The post Thursday links: Overpriced debt, community-approved stables and Justin Sun appeared on BitcoinEthereumNews.com.

This is a segment from The Breakdown newsletter. To read more editions, subscribe Strategy as financing franchise Bond investors are generally considered more sophisticated than stock market investors (there’s more math involved, for one thing) — and no one has ever accused professional bond investors of being less sophisticated retail stock market investors. But a recent paper that does the math on Strategy’s valuation suggests they might be. Equity investors, it finds, are paying the right price for Strategy’s equity — but only because bond investors are paying the wrong price for Strategy’s bonds. This makes Strategy a “financing franchise” that can be valuable enough to justify the premium to NAV it usually trades at: “the ability to sell overpriced bonds to invest in fairly priced securities…creates an intangible asset whose value can make the market value of equity exceed the market value of the firm’s (tangible) assets.” Why would bond investors continually overpay for Strategy’s bonds? The authors suggest it’s because Michael Saylor is blinding them with science.  Strategy’s convertible bonds, layered preferred stock, optional conversion features and callable provisions — full of “various embedded optionalities and differing seniority levels” — are deliberately engineered to make “returns more salient while obfuscating risk.” If so, this should reframe the debate around Strategy: Instead of asking how long it can sell shares above NAV, as investors typically do, we should be asking how long it can sell bonds above fair value. Not forever, presumably. “In our model, the pool of ‘dumb capital’ willing to purchase overpriced debt is not bottomless,” the authors caution. By their calculation, an equity premium of 70-135% over NAV implies that Strategy will be able to sell overpriced bonds for about eight years. That sounds optimistic to me — which might be why Strategy’s premium to NAV has…

---

Filed under: News - @ September 11, 2025 10:28 pm