Michael Saylor's Bitcoin Strategy: Is His Company on the Brink? The situation is heating up for Michael Saylor's company, Strategy, a firm heavily invested in Bitcoin. Recent market fluctuations have brought the company perilously close to a critical threshold, raising serious questions about its future. Let's dive in.
Strategy's stock saw a modest increase of 1.22% in early trading, offering a brief respite. However, the stock has plummeted by 66% since its peak last July. This morning, its “mNAV” (market-to-net asset value), a key indicator of the company's financial health, hovered around 1.02.
What does this mean? If the mNAV drops below 1, it technically signifies that the company is worth less than the Bitcoin it holds. This scenario could trigger a sell-off by investors, as the value of the stock would be undermined by its underlying asset's lower worth. The stock has been staying above this danger zone since November. But here's where it gets controversial:
Already, the company's market capitalization is less than the value of its Bitcoin holdings. Today, its market cap was at $47 billion, while its Bitcoin stash was valued at just under $60 billion. This disparity is a risky position. If the mNAV falls below 1, the stock could face further challenges. mNAV is calculated by adding the company's total market cap and debt, subtracting its cash, and dividing the result by its total Bitcoin reserve. If this value dips below 1, the argument for owning Strategy stock becomes considerably weaker.
Fortune reached out to the company for comment, but there was no response.
Saylor, as usual, has been optimistic about MSTR shares, including a chart showing that “open interest” (investor positions that have not been closed out) is equivalent to 87% of the company’s market value. The implication is that the stock is highly traded, although many of those positions are short bets against the company. He also posted an AI-generated picture of him taming a polar bear.
Below the mNAV level of 1, there's another danger zone for Strategy: the average price at which Strategy has accumulated Bitcoin. Historically, that price was about $74,000 per coin. Currently, Bitcoin is trading at $89.6K. If the price were to fall below $74K, it would imply that Strategy’s Bitcoin holdings are worth less than what Saylor originally paid for them.
Strategy supporters might view this as a buying opportunity, believing the stock could rise to meet or exceed Bitcoin's price.
But this situation would be a real test for traders who aren't fully committed to the cause. Why hold a stock that is worth less than the asset it represents?
What do you think? Is Strategy's current position a cause for concern, or an opportunity? Share your thoughts in the comments below!
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About the Author: Jim Edwards is the executive editor for global news at Fortune. His investigative journalism has changed the law in two U.S. federal districts and two states. The U.S. Supreme Court cited his work on the death penalty in the concurrence to Baze v. Rees, the ruling on whether lethal injection is cruel or unusual. He also won the Neal award for an investigation of bribes and kickbacks on Madison Avenue.
