Lions, we are excited to introduce SURGE. SURGE is a perpetual preferred offering that LeoStrategy is bringing to the Hive Engine marketplace. This perpetual preferred token carries a 15% stated yield that is paid out weekly in HBD (16.67% effective yield if acquired during the limited initial sale).
LeoStrategy is a permanent capital vehicle that acquires LEO and permanently stakes it. We also build revenue-capture products/services which all feed our mission of acquiring LEO and perma-staking it. We source inspiration from Microstrategy but add LEO-specific elements along with a better model around revenue capture.
Why SURGE?
We are sure this will be the first question many ask. Why would we release something like SURGE?
SURGE is built to:
- Acquire HIVE to buy our next 1,000,000+ LEO acquisition
- Help LEO HODLers convert to a downside-capped instrument that pays stable yield on a weekly basis
- Expand our capital stack to create the second gear in our volatility harvesting income stack (more on this below) to generate more LEO Per Share for LeoStrategy
- Increase the LPS for all existing LSTR
The timing of SURGE is vital:
- LEO is still cheap and we aim to acquire 10M LEO tokens by 2026
- LEO has risen dramatically and some lions may want to hedge and take profits but not lose out on future LEO (and LSTR) price movements
#1 is something I think all Lions agree on. LEO may have 10x'd from the bottom but at a $6.6M market cap, it is still feverishly cheap. LeoDex is doing over $8M per month in trading volume and generating thousands of dollars per month in fees. The team has only been building it for ~6 months and has a long road ahead but the early success is very promising. LeoStrategy believes LeoDex will reach $100M+ per month in trading volume in the years to come and this is a core part of our business strategy: acquire 10M LEO, stake it as sLEO and earn USDC yield from LeoDex which will then autocompound for more LEO.
SURGE encourages LEO holders to take some profits and enjoy some downside-protected hedging without missing out on future upside for LEO/LSTR
#2 is a big reason why we are launching SURGE today. SURGE allows LEO holders to take profits from the rise in LEO's price, buy SURGE and have a downside-protected token (liquidation preference at $1 means that initial sale buyers at $0.90 are protected at $1) while earning stable, reliable and growing yield in the form of HBD (or LSTR) paid weekly to your wallet.
What is SURGE?
SURGE is a perpetual preferred token with no maturity date. Effectively, SURGE operates similarly to a hybrid of debt/equity.
Key Features to understand SURGE place in the market:
- Yield: $0.15 per 1 share of SURGE = 15% stated yield at $1/SURGE
- Initial Sale: 500,000 SURGE @ $0.90
- Payment Frequency and Method: Weekly (every Monday); payable in HBD (Stablecoin on Hive) or LSTR shares which are repurchased from the market at the time of distribution and payable at 95% of the current LSTR price at the time of distribution (the remaining 5% buffer is to be captured as revenue by LeoStrategy and deployed to purchase LEO for our balance sheet)
- Liquidation Preference per Share: $1 (in the event of a liquidation, SURGE holders are at the top of the preference stack and receive $1 in value per SURGE)
- SURGE tokenomics: Maximum of 500,000 Initial Sale. 2M max supply
- Conversion ratio: 50 SURGE can be converted to 1 LSTR at any time
- Conversion requests: Conversions of SURGE to LSTR are handled 1x per week after the weekly yield has been distributed
- Effective Conversion Price Per LSTR: $50 (the effective conversion is intended to be when LSTR 10x's in value to $50 and beyond. Meaning, SURGE is always worth $1 at the liquidation preference and while holding it, you earn $0.15 HBD per 1 SURGE. When LSTR is worth greater than $50, it is economically feasible to convert 50 SURGE into 1 LSTR (since 1 LSTR is worth more than $50). As LSTR's price increases above $50, SURGE will move to a delta 1 status and move in lockstep with that conversion value. This acts like a perpetual call option on LSTR
- Initial Yield at Initial Sale: ~16.67% (15% on $1 preference divided by $0.90 purchase price)
- Potential Dilution to LSTR: Potential dilution from the initial sale is 10% for LSTR if all SURGE from the initial sale is converted. SURGE is accretive to LSTR holders as it adds more LEO to the balance sheet now for the right to convert to LSTR at a future (higher) price. If LSTR is trading for $50, you know that LEO is exponentially more valuable than it is today which means LSTR holders benefit from this dilution in terms of LEO Per Share more than they are diluted
- Listing: Listed on Hive-Engine for initial sale. Liquidity pool for $50,000 SURGE:LEO will be launched after initial sale is sold out
- Yield for LPs: LPs will still earn yield based on the SURGE portion of their liquidity position (i.e. if you have 100 SURGE:5 LEO in the liquidity pool, you will still earn $15 per share of SURGE per year, paid weekly)
- ATM Strategy: LSTR reserves the right to deploy an at-the-market (ATM) strategy to acquire additional HIVE for LEO acquisitions by selling SURGE to the liquidity pool. Importantly, this follows a strict and methodical approach - similar to Microstrategy's ATM practices. ATM is done opportunistically and always with an "accretive to LSTR holders" mindset. If it is unwise to tap the ATM, then LSTR will not tap it. If it is wise economically to tap the ATM to acquire more LEO, then LSTR will do so. The maximum SURGE that can be issued is 2M so the maximum ATM offerings can be 1.5M more SURGE. Again, methodical is the key word. LSTR may or may not ATM SURGE and will do so following the parameters stated here
How Does SURGE Maintain $1?
SURGE is not a stablecoin. It is not intended necessarily to maintain $1. However the mechanics of SURGE are such that it should trade around $1.
How this works:
- SURGE's initial sale is at $0.90 to give preference to early entrants
- SURGE's stated yield is $0.15 per 1 SURGE or 15% APR based on a $1 price
- SURGE's effective yield for initial sale buyers is ~16.67% ($0.15 on $0.90)
- For every $0.01 SURGE is trading below $1, buyers can obtain a higher effective yield (paying less than $1 for something yielding 15% at $1 par). The lower SURGE's price, the greater the effective yield which increases demand for SURGE
- For every $0.01 over $1, the effective yield reduces from 15%
- Conversion to LSTR at 50:1 means that when LSTR crosses $50, it is economically sensible to convert SURGE tokens to LSTR tokens (for example, if LSTR is $51, 1 share of SURGE will have a conversion value of $1.02)
How is The Yield Economically Feasible?
Two main reasons:
- Convertible preferred tokens allow LeoStrategy to buy more LEO today while LEO is still cheap in price but without diluting LSTR tokens until the price of LSTR is $50+ which means lower share dilution but a cheaper acquisition price for LEO. This is accretive to LSTR token holders
- Our new Market Maker volatility harvesting project benefits from volatility via derviatives
Point #1 is relatively straightforward: SURGE allows LeoStrategy to buy LEO today without enabling economically-sensible conversions to LSTR until the price of LSTR is greater than $50.
SURGE acts like a perpetual, no-expiration option to convert to LSTR at $50. For buying SURGE at $0.90, you are receiving this option to convert a token that is par-valued at $1 while earning 16.67% effective yield.
If it takes 1 year for LSTR to reach $50, you held what is effectively a "stable priced coin" and earned 16.67% or $16.67 per 100 SURGE while still participating in LSTR's (and by proxy, LEO)'s upside beyond $50 per LSTR.
Where Does the Money Come From for HBD Payouts?
We've followed the exact roadmap used by "Microstategy" when it comes to funding the HBD Payouts:
- A portion of the initial SURGE sale is set aside for HBD payouts covering a minimum of 6 months worth of payouts
- Volatility harvesting (our ability to market make both the derivative SURGE as well as LSTR and LEO (bLEO, pLEO, heLEO and LEO)
- ATM and other offerings
Future SURGE Liquidity
When the SURGE sale is completed, a $50,000 Liquidity Pool of SURGE:LEO will be created by one (or multiple) of our board members. Exactly how the LSTR:LEO pool was setup.
LeoStrategy's Current Capital Stack
Our current capital stack is nearing on 2M LEO which is currently valued at ~$500,000 ($0.25 per LEO) along with $450,000 in LSTR common equity (100,000 LSTR shares at $4.50 per LSTR). A total of ~$950,000.
SURGE will add a massive pillar to our capital stack while increasing the LEO on our balance sheet which backstops the LSTR and SURGE tokens with pristine LEO collateral.
This capital stack generates accretive value to LSTR holders through volatility harvesting. In plain english, having these capital pillars allows our Market Making bot to generate yield from fluctuations in LEO, LSTR and LSTR-based derivatives (like SURGE). This yield is then used to purchase more LEO and add it to our balance sheet which further enhances the collateralization of our assets.
SURGE With LeoStrategy
SURGE suggests a sudden and aggressive growth in the value of LEO and the holdings of LeoStrategy. We are at an economic stepping off point for LEO where we believe LEO will rapidly rise to $100M+ and beyond in market cap. We have built LeoStrategy to be the financial layer on top of the LEO economy that permanently absorbs value into it. This offering is intended to surge LEO along with our LEO holdings in our quest for 10M LEO.
If you're a lion and you're ready to SURGE this LEO economy into overdrive, join the LeoStrategy family! Our capital stack is growing and with the new @lstr.voter project along with our volatility harvesting project, we're generating more and more LEO Per Share on a daily basis.
SURGE is a way for LEO holders (and other crypto holders) to cash in some profits in a downside-mitigated product that allows you to earn yield.
Questions? We're expecting a lot as the financials of this can be complex. Please give the post above/use AI to summarize and explain it to you and then leave a comment below and someone from the LeoStrategy board will reply to you.