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Blockstream CEO Adam Back defends MicroStrategy’s (MSTR) stock premium, emphasizing its historical ability to double Bitcoin per share within 16 to 18 months.
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Back highlights that the premium on MSTR shares reflects a calculated risk-reward balance, supported by the company’s growing Bitcoin treasury and strategic use of leverage.
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According to Back, the premium is justifiable as the firm’s market net asset value (mNAV) growth effectively derisks the investment over time, a perspective shared during BTC Prague.
Adam Back explains why MicroStrategy’s stock premium is reasonable, citing its Bitcoin per share growth and mNAV trends as key factors for investors.
MicroStrategy’s Premium Reflects Its Bitcoin Growth and Risk Mitigation Strategy
Adam Back, CEO of Blockstream, provided a detailed analysis of MicroStrategy’s (MSTR) stock premium during a recent discussion at BTC Prague. He noted that the premium, which currently stands around 1.7x to 1.9x depending on share dilution, is not excessive given the company’s track record of doubling Bitcoin per share approximately every 16 to 18 months. This growth trajectory implies that investors who hold MSTR shares over this period effectively reduce their exposure to Bitcoin price volatility, as the market net asset value (mNAV) converges with the stock price.
Back emphasized that MicroStrategy’s use of financial leverage—including at-the-market equity offerings (ATM) and convertible senior notes—enables the firm to expand its Bitcoin holdings efficiently. As of the latest data, MicroStrategy holds 592,100 BTC, valued at nearly $61 billion, underscoring the scale of its treasury strategy. This substantial Bitcoin reserve forms a “hard currency base,” which Back argues supports the premium investors pay for the stock.
Investor Considerations: Balancing Premiums and Yield in Bitcoin Treasury Companies
Back advised investors to carefully evaluate the premium on Bitcoin treasury stocks by considering the timeframe required to overcome it through Bitcoin accumulation. He explained that while elevated mNAVs can introduce speculative risk, they often coincide with higher yields for shareholders, reflecting the potential upside of these investments. This nuanced view encourages investors to weigh the premium against the company’s historical performance and growth prospects rather than dismissing it outright.
Furthermore, Back highlighted the importance of understanding the volatility inherent in mNAV fluctuations. He pointed out that while high premiums can be unsettling, companies with strong treasury management and consistent Bitcoin accumulation tend to recover from market dips, offering a more resilient investment profile.
Volatility in Market Net Asset Value: Lessons from Metaplanet’s Bitcoin Treasury
Expanding on the theme of mNAV volatility, Back referenced Japanese investment firm Metaplanet, which has experienced significant swings between 5 and 10 mNAV. Despite these fluctuations, Metaplanet has demonstrated resilience by bouncing back after downturns, illustrating the dynamic nature of Bitcoin treasury valuations. This volatility, while potentially nerve-wracking for investors, is part of the broader risk landscape in Bitcoin-centric investment strategies.
Metaplanet recently bolstered its Bitcoin holdings by acquiring 1,112 BTC on June 16, bringing its total to 10,000 BTC. This milestone positions Metaplanet as the seventh-largest publicly traded company by Bitcoin treasury size, surpassing Coinbase. Such aggressive accumulation strategies underscore the growing institutional appetite for Bitcoin exposure through treasury management.
Strategic Implications for Investors in Bitcoin Treasury Companies
The insights shared by Adam Back highlight critical factors for investors considering exposure to Bitcoin treasury companies. The premium on stocks like MicroStrategy reflects not only current Bitcoin holdings but also anticipated growth in Bitcoin per share, which can mitigate risk over time. Investors should assess the duration needed to offset premiums and remain mindful of mNAV volatility as part of their risk management framework.
Additionally, the use of leverage by these companies introduces both opportunities and risks, necessitating thorough due diligence. Understanding the financial instruments employed and the company’s acquisition pace is essential for evaluating long-term investment viability.
Conclusion
Adam Back’s commentary provides a grounded perspective on MicroStrategy’s stock premium, framing it as a reasonable reflection of the company’s Bitcoin accumulation strategy and market net asset value dynamics. While premiums and volatility present challenges, they are balanced by the potential for significant yield and risk mitigation over time. For investors, a disciplined approach that considers growth timelines, leverage use, and mNAV fluctuations is crucial when navigating the evolving landscape of Bitcoin treasury companies.
