STOCKS | WSJ Reports Strategy’s mNAV Metric May Overstate Valuation Premium to Bitcoin Holdings

Strategy’s self-created mNAV metric, used to gauge its valuation premium relative to its Bitcoin holdings, has a systemic flaw, The Wall Street Journal reported. According to Foresight News, the metric calculates enterprise value using the par value of debt and preferred stock rather than market value, which can inflate the numerator. Using June 26 as an example, Strategy reported an mNAV of 0.99, while a calculation using market values would be 0.89, the report said. As of last Thursday, the company’s official mNAV was 1.09, compared with an adjusted figure of about 1.04. The report said Strategy’s stock has fallen 75% over the past year. It added that mNAV briefly dropped below 1 last month, which it said signaled a halt in the company’s model of using premium-priced equity financing to buy Bitcoin. The report noted that Strategy’s board has authorized the sale of up to $1.25 billion in Bitcoin to fund share buybacks and to pay interest and preferred stock dividends. It also said Strategy holds 4% of the global Bitcoin supply, and that large-scale sales could further weigh on Bitcoin’s price. Strategy estimates its existing $2.55 billion cash reserves can cover roughly 17 months of interest and dividend payments, the report said, but added that if mNAV remains below 1, the company may ultimately need to tap its Bitcoin reserves.