You’re giving microstrategy a 0% interest loan they can invest at 4.5% and then buy you out before you make any money on the conversion which is also electable at their discretion to be in cash or stock.
Most likely this is a move to pump bitcoin and by inducing one sided market impact allow offloading via pledged asset type of loans without having to sell Bitcoin (which would cause down side market impact and impair the price)
The path makes you feel good but they convert at discrete event times if they occur. I would suspect they’re highly illiquid and cashing in may be difficult. I’m speculating though. We will find out when they mature.
Edit: The general rule is that products like this are sold, not bought ;-)
For this convertible bond to be in the money requires the price of the stock to hit $800+ by 2029. You can also book trading profits in the meantime (path dependence is useful here) but I suppose liquidity may be a problem down the line. In general I’m skeptical. I have set a reminder to come back here in 2029
Without knowing the details, Microstrategy stock, and especially their bonds, look like an overly complicated way of gambling on bitcoin.
My guess is that a high degree of complicatedness of a bet can make it very compelling to certain types of gamblers because the process of learning how the bet works makes one feel like they have an advantage. But how that results in Microstrategy stock (total market capitalization) selling for around 3x the value of their bitcoin holdings is a mystery to me.
I agree that it is likely an indirect Bitcoin bet. It can be attracting investors prohibited from holding Bitcoin directly by regulations (pension funds, VCs, etc).
I also agree with your assessment of tricking people with an imagined advantage based on knowing the gamble mechanics. It’s a human cognitive fallacy. Knowing != good at.
There's no trick. The real trick is fiat's lack of proof-of-work, which is what Microstrategy's exploiting.
There is an enormous amount of money in the market that is prevented from buying/speculating on bitcoin and MSTR is the pathway for them to do this that has many advantages over an ETF. Once you understand bitcoin enough to know that the risk is very small and the reward enormous, with a finite supply (first liquid asset in the history of mankind with this quality), Gresham's law kicks in.
