In November, the market valuation of Strategy, previously known as MicroStrategy, dipped below the worth of its bitcoin (BTC) assets.
Recently, the firm acknowledged on its official website that its enterprise multiple-to-Net Asset Value (mNAV), which is derived by dividing its enterprise value by BTC holdings, has also decreased to 1x.
The stock price of MSTR fell to $158.45 during the morning trading session on Nasdaq, resulting in an Enterprise Value dropping beneath $63 billion. (Enterprise Value encompasses both common and preferred shares outstanding plus pro forma net debt; it combines market capitalization with additional values from preferred stocks and bonds.)
With BTC assets valued at approximately $62 billion and fluctuations in prices for five publicly traded securities along with six series of corporate debts, mNAV fluctuated within a hundredth decimal point of 1.
Archived versions from this month’s homepage show a recorded mNAV of 1.02x via Archive.org’s Wayback Machine. Recent screenshots indicate an mNAV currently reflecting 1x.
Read more: CHART: Two years of Strategy investment narratives
A Decline Spanning Over Two Years
The last instance when Strategy’s enterprise value mNAV was this low occurred on March 12, 2023.
Despite numerous investment pitches from Strategy—including bold promotions by founder Michael Saylor positioning their securities as alternatives to high-yield bank accounts—investors’ willingness to pay a premium for Strategy’s equity has reached a low not seen in over two years.
The initial mNAV calculation simply divided the company’s market cap by its BTC holdings. As this figure dropped below 1x and following the introduction of complex dividend-yielding preferred shares, basic mNAV was removed from their website.
This metric was substituted with Enterprise Value mNAV—simply labeled “mNAV” without any further clarification—to enhance perceptions regarding that number’s performance.
This strategy worked temporarily until it too fell back down to 1x.
Even though it’s somewhat misleading terminology-wise, mNAV remains crucial for gauging investor confidence in Strategy since it generates minimal earnings relative to its overall valuation.
No public company technically possesses a net asset value—a term reserved for funds—but colloquially referring to this ratio between Strategy’s valuation and BTC holdings remains essential nonetheless.
If investors are reluctant to invest more into company equity compared to purchasing spot BTC directly instead indicates management may be struggling to inspire confidence in their leadership capabilities.
According to their narrative framework, Strategy should hold significant value as the largest publicly-traded holder of BTC due primarily because they claim expertise at financializing these assets through credit markets.
Sadly enough those claimed skills appear now under scrutiny.
Lack Of Accretive Dilution When Facing Low NAV
Saylor has driven most increases seen within MSTR’s per-share Bitcoin figures—a concept termed accretive dilution—through at-the-market (ATM) sales involving MSTR stocks .
The ATMs only produced accretive dilution—increasing per-share Bitcoin after accounting adjustments made necessary due ATM effects—as long as MSTR maintained an NAV above one times .
Read more : The falloff In Market Cap For Strategies Below Their Bitcoin Holdings
N ow faced with such close proximity towards achieving just one time , those ATMs can no longer create accretive dilution leaving Saylor limited options available : either pursue further debt , issue new preferreds or generate interest bids aimed towards raising higher levels again before resuming his ATM activities .