Is the MSTR value with mNAV less than 1 worth buying? Does the logic of buying Bitcoin at a discount hold?
Recently, the mNAV of $MSTR has dropped below 1, and many friends have started discussing whether buying MSTR now is equivalent to buying Bitcoin at a discount.
I want to share my own perspective. First, this statement has some merit, but it cannot just rely on the mNAV number since the calculation method for "mNAV" may not be as expected.
In Strategy's own calculation of mNAV, the market value of MSTR common stock is $29.54 billion, the debt is $6.754 billion, the preferred stock is $15.467 billion, and the cash reserves are $1.4 billion, so the enterprise value is approximately $50.361 billion.
The value of BTC reserves held by MSTR is $50.993 billion. Dividing the enterprise value by the BTC reserve value gives 0.99. This represents that the market pricing of the entire capital structure of MSTR is already below the market value of the BTC it holds.
However, this mNAV can easily be misunderstood.
This 0.99 does not reflect how much BTC common stock shareholders can obtain, nor does it reflect the liquidation value of the common stock. MSTR common stock ranks behind debt and preferred stock, so the true value belonging to common stockholders should be the residual value. A more accurate calculation should be:
Common stock residual net value = BTC market value + cash + software business value + other assets - debt - preferred stock liquidation rights - accrued unpaid dividends - other liabilities
If only using Strategy's calculation method without considering the software business value or accrued dividends and other liabilities, the remaining value is approximately $30.172 billion. The current market value of MSTR common stock is $29.54 billion. The final result shows a discount of approximately $632 million, with a discount rate of about 2.1%.
So, the logic of "buying Bitcoin at a discount" has a basis, but the discount is not as large as many people imagine. A discount of around 2% is not considered very cheap for MSTR, which has debt, preferred stock, annual dividends, future financing, and equity dilution risks.
Furthermore, this does not account for accrued dividends and other liabilities, nor does it include the costs of future continued financing.
The most critical issue for MSTR is that BTC itself does not generate cash flow, but MSTR's capital structure requires cash flow. Debt has maturity dates, preferred stock has dividends, dollar reserves will be consumed, and common stock ATM relies on the market's willingness to take over.
As long as the BTC price rises, and mNAV returns above 1, the common stock financing window reopens, and preferred stock prices stabilize, MSTR's model can continue to operate. However, if BTC continues to decline, mNAV remains below 1 for an extended period, common stock remains sluggish, and preferred stock also comes under pressure, the market will begin to reprice MSTR's credit risk.
So whether buying MSTR now is a good opportunity depends on what exactly you want to invest in.
If you just want to buy BTC, it's simpler to buy BTC directly.
If you buy MSTR, it's equivalent to buying leveraged BTC, meaning you are prepared to go long on BTC and believe that MSTR is currently undervalued relative to BTC. At this time, buying MSTR is like buying BTC at a discount.
Although both are essentially going long on Bitcoin, there are slight differences in form. My current focus is on what actions @saylor will take this week. If it aligns with my expectations, starting to hibernate for the winter through common stock ATM, and buying a small amount of BTC while accumulating cash, I will prepare to buy some MSTR and $STRC.
Of course, this is limited to my personal view and is not an investment advice.
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