## Main Document: All Your Models Are Destroyed### Chapter 1: The Before Times#### History and Lessons Learned* In March 2022, MicroStrategy shifted its focus to a Bitcoin Accumulation Strategy, becoming the world's largest publicly traded corporate investor in Bitcoin.* This shift in strategy has led to a rise in the company's market valuation.* However, this valuation premium may be overstated due to various factors.* MicroStrategy's past history includes a large valuation premium during the dot-com bubble that eventually led to a significant decline in the company's stock price.* This previous experience has been largely ignored by current investors.### Chapter 2: The Exploration Era#### Bitcoin Acquisition and Strategy* MicroStrategy's Bitcoin Accumulation Strategy involved several convertible bond issuances to raise funds for Bitcoin purchases.* The company viewed Bitcoin as a digital gold and a long-term store of value.* MicroStrategy's Bitcoin holdings have grown to over 132,500 Bitcoin, with an average purchase price of approximately $30,137 per coin.* The company's mission has been increasingly focused on acquiring and holding Bitcoin.#### Capital Structure and Debt Issuances* MicroStrategy issued several convertible debt instruments with low interest rates to fund its Bitcoin purchases.* These debt issuances were structured to allow conversion to common stock at a predetermined price, typically above the market price at the time of issuance.* The low interest rates and premium conversion prices have raised concerns about the company's debt sustainability and the potential for dilution.### Chapter 3: The Golden Age#### Shift to Bitcoin Treasury Company and 21/21 Plan* MicroStrategy has transformed itself into a Bitcoin Treasury Company, aiming to extract value from Bitcoin through treasury operations.* The company's 21/21 Plan involves issuing $21 billion in equity and fixed-income securities to raise funds for additional Bitcoin purchases.* MicroStrategy defines Bitcoin yield as the percentage change in the ratio between its Bitcoin holdings and its assumed diluted shares outstanding.#### The Mechanisms of Bitcoin Yield* Bitcoin yield can be generated through share issuance at a premium to net asset value (NAV).* Convertible bond issuances can also contribute to Bitcoin yield, although they carry the risk of dilution if the bonds are not converted.* The 21/21 Plan has facilitated the extraction of Bitcoin yield through ATM offerings and convertible debt issuances.### Chapter 4: The Foundation Shakes#### Narrative 1: Cheap Debt* Convertible bonds issued by MicroStrategy do not necessarily represent cheap debt due to their embedded call options and the potential for dilution if the bonds are converted.#### Narrative 2: Share Dilution* The company is not shielded from share dilution despite the anti-dilutionary clauses in its convertible bond agreements.#### Narrative 3: The Infinite Money Glitch* MicroStrategy does not have the ability to create an infinite money glitch by repeatedly issuing shares and using the proceeds to purchase Bitcoin.#### Narrative 4: ATM Offerings and Company Valuation* Share issuance at a premium to NAV does not increase the company's Bitcoin per share ratio but instead offsets the impact of equity dilution.#### Narrative 5: Bitcoin Analogies* Comparing Bitcoin to physical capital and real estate is flawed as Bitcoin is not a physical asset and does not generate conventional yield.#### Narrative 6: Premium to NAV#### Narrative 7: Bitcoin Yield* The concept of "Bitcoin yield" is essentially a transfer of wealth from new investors to existing ones.* The extraction of Bitcoin yield is maintained through a constant inflow of new investors willing to pay a premium for MicroStrategy shares.### Chapter 5: The Coming Fall#### Declining Bitcoin Yield* As the Bitcoin yield diminishes, retail investors who acquired shares at high premiums may seek to sell, putting pressure on the company's valuation.* The decline in Bitcoin yield could also result in convertible bond investors exiting the investment, further reducing liquidity.#### Bond Traders* Hedge funds that have been utilizing convertible bond arbitrage strategies may become indifferent to MicroStrategy shares if volatility decreases, accelerating the decline in the company's valuation.#### Tied to the Mast* MicroStrategy's ability to acquire Bitcoin primarily occurs during bull markets, limiting its purchasing power during prolonged downturns.* As debt obligations remain constant while the value of Bitcoin may decline, MicroStrategy could face balance sheet distress and increased financing costs.#### Lessons from the Past* MicroStrategy's current situation bears similarities to the company's past financial collapse during the dot-com bubble.* The company's founder, Michael Saylor, has exhibited a pattern of overconfidence and grand visions that have ultimately proven unsustainable.