According to Blockstream CEO Adam Back, the stock premium associated with Michael Saylor’s MicroStrategy (MSTR) is understandable, especially given how quickly companies are ramping up their Bitcoin holdings, which eases the risks for investors.
Back mentioned that the timeline for MicroStrategy has been around 16 to 18 months, as noted during his conversation with Bitcoin podcaster Stephan Livera at BTC Prague. He pointed out that stocks are often trading at double the usual price while mentioning the time it usually takes for companies to enhance their Bitcoin per share.
Back supports MSTR’s premiums
He explained that the premium isn’t unreasonable. If the growth trajectory of Bitcoin continues, investors may find themselves reaching a comparable net asset value (MNAV) in about a year and a half.
He added that there’s a solid currency base backing that level, with MSTR’s net asset value premium sitting at approximately 1.7 times based on standard stock calculations and nearly 1.9 times when accounting for diluted shares.
The strategy employed involves leveraging financial tools, such as market equity offerings and convertible senior notes, to amplify Bitcoin acquisitions.
As of the latest updates, MicroStrategy holds around 592,100 bitcoins, estimated to be worth about $608.9 billion.
MSTR’s stock price closed at $369.70 on Friday, marking a decline of 7.45% over the previous month.
Back stressed that when investing in a Bitcoin-focused financial company, it’s crucial to assess whether the stock premium is rational. He provided a perspective on premiums, highlighting the duration it takes to offset them.
“One way to think about premiums is how many months it takes to overcome them,”
he stated. Back also noted that with rising MNAV, investors may encounter greater risks, adding that finance firms with elevated MNAVs often offer significant yields.
Volatility observed in MNAV
Interestingly, Back mentioned that Japanese investment firm Metaplanet has witnessed notable fluctuations in MNAV but has managed to recover each time. He explained that Metaplanet usually experiences shifts between 10 and 5 MNAVs, and while a drop to 5 is possible, it tends to rebound afterwards.
Additionally, on June 16, Metaplanet made a Bitcoin acquisition of 1,112, raising its total Bitcoin reserves to 10,000 BTC, surpassing Coinbase and establishing itself as the seventh largest public company in terms of Bitcoin treasury.
