Blockstream CEO Adam Back says Michael Saylor’s Strategy (MSTR) stock premium is within reason, considering how quickly the firm doubles its Bitcoin per share, which reduces risk for investors.
“It turns out in the case of MicroStrategy it’s been 16 months, 18 months,” he told Bitcoin podcaster Stephan Livera at BTC Prague on Saturday, referring to the typical time it takes for Strategy to double its Bitcoin (BTC) per share, noting that the stock has traded at a 2x multiple “on and off.”
MSTR’s track record justifies its premium, says Back
“So you can see that that’s not an unreasonable premium,” he said. Back explained that if Strategy’s Bitcoin per share keeps growing at the same rate, after about a year and a half, investors “would be at an equivalent” of the market net asset value (mNAV) — meaning the stock price would align with the value of its underlying Bitcoin holdings.
“So, you’re derisked actually,” he said.
“It’s got a hard currency base at that level,” he added. MSTR’s net asset value premium is currently about 1.7x based on basic shares and around 1.9x when calculated on a diluted share basis, according to MSTR Tracker. Strategy uses leverage, using financial instruments such as at-the-market equity offerings (ATM) and convertible senior notes to increase its Bitcoin holdings.
Saylor Tracker data shows the firm holds 592,100 Bitcoin at the time of publication, worth approximately $60.89 billion.
MSTR closed the trading day on Friday at $369.70, down 7.45% over the past 30 days, according to Google Finance data.
Back reiterated that when investing in Bitcoin treasury companies, it’s important for investors to consider whether the premium “is reasonable.” He added:
“One way to think about the premium is how many months does it take to overcome the premium.”
Back said that investors face a higher risk when the mNAV is elevated. “It can be a bit speculative when you get higher mNVAVs, but the treasury companies with high mNAVs also have a very high yield,” he said.
MNAV significant fluctuations are going to be “a nervous experience”
Back said that although Japanese investment firm Metaplanet has experienced more volatility with its mNAV, it has generally managed to recover each time so far.
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“Metaplanet has fluctuated generally between 10 and 5 mNAV, then of course, if you hold it at 10, then it quickly drops to 5, that’s going to be a nervous experience,” he said.
“But so far, it’s tended to bounce back after that,” he said.
Meanwhile, Metaplanet’s latest 1,112 Bitcoin purchase on June 16 has tipped its total Bitcoin holdings to 10,000 BTC, surpassing Coinbase as the seventh-largest publicly traded company with a Bitcoin treasury.
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