options or

actually buying into Bitcoin so I'm not

here to say say like oh when it goes

down it's going to go down forever there

will always be better times to buy it's

simply to say that now that we have an

understanding of all this we have to

consider micro strategy again so what

happens when micro strategy potentially

gets into a place where they have to

start paying back their bonds their

convertibles but they cannot pay them

back okay this is a problem so when you

have $7 billion of

convertibles and uh your stock starts

falling then you're not going to be able

to convert the bonds to shares instead

you will have to pay them back but if

your stock keeps falling it makes it

very difficult for you to refinance

those bonds to get new loans new bonds

to replace the olds uh and in that case

you start running into potential

problems where you have to issue shares

on the stock market to pay for your

first bonds to pay them off so you're

not in default

that's fine it works for a while as long

as your stock price still has something

to it but what happens is your next

bonds expire in

2027 and there's only about a billion

dollars of them then you've got about a

billion in 2028 and you've got about

785 in

2030 uh you've got uh and then you got

someon you got about

631 in in 30 sorry 600 in 2031 you've

you got 786 in 32 and then of course you

just added the three for 2029 so when

this really becomes a problem isn't

actually really until well likely

2027 if and when Bitcoin was a lot

cheaper and all of a sudden they

couldn't pay off that billion dollars in

bonds I think that's one of the reasons

why they've actually been smart to start

moving these bonds down in in further

out in time you know they're going 27 28

the latest three bills that they did are

in

2029 this is smart the biggest risk

factor is not going to be near-term for

micro strategy there's going to be

near-term fluctuation it's actually what

happens at the end of the decade what if

you're at a place where the Bitcoin

Euphoria has has died down a little bit

and now you're below cost that would be

problematic let's say their cost you

know their average cost bases would be

somewhere around 35,000 once they keep

adding more Bitcoin whatever let's say

their average cost is somewhere around

35,000

and Bitcoin goes to I don't know $20,000

I'm just making an extreme example here

I I know many people are oh my gosh I

buy the dip out of that great that's

fine but but what if you're buying the

dip doesn't help because you don't have

Micro strategy buying okay and now the

asset trades sideways for 3 or 4 years

well the big risk here and you can see

how far down the road it is but the big

risk here is the asset trades sideways

there's little liquidity for micro

strategy they need to dump shares to

actually be able to pay off their debt

so their stock valuation goes down down

their earnings from their software

business aren't helping them because

there are no earnings and they're not

growing the earnings so all of a sudden

towards the end of the decade you could

be in a place where this stock has a lot

of problems if Bitcoin is not worth more

Bitcoin just consistently needs to stay

above

$35,000 would be my my safety buffer

there uh which honestly you've got a lot

of room between now and then uh you're

at 35 now it would have to fall

somewhere around

63% so that that I mean it can happen

you you get another crypto winter it

seems like there's insulation here but

I'm just saying I if for whatever reason

we start trending in that

direction uh keep that in mind micro

strategy is going to have the oopsies

between 27 and

2030 if Bitcoin gets back below you know

maybe write that down 50k so put put a

little alert if Bitcoin under 50 and

date after 2027 micro strategy starts

having maybe oopsies but between now and

then your debts just aren't coming due

with this company so really this company

I mean Bitcoin could go down to $20,000

and this Bitcoin or this company doesn't

have any problems because they're not

paying any yield on their bonds anyway

pretty much I think they just paid off

their yeah they paid off their 75 yields

uh oh they're 2028 cost them 62 2030s 62

20 31s cost

87 and their 2032 is cost 2.25 Okay so

so they've got a little bit of interest

expense but it's so freaking nominal

they could sell you know a few Bitcoin

and cover it basically they're probably

going to be okay until their bonds start

coming due and you would need Bitcoin to

collapse so in other words you know a

lot of people it makes sense why people

are looking at these these 2029 bonds

for micro strategy because they are

probably insulated between now and

certainly until their next bonds come

due 27 28 29 uh and you would need

Bitcoin to fall substantially in which

case if you thought Bitcoin was going to

fall substantially you wouldn't buy the

bonds anyway so this is why uh when we

ask why would somebody why would people

spend $3 billion on bonds offering

0% here's your answer so hopefully this

is a useful look into what the heck is

going on at micro strategy if you found

this helpful subscribe to the channel

check out Robo hack. check out househ

hack.com for convertible bonds that

actually pay Y and uh subscribe to the

channel thanks so much for watching bye