Jan. 30 at 9:48 PM
$STRK Why would anyone with half a brain buy MSTR convertible preferred ("STRK"). It has the lowest yield of all the MSTR preferreds and is junior to STRC and STRF (both with higher yields). If it traded with the same yield as STRC (again STRC is structurally senior), it would be
$12-13 LOWER than its
$85 price (15% lower). The long-dated call option embedded in STRK is effectively worthless given the time value of money (the conversion price is
$1,000). Using historical volatility of 50%, there is a greater chance that MSTR common trades at
$15 than above the
$1,000 strike price. It would take 5 straight years of MSTR being up 50% before MSTR common would be above the
$1,000 strike price!!! In fact, unlike most options, the higher the volatility input, the less value the option has (i.e., greater chance of MSTR bankruptcy). After funding the position at the risk-free rate, it would take about 14 years just to recoup one's principal.
