Author: Chen Xiaomeng
STRC has dropped below 90, will it go to zero?
Let's use @khingoei's model to explain:
This model divides STRC into three scenarios:
1) Increase dividends, pulling the price back near par: 100
2) Maintain current dividends, but the market demands a 13% yield: 88.5
3) Suspend dividends, with dividend accumulation deferred by 2–3 years: 70
Under the assumption that the probability of suspending dividends is only 5%, the implied probabilities derived are roughly:
- Increase dividends: 62.8%
- Maintain dividends: 32.2%
- Suspend dividends: 5.0%
In other words, if you agree with this model, the current price is already pricing in some discount for the worst-case scenario, while the market's main pricing contradiction is whether $STRC will eventually increase dividends to restore the price back near par.
The sensitivity table below is also crucial.
With the maintain-dividend price at 88.5 and a 5% probability of suspending dividends, the corresponding implied probability of increasing dividends is approximately 63%.
In other words, the market is now roughly betting: STRC has about a 60% probability of moving back near 100 by increasing dividends/repairing the yield structure; the remaining 30%-plus probability is for maintaining the current state; the model assigns only a 5% probability to actually suspending dividends.
This is also the core of how I view STRC now:
Short-term price fluctuations do affect sentiment, especially when it drops below 90, many people start to doubt whether the logic has changed.
But from this model's perspective, what really needs watching isn't the daily few-dollar fluctuations, but these three questions:
1) Are dividends stable?
2) Does management have the incentive to repair par?
3) Will the market's required yield for STRC continue to rise?
As long as the dividend logic hasn't broken and the probability of suspending dividends hasn't significantly increased, STRC is now just a credit asset being repriced by a higher yield.
So, what about the risks?:
1) If the market's required yield continues to rise, STRC could remain under pressure
2) If expectations of a dividend suspension actually emerge in the future, then the 70 scenario isn't just for show
3) If liquidity/sentiment continues to deteriorate, short-term prices may also continue to deviate from the model
My personal view is that STRC is not afraid of volatility; what it fears is the collapse of its logical support.
As for whether this model is accurate, we can refer to the price fluctuations of $SATA. Currently, SATA has already returned to 100, and it should continue ATM buying BTC today. Is SATA's logical structure any different from STRC's?
Completely identical, and SATA even has 50M of $STRC at its base layer ~
Finally, I want to say one thing: analysis must look at the players holding positions. I don't know why there is so much hostility in the world. Just because someone holds a large position doesn't mean they can't be objective; just because someone has no position doesn't mean they are naturally clear-headed.
Truly meaningful discussion should revolve around asset structure, dividend coverage, management actions, and market yield requirements, rather than just slapping on a "death spiral" label the moment the price drops.
This market is already restless enough; can we have a bit more discussion based on models and facts?
Not financial advice, DYOR
