Strategy (MSTR) is not facing an imminent threat that would force it to sell its substantial Bitcoin holdings, according to Matt Hougan, chief investment officer at Bitwise. In a recent note, Hougan firmly dismissed claims suggesting that a decline in MSTR’s share price would necessitate selling off its vast Bitcoin assets, which are valued at around $60 billion.
Hougan emphasized the company’s chairman, Michael Saylor’s unwavering commitment to Bitcoin, countering concerns with concrete financial data. “There is nothing about MSTR’s price dropping below NAV [net asset value] that will force it to sell,” he stated. Such action, he argued, would have dire consequences for the broader Bitcoin market, potentially equivalent to two years of Bitcoin exchange-traded fund (ETF) inflows.
Recent fears about MSTR’s need to liquidate some of its BTC holdings intensified when CEO Phong Le mentioned that selling some Bitcoin could be a “last resort” if the company’s market valuation fell below the value of its Bitcoin reserves. Le indicated that if financing options tightened, offloading Bitcoin could be necessary to maintain the firm’s “Bitcoin yield per share.”
Despite facing challenges such as a lengthy downturn in the crypto market and a possible delisting from the MSCI stock market index, Hougan remains optimistic about the firm’s ability to endure. He pointed out that MSTR’s stock is currently trading at approximately $92,000, well above the average price of $74,436 at which it acquired its Bitcoin assets. This gives MSTR significant leeway despite recent declines in its stock price, which has dipped 24.69% over the past month, closing at $186.01.
The potential exclusion from the MSCI indexes, announced by Morgan Stanley Capital International, has raised concerns that index-tracking funds might be forced to divest from companies with significant crypto assets. However, Hougan downplayed the potential impacts of such exclusions, citing his experience with previous index fluctuations and suggesting that they often have a muted market effect. For example, when MSTR was added to the Nasdaq-100 Index last December, the required buying pressure of $2.1 billion barely moved the stock price.
In terms of financial obligations, MSTR has only to cover approximately $800 million annually in interest payments. With around $1.4 billion in cash reserves, the company is well-positioned to manage its financial responsibilities for at least the next year and a half, further reducing the likelihood of needing to liquidate Bitcoin holdings to stay afloat.
Overall, Hougan remains confident that MSTR has the capacity to weather current market pressures without resorting to drastic measures regarding its Bitcoin holdings.
