In November, the market capitalization of Strategy (formerly MicroStrategy) fell below the value of its bitcoin (BTC) holdings.
Today, the company admitted on its own homepage that its enterprise multiple-to-Net Asset Value (mNAV), calculated by dividing its enterprise value by its BTC holdings, has also fallen to 1x.
MSTR, the company’s common stock, fell to $158.45 during Nasdaq’s morning session, sending its Enterprise Value below $63 billion. (Enterprise Value is the value of common and preferred shares outstanding plus pro forma net debt. It includes market cap and adds the extra value of preferreds and bonds.)
With its BTC holdings worth about $62 billion and its five publicly listed securities plus six series of corporate debt fluctuating rapidly in price, its mNAV flickered within one-hundreth decimal points of 1.
There are even archived versions of Strategy’s homepage from this month memorializing a 1.02x mNAV on Archive.org’s Wayback Machine. Screenshots within the last 24 hours show an mNAV displaying 1x.
Read more: CHART: Two years of Strategy investment narratives
33 months of declining mNAV
The last time Strategy’s enterprise value mNAV was this low was March 12, 2023.
Despite a dozen Strategy investment pitches including brazen advertisements by founder Michael Saylor of Strategy’s securities as a competitor of high-yield bank accounts, investors’ willingness to bid a premium for Strategy’s equity is at a 33-month low.
The original mNAV metric simply divided the company’s market cap by its BTC. As that number slumped below 1x and the company introduced a spree of complex, dividend-yielding preferred shares, Strategy removed basic mNAV from its website.
It replaced it with Enterprise Value mNAV, which it simply displays as “mNAV” without qualification, to boost the appearance of that number.
The swap worked for a while, until it, too, fell to 1x.
Despite it being a misnomer, mNAV is the most important metric of investor confidence in Strategy which earns negligible earnings relative to its valuation.
Although no public company actually has a net asset value, which is a controlled term for funds, the colloquially named ratio of Strategy’s valuation to its BTC holdings is nonetheless fundamental.
Indeed, if investors are unwilling to pay more for equity in the company versus simply buying spot BTC, it indicates that management is failing to instill confidence in its leadership abilities.
Strategy, according to their narratives, is supposed to be valuable as the world’s largest publicly-traded holder of BTC due to their unique skills at financializing it through credit markets.
Unfortunately, those skills seem to be under scrutiny.
ATMs can’t accretively dilute when the mNAV is at 1
Saylor has achieved the vast majority of Strategy’s increase in BTC per share of MSTR, a metric called accretive dilution, from at-the-market (ATM) sales of MSTR.
Those ATMs only accretively diluted, i.e. increased BTC holdings per share after adjusting for the effects of ATM dilution, while the mNAV of MSTR remained above 1x.
Read more: Strategy’s market cap falls below value of its bitcoin holdings
Now, with an mNAV as close to 1x as it has been for years, those ATMs can’t accomplish accretive dilution, leaving Saylor with limited options: more debt, preferred issuances, or drumming up bids for a higher mNAV to resume his ATMs.
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The post Strategy’s bitcoin premium vanishes as mNAV crashes to 1x appeared first on Protos.
