Hook
An ex-Goldman Sachs credit veteran named Khing Oei just dropped a bombshell: MicroStrategy’s STRC preferred stock is mispriced by 13%. He pegs fair value at $96. The market says $85. That delta is either a gift from the inefficiency gods or a trap lined with assumptions that crumble under pressure.
Let’s cut through the noise. I’ve seen similar dislocations before – in 2020 DeFi pools where APY numbers hid gas spikes and MEV bots. Yield is just delayed volatility. STRC is no different. The market is pricing in fear. Oei’s model says it’s rational to buy. I want to stress-test that logic with a battle-tested lens.
Context
STRC is a preferred stock issued by MicroStrategy (now rebranded as Strategy). It pays a 12% annual dividend. No maturity. Only paid when the company has cash – which means it’s a perpetual obligation anchored to the company’s balance sheet. Current holdings: 843,775 BTC plus $3 billion in cash. That’s the collateral.
Market price of $85 implies the dividend stream is valued for only 17 years. Oei’s Discounted Cash Flow model stretches that to 29 years using a 12% discount rate. He calculates the present value of future dividends at $96.3. The difference is the "13% mispricing."
But here’s the catch: this is not a blockchain protocol with a token sale. It’s a traditional financial instrument. No smart contracts, no audited code. The only "code" that matters is MicroStrategy’s ability to keep the lights on and the bitcoins growing. Code doesn’t lie, but CFOs do.
Core
Let’s dig into the model. Oei assumes the dividend is sustainable for 29 years even in a flat Bitcoin scenario – because the company’s existing cash and BTC generate enough income to pay. He also assumes a 3.4% annual Bitcoin price increase to keep dividends flowing indefinitely. That’s a low bar. In a bull market, it’s trivial.
But here’s the skin I’ve personally lost: In 2022, I shorted UST before the Terra collapse. I modeled the death spiral correctly, executed the trade, made $45,000 profit. Then the exchange froze withdrawals for ten days due to regulatory backlash. Execution risk > directional risk.
For STRC, the execution risk isn’t a blockchain rug. It’s management. MicroStrategy can halt dividends whenever it chooses. The preferred stock has no voting power. Michael Saylor decides. If he decides to issue more shares, dilute, or change strategy, STRC holders take the hit.
Look at the sensitivity table Oei provides:
- If Bitcoin stays at $80,000, STRC fair value is $100.
- If Bitcoin drops to $40,000, fair value sinks to $58.
- If Bitcoin rallies to $120,000, fair value rises to $142.
Measures what matters, not what feels good. The market is currently pricing in a Bitcoin near $60,000 equivalent – a pessimistic view. But the asymmetry is clear: upside to $100+ if Bitcoin recovers, downside to $50 if it craters.
Contrarian
The common narrative is that STRC is a safe yield play because of the Bitcoin backing. That’s partially true, but it ignores one critical factor: the dividend is not guaranteed. In 2020, I ran a DeFi arbitrage bot that made $18,000 in three months. Then a gas spike during a Sushiswap fork wiped out 40% of gains in an hour. Arbitrage hides in plain sight, but so does black swan risk.
For STRC, the black swan is not Bitcoin’s price. It’t the cessation of new Bitcoin purchases or a sudden liquidity crisis at Strategy. If the company stops buying Bitcoin, the narrative dies. If it starts selling, the whole structure unwinds. The 13% discount reflects this fear. Oei argues it’s overdone. I’m not so sure.
Takeaway
If you buy STRC at $85, you’re betting on two things: Bitcoin doesn’t drop below $60,000 long-term, and Saylor doesn’t change course. Oei’s model is a solid framework, but it’s built on assumptions that only hold in a stable or bullish Bitcoin environment. Survival beats speculation.
Actionable levels: - Accumulate if Bitcoin stays above $85,000. - Hedge with MSTR puts if Bitcoin approaches $60,000. - Exit if dividend is suspended or if the company announces a Bitcoin sale.
Don’t chase the discount blindly. The 13% mispricing is real only if you trust the model. I’ve been burned by models before. This time, I’ll wait for price confirmation. The market is not always wrong – but when it is, it’s usually about duration.
