Strategy, the bitcoin-hoarding company led by Chairman Michael Saylor, is caught in a math trap of its own making.
Saylor has trained investors to believe Strategy’s model for acquiring bitcoins would work so long as the market valued the company at a premium to the value of its bitcoin holdings. Effectively, the company’s overvalued stock became a currency to buy bitcoin.
Strategy even created a bespoke metric called mNAV to track the premium. It did so while building a bitcoin stash worth more than $50 billion financed with sales of equity and debt securities.
The problem that came to a head recently is the metric began showing the market was valuing Strategy at a discount to the value of its bitcoins. The roll-up strategy was starting to come undone, and roll-ups typically don’t work well in reverse.
Adding to the strain: The metric is artificially inflated because it ignores sharp declines in the value of some of the company’s securities. Although the metric is essentially a made-up measure, it matters for Strategy investors and the crypto market.
