Author: Chen Xiaomeng

STRC has fallen below 90, will it go to zero?

Let's use @khingoei's model to explain:

This model divides STRC into three scenarios:

1) Increase the dividend, bringing the price back near par: 100

2) Maintain the current dividend, but the market demands a 13% yield: 88.5

3) Suspend the dividend, with accumulation delayed by 2–3 years: 70

Assuming the probability of suspending the dividend is only 5%, the implied probabilities derived are approximately:

• Increase dividend: 62.8%
• Maintain dividend: 32.2%
• Suspend dividend: 5.0%

In other words, if you accept this model, the current price is actually giving a portion of the worst-case scenario some discount, while the main point of market pricing is whether $STRC will repair the price back towards par by increasing the dividend.

The sensitivity table below is also crucial.

In the scenario of maintaining the dividend price at 88.5 and a 5% chance of suspending the dividend, the corresponding implied probability of increasing the dividend is about 63%.

In other words, the market is currently betting that STRC has a 60% chance of approaching 100 again through dividend increases/repairing the yield structure; the remaining probability of over 30% is to continue maintaining the current state; the actual probability of suspending dividends is modeled at only 5%.

This is also the core of my view on STRC:

Short-term price fluctuations will indeed affect sentiment, especially when it falls below 90, many will start to doubt whether the logic has changed.

However, from this model, the real focus shouldn’t be on the daily few dollars of fluctuations, but rather on these three questions:

1) Is the dividend stable?

2) Does management have the motivation to repair par?

3) Will the market's required yield for STRC continue to rise?

As long as the dividend logic has not broken and the probability of suspending the dividend hasn't significantly increased, STRC is currently just a credit asset repriced by a high yield.

So, what are the risks?:

1) If the market demands a higher yield, STRC may continue to come under pressure.

2) If in the future there really is an expectation of suspending dividends, then the 70 scenario is not just a theoretical exercise.

3) If liquidity/sentiment continues to deteriorate, the short-term price may also continue to diverge from the model.

Personally, I believe that STRC is not afraid of volatility, but is afraid of the collapse of the supporting logic.

Whether this model is accurate, we can refer to the price fluctuations of $SATA. Currently, SATA has returned to 100, and today it should continue to buy BTC at the ATM. Does the logical structure of SATA differ from that of STRC?

It is completely consistent, and SATA even has 50M of $STRC underlying.

Finally, I want to say that analysis must consider the players holding positions; I don’t understand why there is so much hostility in the world. Just because a person has a large position does not mean they cannot be objective; just because someone has no position does not mean they are inherently clear-headed.

Meaningful discussions should revolve around asset structure, dividend coverage, management actions, and market yield requirements, rather than simply slapping a "death spiral" label on a price drop.

This market is already restless enough; can we have more discussions based on models and facts?

Not financial advice, DYOR

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