Prepared remarks
Hello, everyone, and good evening. I am Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 Second Quarter Earnings Webinar. Today marks a historic day for Strategy and all our investors. We believe this deserves an exciting brand-new format of our earnings call in line with our mission to digitally transform Investor Relations and be the most transparent company in the world. We will start the call with a 60-minute presentation approximately. This time, we have shuffled the order of the presenters. Andrew Kang will begin first, followed by Michael Saylor and then Phong Le. This will be followed by a 30-minute interactive Q&A session with our 4 Wall Street equity analysts and 4 Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, guidance, and prospects may constitute forward-looking statements, including, without limitation, our guidance with respect to 2025 operating income, net income, earnings per share, BTC Yield, and BTC Gain and the hypothetical valuation models contained in this presentation.
Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent quarterly report on Form 10-Q filed with the SEC on May 5, 2025, and our current report on Form 8-K filed with the SEC on July 7, 2025. And in the case of our guidance with respect to 2025 operating income, net income, earnings per share, BTC Yield, and BTC Gain and the hypothetical valuation models contained in this presentation, each of which is based on assumed Bitcoin price at the end of the year, the risk that the price of Bitcoin as of such date may be substantially different than the assumed target price. This could cause our actual results to vary substantially from such guidance and the hypothetical values generated by such models. So we assume no obligation to update these forward-looking statements, which speak only as of today.
Also in this presentation, we refer to certain non-GAAP financial measures. Reconciliations are available in our earnings release and the appendix of this presentation, which was issued today and available on our website. With that, I will turn the call over to Andrew Kang, CFO of Strategy.
Thank you, Shirish. And I'd like to welcome everyone to today's webinar, and thank you for joining what I think will be one of the most important quarterly earnings calls in the history of our company. I'll start with some key highlights from Q2 and year-to-date. Through July 29, our Bitcoin holdings were 628,791, which now accounts for 3% of all Bitcoin ever to be in existence and positions us as the most dominant player in the Bitcoin Treasury Company space. Our market cap has eclipsed over $112 billion, making Strategy the 96th largest public company in the U.S. And as part of our expanding and innovative capital markets plan this year, so far, we've launched 4 listed preferred equity offerings, STRF, STRK, STRD, and STRC, with STRC representing the largest IPO in the U.S. so far this year. And finally, we raised an impressive $18.3 billion in capital year-to-date, which already accounts for 81% of the total capital we raised in all of last year combined.
And we accomplished that in just 7 months. So in addition to expanding the depth of Bitcoin-backed credit instruments to the market, we are raising capital more quickly and more efficiently than we have ever before. Now moving on to our EPS results. Q2 '25 stands out as a transformational quarter for Strategy driven by 2 major factors: the substantial appreciation in Bitcoin price between the end of Q1 and Q2 in conjunction with the adoption of FASB's fair value accounting rule at the beginning of this year. We achieved a record $14 billion in GAAP operating income and $10 billion in net income, reflecting a fully diluted EPS of $32.60 per share for the quarter, the highest in the company's history and what may be among the highest of all S&P 500 companies this quarter. Our results for the first half reflect $8.1 billion in GAAP operating income, $5.7 billion in net income, and an EPS of $19.43 per share, also a record high for the company.
This sets us up for continued momentum through the remaining second half of the year. Here, we introduced an important metric, bitcoin per share or BPS. This measures the accretion of Bitcoin on a per share basis by calculating the ratio between the company's Bitcoin holdings and its assumed diluted shares outstanding. We are presenting bitcoin per share using Satoshis, where 100 million Satoshis equal 1 Bitcoin. In 2021, we achieved a Bitcoin per share of $26,752. The trend in '22 and '23 reflected the then market conditions. However, in '24, we saw a massive increase in our Bitcoin per share of $67,730 on the strong price performance of Bitcoin. This year, the positive performance continues with a year-to-date bitcoin per share of $39,716 as of July 31, close to 60% of what we achieved last year with much of the second half remaining for further execution. In short, our BPS performance shows how Bitcoin treasury model is consistently accumulating more Bitcoin per share, the highest of any Bitcoin Treasury Company directly and measurably increasing value for our shareholders.
Beginning in 2020, and over the last 4.5 years, we have increased our cumulative Bitcoin per share to 198,543 as of the end of July and positive growth around BTC Yield across those same years has consistently contributed to our Bitcoin per share outperformance. We have now achieved a BTC Yield of 25% year-to-date, meeting our initial full-year target in the first 7 months of the year. Our BTC Gain year-to-date is 111,894 Bitcoin, fueled by a strong Q1 and Q2 through the IPOs of our credit instruments as well as through disciplined activation of our common stock ATM. In terms of BTC Gain, our treasury operations have generated $13.2 billion so far this year, closing in on our initial $15 billion full-year target. Overall, these results reflect the real incremental value from our ability to strategically manage and maximize our treasury operations, showing strong momentum into the second half and supporting the increase in our full-year targets that Phong will detail later in the call.
Moving on to our balance sheet. We have added Bitcoin to our balance sheet in every single quarter since August 2020, and 100% of our Bitcoin remains fully unencumbered. We now hold over $74 billion of Bitcoin, which was purchased at a cost of $46 billion or just over $73,000 per Bitcoin. Our attractive low-cost basis reflects the benefit of starting our acquisitions over 4.5 years ago, which makes us the most committed and consistent corporate holder of Bitcoin in the world. This slide highlights the increase in the value of our digital assets following the adoption of FASB's fair value accounting standard on January 1, 2025. Under fair value accounting, as of January 1, we recorded a one-time adjustment of $17.9 billion of our Bitcoin balance sheet and an offsetting $5.1 billion deferred tax liability, which increased our total stockholders' equity by $12.7 billion. As of June 30, the value of our total digital assets have grown to over $64 billion with a deferred tax liability of $5.9 billion.
With our current long-term debt and added preferred equity, our total stockholders' equity stands at $47.5 billion. The change in accounting to fair value now better reflects our Bitcoin market value, improves balance sheet transparency while driving significant growth in shareholder equity. At the end of Q1, under the new FASB fair value accounting rules and due to the change in the price of Bitcoin between January 1 and March 31, we reported a Q1 unrealized loss of $5.9 billion. However, in Q2, we recognized a dramatic increase in the fair value of our Bitcoin holdings due to the increase of an additional $6.8 billion of Bitcoin to our balance sheet, along with the dramatic Bitcoin price increase between the first and last day of the quarter, which drove the $14 billion unrealized fair value gain for Q2. Quarter-to-date, we have further increased the total fair value of our Bitcoin holdings to over $74 billion, having added $3.7 billion through capital markets proceeds and also through the change in Bitcoin price since the end of Q3.
At current prices, we sit on approximately $6.2 billion in fair value gains so far this quarter, which will be finalized on the last day of Q3. Here, we show $8.2 billion in total notional debt across our convertible instruments with a market value of over $12.3 billion. All but 2 of the converts are in the money with a total weighted average maturity of 4.7 years, giving us flexibility to manage our long-term obligations. The earliest of the embedded call dates begin in December 2026, and we plan to be strategic in managing our outstanding convert complex. Our current preferred equity outstandings are $6.3 billion, all of which are perpetual and provide stable and long-term capital matched to our long-term strategic asset, Bitcoin. The combination of our large Bitcoin holdings and sizable equity base ensures that both our debt and preferred securities are backed by robust assets and are well fortified.
Our $74 billion in Bitcoin holdings provide $60 billion in surplus balance against the $8 billion in convertible debt and preferred equity obligations, and our $126 billion of enterprise value consists of $112 billion in equity on top of our debt and preferred stock. Our total annual interest and dividend obligations are currently $614 million, which includes $35 million in interest expense on our convertible debt, translating to a weighted average cost of about 42 basis points. We have $459 million in dividend obligations related to our cumulative preferred stocks, STRF, C, and K, along with an additional $120 million from our noncumulative preferred stock, STRC. This demonstrates that we have ample liquidity to effectively manage our total annual obligations through our established capital-raising capabilities. These obligations make up just 1.6% of the total capital we raised in the past year and only 2.3% of the total common equity raised in the same period.
Additionally, the daily market liquidity is sufficient to comfortably meet these annual commitments, considering the current average daily trading volumes of our common stock. With $74 billion in Bitcoin holdings, we are significantly over-collateralized compared to our $5 billion in out-of-the-money convertible debt. Our strong Bitcoin balance sheet provides a substantial buffer to manage these liabilities if necessary. Furthermore, after managing our out-of-the-money converts, our Bitcoin holdings at current valuations can cover around 120 years of our annual preferred dividend requirements. Now, I will hand it over to Michael for insights on Bitcoin, our financial products, and our BTC credit model.
Thank you, Andrew. And I want to thank everybody for being with me today. So I thought I'd start with a macro-overview of the Bitcoin universe. The first thing that I'll note is we have a very supportive White House and that started with the establishment of the Bitcoin strategic reserve, but it continues across the board. Next, as you can see, we have 12 cabinet members in this administration that are all pro Bitcoin. A year ago, we had 1 cabinet member who was neutral and 11 that were indifferent or uninterested and certainly not supportive. So this is a major change in the political landscape. Yesterday, the White House released a Crypto Policy Report. It's about 150 pages long. I did a scan. I'm sure some of you have done a scan. The takeaway is that this administration is going to be very enthusiastic and in support of the entire crypto industry and the Bitcoin ecosystem. Some of the things they're doing include work in the area of taxation to cure unfair tax treatments of digital assets and that includes relief or de minimis digital asset transfers like de minimis Bitcoin payments.
And it also includes guidance that digital assets should not be included when calculating CAMT unrealized capital gains taxes or when calculating CAMT minimum taxes. And so we have the support of the administration on this, and that was made very precise in writing just yesterday, and this is an excerpt of it. I think this is just very positive for the entire crypto industry and very positive for Bitcoin. And of course, it's very positive for the hundreds of companies that are starting to put crypto assets on their balance sheet. Wall Street has embraced Bitcoin, with 80 ETFs launched and $170 billion in value flowing into these ETFs. They continue to gain momentum and are becoming increasingly influential. Public companies are taking advantage of Bitcoin, marking a significant shift. We witness new announcements daily, whether from dedicated Bitcoin firms or hybrid companies and newcomers.
Currently, 950,000 Bitcoin have been acquired by 160 different publicly listed companies. If we look at the trend, we were pioneers in 2020 when there were only 2 at the end of that year, followed by 33, 39, 43, and 64 last year. Now, we see 160 companies involved before the end of 2025, which is remarkable. We are in a phase of rapid growth and adoption of Bitcoin as a treasury reserve asset. Companies are eager to join the Bitcoin 100, and there's even competition among them to track this group. Typically, there are 20 or more companies acquiring Bitcoin in any given week. Just recently, Coinbase announced it acquired thousands of Bitcoin this quarter, indicating very positive trends. Each of these companies could theoretically acquire a significant amount of Bitcoin in terms of dollar value. Although they won't reach 3% of the Bitcoin supply, the competition among 100 companies seeking to acquire as much Bitcoin as they can will impact the market.
Analysts are beginning to cover Bitcoin and form opinions on it. If you're looking at the 160 companies holding Bitcoin on their balance sheets, you must consider Bitcoin's outlook. The average price forecast by equity analysts covering our stock is $168,000 by the end of the year, reflecting the consensus among those tracking our performance. Technology investors are looking for the next great thing. Everybody knows AI is the next big thing. But now they're starting to realize that Bitcoin is also the next big thing, and it's being lumped as a technology transformation and a digital disruption. This is really positive because this is going to draw lots of Magnificent 7 investors into our space. Financial regulators are embracing Bitcoin. You see a new positive Bitcoin announcement just about every other day now from all parts of the government. Just a few days ago, the SEC released a memo allowing an in-kind creation and redemption of Bitcoin ETFs.
This is a huge deal. This is going to accelerate the development of the industry. They also loosened restrictions on options trading of Bitcoin ETFs. Paul Atkins just gave a speech and made a number of comments about the digital assets industry. It's clear that he's very supportive of innovation, very supportive of the crypto economy, very supportive of your right to self-custody, and this is a welcome development from the SEC. Another welcome development is the guidance that came from William Pulte to Fannie Mae and Freddie Mac, where he said they should prepare their businesses to count cryptocurrency as an asset in the mortgage. This is going to accelerate the institutional adoption of Bitcoin as collateral in the banking industry. There could be no more legitimate driver of the collateralization of credit with Bitcoin than the U.S. Federal Housing Authority. Capitol Hill's embracing Bitcoin.
There are 3 bills, one of them, the GENIUS Act, has already been passed. CLARITY is coming in September, and the Bitcoin Act allows for the government to acquire 1 million Bitcoin. These are picking up momentum. This is a positive development. U.S. states are also embracing Bitcoin. We've now got 3 strategic Bitcoin reserves, including 1 in Texas, just recently that was funded with $10 million. So this is a trend that's growing. International governments are enthusiastic about Bitcoin, and we're seeing this everywhere in the world with politicians in Ireland, in the U.K., in Pakistan, in the UAE, in Ukraine, etc., all of them making pro Bitcoin moves. The crypto industry has coalesced around Bitcoin. There used to be some conflict 2, 3 years ago. I think the previous administration played the crypto industry against the Bitcoin industry. They have now come together. It's pretty clear that Bitcoin is viewed as the foundation of the entire crypto economy.
We see that as really constructive for the growth of the entire industry. Now I'd like to talk about our financial products and our business. As you can see here on this slide, our company, Strategy, sits between the crypto economy and the traditional finance economy. The primary asset and the foundation of the crypto economy is Bitcoin, which is worth $2.3 trillion. When I think about the crypto economy, I think about every country on Earth and every capitalist on Earth, 24/7, 365 acting rationally in whatever their economic interest is. That's being manifested on Saturday night, and that's creating extraordinary performance and extraordinary demand in the underlying collateral, which is BTC. However, most of the world is unable to access the crypto economy. What we're doing is refining and harnessing the power of the Bitcoin asset. We're able to actually refine it into low volatility, low leverage, less risky financial products and then higher volatility, higher leverage financial products.
Just like you might refine a barrel of crude oil into kerosene, which would be very pure and asphalt, which is not so much, we're basically providing a function that, say, an ETF cannot provide. You can see IBIT, the most famous example here in this chart. It basically wraps Bitcoin and serves up a security flavor of raw Bitcoin to the investment community. We, on the other hand, are offering stepped-down elements, convertible bonds, convertible preferred stock, senior fixed stock, junior high yield, preferred stock, and of course, this treasury preferred stock in the form of Stretch. We're offering those. In essence, we're stripping and modifying the duration of the asset. We’re also stepping down the volatility of the asset, and we're extracting the yield from the asset, which is Bitcoin, and we're serving it to each of these fixed-income investors. But the excess yield, excess volatility, and excess performance that does not go in those fixed income instruments goes into the MSTR common stock.
Then of course, that feeds to the MSTR-based ETFs and the MSTR options. So all of these are different instruments. They're all targeted at a different type of investor. Some of them offer yield, some of them offer return. So let's delve into them a little bit closer. First, Strike is structured Bitcoin. Some people prefer a product with lower volatility and less risk instead of high return Bitcoin. They seek growth while maintaining yield certainty and reducing risk. The solution is convertible preferred stock. At $100 a share, Strike provides approximately $40 worth of equity, making it a 35 to 40 delta instrument. Investors gain partial upside on MSTR, receive a guaranteed 8% dividend, and have a liquidation preference with seniority in the capital structure. This approach ensures less volatility and downside while preserving some growth. The target market for this product includes growth investors.
The S&P 500 has a 9% year-to-date performance and a 1.3% yield, while Strike offers an effective yield of 7.5% and a 34% year-to-date performance. There are around $55 trillion within the combined market of S&P index and NASDAQ 100 index buyers. Then you've got commercial real estate, people that want some yield, but they also want some growth over time. That's another very large bucket, $30 trillion. Then you have hedge funds that give you downside protection, they may or may not give you performance. Oftentimes, they don't outperform the S&P, but they purport to be hedges and people like the idea of some structured investment, and that's what hedge funds do. Another target audience is Bitcoin investors. Maybe someone that doesn't want 55% vol, 55% performance, what they want is some guaranteed yield, some downside protection. But they still want to keep some of the upside of Bitcoin. That also goes for spot ETFs of Bitcoin.
So you can see they're all different pools of capital. The idea of Strike is kind of simple. What if I could have most of the upside of Bitcoin, not so much of the downside, and a guaranteed dividend while I'm waiting? And that's very compelling for a lot of people. The second product in our portfolio is Strife. Strife is long-duration senior credit. It's for income-focused investors. They want a premium yield, but they also want seniority and enhanced payment protection. Here's the term sheet. It's the most senior thing in our capital structure. It's 8x over-collateralized. As of the date of the term sheet, it's got an 8.7% yield. There are a lot of investor protections. The dividends are cumulative. If we miss a dividend, there's an escalating penalty provision. If you're looking for the most senior form of long duration preferred dividend, this would be it. And of course, what's the target audience, the target market?
Well, there's a $40 trillion capital market here, long-term treasuries, agencies, mortgage-backed securities, investment-grade corporate bonds, municipal bonds. You can see Strife is yielding double. It's basically giving you 8.7% as opposed to 4% or 5%. The third product is Stride, long-duration, high-yield credit. If you're looking for the maximum high yield, and you want it for a long commitment, this is it. You can see it's more junior in the capital structure, but it's still got a BTC rating of 5.1. 5 overcollateralization is more than any investment-grade bond we could find in the market, and it's more than mortgage-backed securities. It's more than junk, it's more than private credit. So actually, it's 5x overcollateralized is more than just about anything else we would be competing with. The effective yield is 11.9%. We've structured this so that it will always have a higher yield than Strife.
For those that understand Bitcoin and want the high yield and they want it for a long period of time, this is how you get it. So what's the addressable market? About $2 billion of high-yield corporate bonds, closed-end funds, preferred stock, ETFs, emerging market debt. Even though we're way overcollateralized compared to this other stuff, we're also paying a higher yield, right? It's just a better instrument if that's what you're looking for. Then we've got Stretch, our latest IPO focused on short-duration high-yield credit, essentially strong credit. It's designed for investors looking to take on just one month of interest rate risk, rather than 10 or 20 years. They want a stable value but are seeking higher yields than a money market. We've tailored this product for them. Stretch carries a higher BTC rating than Strike or Stride, as it is senior in the capital structure, with 6x over-collateralization.
Currently, it offers an effective yield of 9%. This means it pays 9% at par. Who is it meant for? There are $18 trillion in bank accounts yielding around 0 to 0.1% to 4% interest, and $7.4 trillion in money markets yielding 4.2%. You also have short-term treasuries and corporate commercial paper. Typically, most short-duration credit will be close to SOFR, around 420 basis points or less. We are currently offering 950 basis points, which is attractive. Additionally, because payments are made monthly and designed to be stable, it appeals to individuals, retirees, and many others. If you went out and asked 100 people whether they would prefer a 1-month instrument paying 500 basis points more than SOFR or a savings account with 9.5% interest, the majority would likely choose the former. So here, you can see how these things stack up. We have purposely engineered MSTR to be the most volatile security in our portfolio and engineered Stretch to be the least volatile thing in our portfolio and Strike is just after MSTR because it's got that 40% conversion rate.
Then Strife and Stride are sort of in the middle. What we're doing here is we're building out a yield curve for BTC credit. You can see here Stretch looks like a 1-month instrument. Stride has a Macaulay Duration of about 8 to 9. Strife more like almost 11 and Stride getting closer to 14. Now those instruments like Strife and Stride and Strike, they're perpetual. The market expects as the credit of the company improves, as Bitcoin increases in price, as the BTC ratings go up, it’s not unlikely that those durations will keep stretching. At some point, if someone thinks that Strife should be yielding 5%, the duration will stretch for 20 years. It will stretch out on the duration curve, and that's a function of credit spreads, SOFR, and Bitcoin. Stretch, on the other hand, will always be pegged at 1 month. The opportunity is between 1 year and 10 years. We're in a position to issue a perpetual preferred instrument that's a 1-year credit instrument or 3-year or 5-year or 7-year or 10-year, and it would be based on Stretch, the Stretch rate.
What you'll notice from this chart is that throughout the duration curve, we have higher yield. We're providing higher yield on the short end, in the middle, and at the long end of the curve. This indicates that our credit quality is stronger with longer durations and higher yields. Additionally, we have significantly improved our credit liquidity. Stride, Strife, and Strike are between 50 and 100 times more liquid than typical preferred stock. With trading volumes of $30 million to $50 million a day compared to the typical $400,000 a day, this is impressive. Stretch trades in the hundreds of millions of dollars daily and has seen substantial volume recently. We believe we have developed an innovative financial instrument by creating a perpetual preferred stock without including calls and maintaining the integrity of the instruments. This has resulted in outstanding new instruments such as Stride, Strike, Strife, and Stretch, which is a variable instrument.
We've achieved higher yield and greater liquidity with superior collateral that is overcollateralized. The weakest asset in our portfolio shows a 5x collateralization, which is better than most credit portfolios. It is rare to find credit instruments with 5x overcollateralization, while ours ranges from 5 to 9, providing us a significant advantage. If you examine the overall market, we are facing competition from ETFs that manage net assets amounting to billions. Their yields typically range from 6 to 7, while we are providing yields of 7, 9, 12, and 10, without any fees. Our liquidity is stronger, and we offer both long durations for those interested in that aspect and shorter durations for others. Additionally, we present opportunities in between. There are other comparable assets; some possess liquidity but are under-collateralized, such as mortgage-backed securities and investment-grade bonds, while others like junk bonds and preferreds lack significant liquidity.
Our portfolio offers a favorable mix of high collateral, long duration, high yield, and substantial liquidity. This brings us to MSTR, which represents amplified Bitcoin. For those seeking higher returns—such as 2x, 3x, or even 4x the return of Bitcoin, along with 4x the volatility—you need a Bitcoin-backed equity. We target Magnificent 7 investors who believe in the digital transformation of capital. Our goal is to become the Amazon of capital markets, revolutionizing the existing business model. This is evident in our performance metrics, showcasing a 101% annualized return for five consecutive years. If we have no leverage, if we have no credit strategy, we couldn't issue credit, then 10 years from now, we've got 199,000 Satoshis a share. That's like an ETF. That's a BTC factor of 1. But if we issue preferred that's equal to 10% of our Bitcoin assets, that's 10% leverage. It turns out that we have 267,000 Satoshis a share at the end of the period because we're not diluting the common stock as rapidly as we're building Bitcoin.
If we go to 20% leverage, you see you end up with 376,000 Satoshis a share. And now let's go to 30% leverage. You can see at 30% leverage, we would have 555,000 Satoshis per share. The green bars you see is the work that the treasury operation is doing. When people wonder what's the value added of a Bitcoin Treasury Company, it's the ability to create the green bar over the orange bar, and that's a 2.8 Bitcoin factor. It means, in essence, the floor for the mNAV for a company that's got this sort of performance is 2.8. It's not the mNAV, but it's at least the floor. The mNAV of the company should be higher than 2.8. As you increase the leverage and a Bitcoin Treasury Company like ours, if we have 30% leverage and Bitcoin appreciates at 30% ARR, you end up with an amplification of 2.8. You're getting 2.8 times the Bitcoin performance, probably 2.8 times the Bitcoin volatility. As Bitcoin grows faster, the amplification increases.
If we hold the leverage constant, and Bitcoin grows at 50%, you're at 4.7 x leverage. If you hold the growth rate of Bitcoin constant but increase the leverage, we're growing Bitcoin at 30% a year, but we go to 50% leverage, now we're 7.8 amplified, a BTC factor of nearly 8. You're getting 8x the performance of Bitcoin. In the extreme, if you go to 50% leverage, and Bitcoin goes on a tear and grows 50% a year, you're getting 22x performance on the equity versus just holding the ETF. Let's consider a different perspective. If Bitcoin increases by 30% annually and my credit rating improves or interest rates decline, for example, if SOFR drops to 100 basis points and we manage to lower our dividend rate from 10% to 6%, the amplification would rise from 2.6 to 3. As the company's credit quality improves, the amplification also increases. By combining leverage with credit, achieving 50% leverage while interest rates decrease to 5% or credit spreads tighten to 5% would result in equity delivering 9.9 times Bitcoin performance.
You can observe that the risk associated with Bitcoin declines, and credit spreads diminish. This is the existing capital structure, assuming the 40 vol and assuming 0% Bitcoin return. This shows you that the theoretical credit spread for all of the convertible bonds is investment-grade. The credit of the preferreds looks to be mezzanine with a slight high-yield one. You can see there are spread premiums across the board. Even if you're a skeptic and think Bitcoin is going to 0 or going up 0 forever, and it's volatile, you've still got massive spread premiums. These are all underpriced by the market. The risk is misunderstood. If you're using a skeptical view of the outlook of Bitcoin, you still have investment-grade credit. You can see what happens if the volatility comes from 40 to 35 and all of a sudden, all of the preferreds become mezzanine quality, and the risk just drops away from the bonds. As you go to 30 vol, you see pretty much stripped all the risk off the bonds, and you've even got investment-grade credit at the Strife level even assuming a skeptical view of the outlook of Bitcoin.
Thank you, Michael. I am excited to talk about 4 things today: one, our capital plan; two, I'll go through our guidance for 2025; three, I'll talk about comparables to MSTR and using that comparables; four, I'll talk through how you should think about valuing MSTR going forward. I'll start with our capital plan. As Mike mentioned, our goal is to take Bitcoin, to wrap it in Strategy securities and provide it to the largest possible capital base in the world to folks who are interested in equities, folks who are interested in debt, the largest addressable market, and do it with premium returns and premium yields. A few things I'll point out about this slide here. One is our converts represent a fairly small addressable market of $500 billion, compared to our preferreds, which represent markets of $90 trillion, $40 trillion, $2 trillion, $30 trillion. If you think about how we should address our capital structure going forward, I want to share what the midterm looks like.
Mike talked about what would our BTC ratings in our credit profile look, if we didn't have convertible bonds in our structure. That's our plan going forward. In about 3 years, we'll be able to equitize and retire some of our convertible bonds. What remains at the top of our capital structure, our Strife and Stretch, which we plan to have a BTC rating of 10x plus over time. This means that there'll be investment-grade equivalents. Strike will have a BTC rating of 6x-plus, which means there's a mezzanine equivalent and Stride, a BTC rating at 3x plus, which means it's a high-yield equivalent. If you think about it, we'll have a preferred structure, a stack of preferreds starting with 4 today. You could see us having more in the future. Our objective is to have unencumbered Bitcoin, currently $74 billion and MSTR, which is the base of our capital structure, our equity, which today is at $112 billion.
Our objective is to be the largest treasury company in the world, not just the largest Bitcoin Treasury Company in the world. If you take our Bitcoin holdings and compare it to cash and short-term investments of companies in the S&P 500, we are currently #5 today. I could see us being in a place by the end of the year, or in the next year or so, where we're #2 and we pass the Magnificent 7, Microsoft, Google, and Amazon, great companies. Our objective is to surpass Berkshire Hathaway's $348 billion of capital, thus having the largest capital base in the world based on Bitcoin. So how are we going to do that? We're going to do that primarily through tapping the preferred markets. You’ll see here in the last year, we were able to add $22.6 billion in capital to our capital structure. Year-to-date, 7 months through, we're near close to that $22.6 billion, and you’ll see a lot of that has been done through preferred equity, right?
Four IPOs in the first 7 months of the year have led to about $5.6 billion of capital added. Why are we optimistic that preferreds, which have historically been a sleepy underutilized under-invested market can become the base of our capital structure going forward? It's really on the back of the success of Stretch. Stretch last week was the largest IPO in the U.S. markets in this entire year. We raised more than fairly well-known companies like CoreWeave, SailPoint Circle, which is another digital assets company. We’re starting to see a shift of understanding of what a preferred market can look like. We're seeing that shift because we're offering what the market demands, right? High yield, highly over-collateralized short-term debt. We think this is going to lead to success in opening up the preferred market, but also allowing us to use preferreds on a go-forward basis to raise more capital.
Another extraordinary evolution from last week or discovery is the retail interest in preferreds. We went from raising about $153 million and 15% in our previous preferred offering Stride to increasing that retail adoption by 3.7x, $570 million, 23% of the total capital raised in Stretch was retail. That’s thanks to our partners, Morgan Stanley, Fidelity, and others who were part of that raising. We’re seeing demand for a product that we haven't seen before, meaning this is a retail-focused product, but also there's institutionals that will be interested in it. Our fourth time into the preferred market we think will unlock something that's going to be able to help us with our capital structure. How does this look over time with our convertible bonds? You’ll see here that through the course of 2029, taking the earliest allowable call date, we should be able to equitize over time or we’ll be able to call them over time.
What’s our capital plan and credit strategy on a go-forward basis? There's really 4 pieces to this. One is we want to make sure that we maintain what we think are reasonable collateral coverage for our preferreds. If you look at Strife and Stretch, that means 10x over-collateralized, Strike and Stride 6x and 3x, respectively. If we currently intend to reduce the overall exposure to senior convertible debt outstanding over time, it's a much smaller addressable market and it's a more illiquid market. Retail investors cannot partake in convertible bonds, and the pricing is less favorable to us; there are larger spread premiums. Our preferreds will remain perpetual over time. It's important for us to preserve flexibility and also minimize default risk having credit instruments that we don’t have to return. We think preferreds are superior. Our goal is to be the leading issuer of Bitcoin-backed credit.
We're going to do it responsibly, we're going to do it in a clear way, and we're going to do it transparently. We're going to provide BTC guidance and GAAP guidance for 2025. Our BTC guidance here starts with an assumption of BTC price because it drives our ability to calculate BTC and our GAAP guidance. You saw earlier that the consensus is $167,000 by the end of the year for equity analysts covering Strategy. We thought we'd be conservative and start with $150,000 as a BTC price as of the end of 2025. This drives a BTC yield percentage and BTC dollar gain at 30% and $20 billion. We're guiding for the end of the year 2025. I think we can increase that more than 4x, $24 billion by the end of the year. An earnings per share of $21.60, we think we can achieve an earnings per share of $80 by the end of the year. Some of you might be thinking, are those big numbers? Yes, they are big numbers.
How are they relative to the rest of the market? I'll share that in a little bit. We think MSTR is undervalued and in some cases perhaps significantly undervalued. Even though issuing equity anywhere above 1.0x mNAV is accretive to Bitcoin Yield and Bitcoin Gain. We will, on a go-forward basis, be more disciplined about how we issue our MicroStrategy ATM. I want to provide guidelines to create more transparency with our shareholders. You don't have to guess when a seller is going to tap the ATM. You'll know when we're going to utilize the ATM on a go-forward basis. Below 1.0x mNAV, we'll consider issuing credit to actually repurchase shares of MicroStrategy, means we're trading below net asset value. When we get above 4x mNAV, above $1,000, which is our view, the minimum that our equity should really be traded at, we'll start to actively and more aggressively issue MicroStrategy to acquire Bitcoin.
I also want to provide additional guidance on Stretch credit. At the end of each month, we will issue guidance or propose a rate structure for the following month. For instance, hypothetically, on August 31, if the 5-day VWAP is below $95 for Stretch, we will recommend a rate increase of 50 basis points or more to our Board and pricing committee. If the 5-day VWAP is between $95 and $99, we will suggest a 25 basis point rate increase. If we are trading within our target range of $99 to $101, we will not take action unless the Fed has changed the overnight rate on SOFR, in which case we might adjust our rate accordingly. If we are trading above $101, we will recommend a rate decrease or issue a SNAP follow-on offering at the end of the month. This provides more clarity on our credit. Let’s talk about comparables. How do you think about GAAP net income? How do you think about GAAP EPS compared to other companies in the S&P 500 universe?
Our GAAP operating income target and guidance for the end of the year is $34 billion. That would make us the #9 company in the U.S. in terms of operating income, bigger than household names like Walmart or AT&T or Pfizer, not quite as big yet as some companies that are very well known in the MAG7, Meta, Amazon, NVIDIA, and Microsoft. Our estimated net income of $24 billion is nearly double that of Tether, which is a great digital asset and stablecoin company. Our estimated net income is more than 10x the next closest company, Marathon, and there have been a lot of other Bitcoin Treasury Companies that have arisen over time. Let's consider a potential valuation. A standard valuation approach involves taking earnings and multiplying them by a price-to-earnings multiple, while also considering factors such as earnings growth, profit margins, industry characteristics, and operational efficiency.
It’s important to assess competitive positioning, product innovation, balance sheet management, and strategic vision. Currently, the average P/E multiple for S&P 500 companies is approximately 24 times, whereas ours is significantly lower at 4.7 times. Our addressable market is substantial compared to Bitcoin and Bitcoin ETFs, and also when compared to many S&P 500 companies. We're targeting individuals investing in equities, which amounts to a $35 trillion market, and there is a $60 trillion credit market for our related offerings. If you take a Bitcoin treasury approach to the valuation, you would take a $20 billion of BTC dollar gain, take a multiple of 10x to 40x on that, also using a similar multiple structure, and add the value of the Bitcoin on its balance sheet. You get to a $575 billion valuation, maybe a range of $250 billion to $900 billion. If you're following along, you might say that, that range should mean that multiple to net asset value, the mNAV of MSTR hypothetically could be 2.5x, which was at the low end, which is the floor for issuing equity to 4x, which is at the middle range here, which is where we would start to more aggressively issue equity to buy Bitcoin.
I think we've started with these types of activities and investor relations to communicate. Our principles about BTC. We buy and hold BTC, definitely, exclusively and securely. It means we're not going to sell, it means we're not going to diversify into other crypto assets and other digital assets. We prioritize MSTR common stock for long-term value creation over 5 to 10 years out. We're going to grow rapidly and responsibly subject to market dynamics. We've shared these before, but hopefully, they have become more of a stark understanding of what MSTR is, what are our preferreds, what is our credit strategy, and what is Strategy all about? We promote global adoption of BTC as a treasury reserve asset, and we’re going to continue to do that.
Thank you, Phong. We are now going to proceed to the interactive live Q&A section of our webinar. I would invite all of our analysts to come on video now. We look forward to hearing your questions. We'll go one at a time. I will call your names and then you can direct your questions to the management team. First, we will begin with Lance Vitanza, our research analyst from TD Bank.
Questions and answers
Let me see if I can get 2 and if I can. The first is, at some point, does concentration of Bitcoin holdings at a single corporation impede adoption of Bitcoin as a store of value, let alone other potential monetary functions, such as medium of exchange or unit of account? And if so, when might that point realistically come for Strategy? Is that 5 years out? Is it 10 years out? Is it longer? Is it shorter? Or is it just the wrong question?
I believe we are seeing an increase in institutional adoption, similar to what BlackRock is achieving with Bitcoin, as we bring in new forms of capital into the ecosystem. There are certain capital sources that wouldn't enter the market without a reliable and creditworthy counterparty. Currently, we represent about 3% of the market. If we reach 5%, Bitcoin could be valued at $1 million per coin, and if we hit 7.5%, we might see it soar to $10 million or even higher. If Bitcoin does reach $10 million per coin, it would imply that 93% of all Bitcoin is owned by others, which could lead to a surge of innovation globally.
As a follow-up, and Phong, you touched on this. You've been actively encouraging other public companies to follow in Strategy's footsteps and create their own Bitcoin treasury models. Are you worried that you may have been too successful in making that pitch? And at what point does the plethora of public Bitcoin Treasury Companies or PBTCs as I like to call them become a problem for you either in terms of access to capital or potential for bad actors, et cetera?
I don't think we get to that point. I think the positive of more Bitcoin Treasury Companies is creating knowledge. The more companies there are, the more analysts will cover them, the more retail investors will get involved, the more institutional investors will get involved, the more large banks. If they're all buying Bitcoin, Bitcoin price is going to go up, causing our Bitcoin net asset value to go up, which caused our equity to go up, which caused our ability to raise more capital. I don't think we're even close to a place where this capital market and the credit markets for Bitcoin are saturated. We are in the first inning of a 9-inning game. I think more and more access will occur.
The Bitcoin companies aren't competing with each other. We're competing against 20th-century credit instruments. If you think about the fundamentals. You're competing against corporate bonds and preferred stocks, illiquid bonds, illiquid preferred stocks, illiquid credit that generates a 400, 500 basis point yield. All these BTC companies create digital credit that generates 400 basis points more than the risk-free rate. The more of us there are, the more capital markets we can provide a digital solution to.
Thank you, Lance. Next, I will invite Lyn Alden.
So Strategy navigated the 2022 bear market successfully. My question pertains to stress testing as it relates to the midterm BTC ratings. Given the strategies credit products are backed more by assets and capital access than operating cash flows, are there certain Bitcoin bear market assumptions or thresholds, either in terms of drawdown magnitudes or lengths of time where capital markets might become inconducive for new capital issuance? What do you see in your forward leverage ratios for your overall capital structure?
If you convert the convertible bonds to all preferreds, you introduce a different type of risk. In that scenario, Bitcoin could decline by 80% and you'd still be okay, or even decline by 90%. I believe that as we transition to preferreds, we will establish a very strong capital structure that is resilient. The principal never comes due, which leads to questions about liabilities. The liability lies in the dividends. If you don't suspend the dividends, they accumulate and remain liabilities. Generally, most people don't expect more than an 80% extreme drop in crypto. I believe our structure is stable enough that we wouldn't miss any dividend payment during an 80% drop. In the case of a 90% to 95% drop, while you might pause some payments temporarily, you would eventually catch up. We carry significantly less risk compared to traditional banking models.
Great. Thank you. Next, I will invite Samson Mow.
0.15 by end of year is very conservative. My question is the preferred shares, they have a BTC/credit rating ranging somewhere between 3 to 9 or 5 to 9. How effective are those preferred at generating yield assuming we have periods of crab market? Under what conditions would you increase or relax that to go above 9 or above 10?
Over the next 36 months, you would think the drivers of our credit strategy will be education of the market. The more we do IPOs, we educate more people. Every time we go back to the market, we're educating credit rating agencies. As the world's view of Bitcoin as collateral evolves, that makes it easier. If Bitcoin trades sideways, the negative is that the collateral does not go up. The positive is that the volatility of Bitcoin falls.
Thank you, Samson. Next, I'll invite Brian Dobson, our research analyst from Clear Street.
The Trump administration has made some very positive regulatory changes for Bitcoin. If you had your way, taking a big-picture view, what would be the next area of improvement for regulators?
My opinion is it would be beneficial to nail down the digital assets taxonomy, under what circumstances can you tokenize a security. I think there's a lot of murkiness. They are supposed to be dealing with the Clarity Act in September. I think that will create a very rich framework for the entire crypto industry.
As a quick follow-up, you've had some very successful offerings this year. Could you share any feedback from the buy side regarding those offerings? What kind of securities could we see the firm offering in the future?
We launched our first perpetual preferred early this year. There was a lot of analysis and price discovery and just trying to get an understanding of that innovative instrument. We've shown a track record of growing demand on every subsequent IPO. We've seen institutional demand increase deal over deal. We've also seen high-net-worth individual demand. I expect more interest in the future. We have opportunities to take existing structures and deploy them internationally. We’re building out a bit of a Bitcoin treasury yield curve. We’ve got long duration, short duration, and as everyone knows, there are maturities everywhere in between. We have a lot of opportunity to grow.
Thank you, everyone, for staying with us for more than 2 hours. This was awesome. This concludes the Q&A portion of our webinar. I would like to thank all of our analysts for their questions and the audience for staying with us. We had thousands of people watch it live and join us on different mediums. I would now like to turn the call over to Phong for the final closing remarks.
Thanks, Shirish. Thanks, Mike. Thanks to Andrew. Thanks to all the analysts that joined us. Thanks to Bitcoin Magazine and Bitcoin for Corporations for cohosting this event. We wish everybody a good quarter and look forward to seeing you all again in 12 months, if not sooner. Thanks, everyone. Have a good evening.