Strategy has made headlines once again with its latest Bitcoin acquisition, funded by proceeds from the issuance of preferred shares. The Tysons Corner, Virginia-based company, which has rapidly risen in prominence within the crypto space, was recently valued at approximately $71 billion—marking a slight premium of 1.06 times its Bitcoin holdings valued at $67.8 billion. This premium, known as multiple-to-net asset value (mNAV), is approaching its lowest level in nearly two years.
In a recent blog post, Strategy announced that it raised $50 million through the issuance of preferred stock, primarily in the form of Variable Rate Series A Perpetual Stretch Preferred Stock. This move was strategically designed to ensure that common shareholders remained undiluted as the company’s market capitalization nears a significant threshold.
Historically, Strategy has opted to issue common shares to facilitate the growth of its Bitcoin holdings. However, the effectiveness of this approach has diminished as mNAV has decreased from a robust 2.7 times over the past year. The company’s portfolio now includes a total of nearly 641,700 Bitcoin after acquiring an additional 487 Bitcoins for $50 million last week.
On Monday, shares of Strategy experienced a slight dip of 0.3%, trading at $241, while Bitcoin prices hovered around $105,400, reflecting a 2% uptick over the previous day, as reported by crypto data provider CoinGecko.
Commentary from short seller James Chanos added an interesting twist to the narrative. On Saturday, Chanos announced via social media platform X that he had closed his position, which had involved betting on a decline in Strategy’s premium. While he did not disclose the size or profitability of the position, Chanos indicated that his strategy was based on the expectation that the elevated mNAV enjoyed by Strategy was unsustainable.
Chanos’s investment thesis involved going long on Bitcoin while simultaneously shorting Strategy’s shares. He expressed skepticism about the longevity of the company’s premium, suggesting that as Strategy continued to issue common equity, mNAV would likely approach the 1.0 mark. He advised followers to let others pursue that trading avenue.
Over the past year, Strategy has attempted to recalibrate its approach to equity issuance, exercising caution and discipline. Notably, the firm refrained from issuing common equity for several weeks last month, a divergence from its previous habits.
Market analysts like Lance Vitanza of TD Cowen anticipate that Strategy’s premium and its capital issuance might see an uptick in the first half of this year, aligning with historical trends. In an announcement last week, Strategy indicated that it expects to generate $715 million from the impending launch of its first euro-denominated preferred share, scheduled for debut on Thursday in Luxembourg.
If the company decides to reinvest these proceeds into Bitcoin, it could represent its largest acquisition since its substantial $2.46 billion purchase of the asset in mid-July. However, experts, including Thomas Perfumo, a global economist at crypto exchange Kraken, have noted that the impact of Strategy’s acquisitions on the market appears to be diminishing. He pointed out that decreasing demand from digital asset treasuries like Strategy is a significant factor influencing current market trends.
