This morning at 7:59:19, Strive filed an 8-K saying it bought 1,375 bitcoin.

At 8:00:15, Strategy filed one saying it bought none.

Both companies pay a large cash "dividend" on a preferred stock. Both have told the Internal Revenue Service, in writing, that they have no earnings to pay it from.

That is where this letter goes. Not to whether either of them is a fraud, because neither is hiding anything. To what the instrument actually is once you read what they filed instead of what they posted.

Strive's VP Controller signed a Form 8937 on 2 September and sent it to the IRS. It says the company expects zero current and accumulated earnings and profits for tax year 2026, and therefore that 100% of the August distributions on SATA will be characterized as returns of capital.

Strategy filed three of the same form this year, in May, June and July. The June one covers all five of its preferred series at once. Same language: the company "will have zero current and accumulated E&P in its taxable year ending December 31, 2026," and "it is expected that 100%" of the distributions "will be characterized as a return of capital."

Strategy did not stop at the tax form. It is in the offering document. From the STRC prospectus supplement filed in March, in the risk factors, about the stock it was selling that day:

"we do not have any accumulated earnings and profits, and do not expect to generate current earnings and profits in the current year or the foreseeable future."

And again in last Tuesday's 8-K, about the payments landing on 30 September and 15 October: the company "expects that the dividends payable" will be "characterized as non-taxable returns of capital."

Two companies. Different states, different lawyers, different auditors. Same sentence to the same agency.

A dividend is paid out of earnings. That is what the word means in the tax code.

A bitcoin treasury company, by construction, does not have earnings. It buys an asset that pays nothing and holds it. Strive lost $265.9 million in the first quarter, of which $295.8 million was bitcoin marked down. Its revenue for the quarter was $2.76 million.

So the payment cannot be a dividend, because there is nothing to pay it from. What arrives in the account is the holder's own money coming back, and it reduces what they paid for the stock.

Nobody is being deceived. It is filed, it is public, and both companies say so. It is simply that almost nobody selling the instrument leads with it.

Nothing is owed on it now. That part is real and it is the good part.

Each payment lowers your cost basis. Tax is deferred until basis reaches zero, and after that further payments are capital gains. At 13.00% a year on SATA's $100 stated amount, basis runs out in 7.7 years. Anyone who bought Strive's January offering at $90.00 gets there in 6.9.

Three things about that, because nobody selling it will say them.

It is deferral, not a discount. Return of capital shrinks your basis, so the gain is bigger when you sell. A qualified preferred dividend and a long-term capital gain are taxed at the same rates for most people. You are moving the tax later, not making it smaller. Time value is real money. It is not the same as tax-free.

It is decided one year at a time. Both companies' forms say these are estimates and that a corrected form follows if the estimates change. Zero earnings in 2026 tells you nothing about 2027.

And the treatment only survives while the bitcoin call is wrong. Earnings are zero largely because bitcoin got marked down. If the thesis works, earnings and profits turn positive, and the distributions become ordinary taxable dividends. The tax treatment holders like exists because the trade is losing.

Strategy's own site prints the upside of this as a number. Next to STRC's 12.00% it shows a "19.49% Tax-Equivalent Yield." That figure only holds while the company earns nothing.

Here is what changed this morning, and it is the reason this is not the letter we would have written in August.

Strategy spent last week buying no bitcoin at all.

From the 8-K, word for word: during the period between 31 August and 7 September, the company "did not sell any shares under its at-the-market offering program and did not purchase or sell any bitcoin."

It was not idle. It spent $176.3 million buying back 1,810,885 shares of its own STRC at $97.36, under the $100 stated amount, out of cash. Then the board doubled the authorization to keep doing it, from $1.0 billion to $2.0 billion. $1.19 billion of that is still unspent.

At this week's price, $176.3 million is about 2,236 bitcoin.

Seven days earlier, the same company said it would hold STRC's dividend rate at 12.00% "until STRC has demonstrated sustained, healthy trading near $100 per share." STRC closed at $97.75 on 4 September.

Read those two filings together. The rate is frozen and the price support is now a two-billion-dollar buyback. The instrument that was sold to buy bitcoin is now consuming the money that would have bought bitcoin.

The prices tell the same story. Strategy has been retiring STRC at $86.53, then $95.30, then $97.48, then $97.36. Roughly five million shares, about $489 million, and every purchase below the stated amount.

Strive did the opposite this week and said so out loud.

It bought 1,375 bitcoin at $79,281, taking its stack to 24,531. Matt Cole posted that 70% of the capital raised last week came from SATA, which now has $999 million notional outstanding, and added: "Time to break the billion-dollar wall."

Run the arithmetic on the wall. At 13.00%, $999.5 million of SATA obliges roughly $130 million of payments a year. First quarter revenue was $2.76 million.

The stack grew 5.9% this week. The claim on the stack grew 10.2%. Both numbers come off the same table in the same filing.

Bobby Tierney's CEBE tracker measures how much of each company's reserve is already spoken for by debt and preferred. Strategy sits at 22.44%. Strive sits at 37.44%. Both figures are dated, 30 and 28 August, from the filings before this week's, and the tracker has not yet caught up to either of this morning's 8-Ks.

Strive publishes a glossary on the same website that calls it The Daily Dividend Company. The glossary is written by people who expect to be held to it.

Perpetual: "no pull-to-par mechanism." Cumulative: "Cumulative is not a guarantee." Board-declared dividend: "payable only when, as, and if declared by the board out of legally available funds." BTC NAV: "An analytical input to coverage, not collateral." Preferred equity: "capped upside."

Strategy's version of the same admission is in its own risk factors. STRC is junior to all of the company's debt and to STRF. There is no escrow at Strive either, and its annual report says the Dividend Payment Account can be reached by creditors.

Both companies also disclose the limit of the remedy. If Strive stops paying, holders elect one director, and Strive's own 10-K notes that because existing holders including Vivek Ramaswamy control the vote through the dual-class structure, "the impact of any such election may be limited."

The remedy for not being paid is a seat on a board somebody else controls.

Strategy's STRC prospectus carries a risk factor about "fast-pay stock." If the IRS ever decided STRC met that definition, the arrangement becomes a listed transaction and every holder files a Form 8886 with their return every year.

The company says it does not intend to issue shares that would be treated that way and has taken advice. It also says, in the same paragraph, that "there may be increased risk that the IRS could assert" otherwise.

That is the company raising the possibility, in its own selling document, that the tax treatment being marketed could be reclassified into a reporting obligation.

Nothing directly, and that is the point.

You already own the thing all of this is a claim on. Every instrument in this category is a promise to hand you dollars out of an asset that is not dollars, and the promise is exactly as good as that asset's next few years.

Neither company is hiding the structure. Strive publishes a glossary conceding no pull to par, no guarantee, no collateral. Strategy prints the return-of-capital line in its own prospectus and its own tax filings. Both told the IRS the same thing in writing.

The week to remember is this one. One of them raised money on the preferred and bought bitcoin with it. The other bought no bitcoin and spent the week buying the preferred back below par, then doubled the budget to keep going.

Nobody has to elect a director to your wallet.

Capitalist.

This Sunday: Blockstream's Liquid sidechain lost about 4,000 bitcoin through a working front door, got 3,400 of it back, and has been stopped ever since. The negotiation is happening in public, on the bitcoin blockchain, in a language nobody can read.