Key Insights:
- Saylor said that Strategy would sell its Bitcoin if the mNAV goes below 1X.
- CEO Phong Le and Saylor unveil $1.44B Reserve to improve Strategy’s “Creditworthiness”.
- Strategy filed an 8-K form Monday morning, revealing the latest purchase of 130 BTC.
The MSTR stock price crashed by over 4% on Monday as Bitcoin continued its strong downward trend, and after the Chief Executive Officer (CEO) hinted that the company may sell the coins if the mNAV turns negative. However, to improve Strategy’s “creditworthiness” and capital structure “durability”, Strategy announced a $1.44 billion reserve, which will serve as the primary source to fund its ”interest and dividends”.
Strategy shares dropped to a low of $166, its lowest level since September 30th this year. They have plunged by 70% from the year-to-date high.
When Will Strategy Sell Its BTC?
“The future of the company is digital credit,” Saylor said in an announcement made with CEO Phong Le.
In the Monday morning announcement, Saylor said that their credit model, based on preferreds, offered compelling spreads.
The $1.44 billion USD reserve was introduced to serve ‘volatility-adverse investors’ since ‘BTC is volatile,’ Saylor pointed out. $1.44 billion covers around 21 months of dividends as of December 1st. Strategy’s objective is to maintain a USD stash to cover at least a year’s worth of dividends and expand the stash to cover a longer period eventually.
Shortly after describing the benefits of the credit model, Saylor made the most important part of the announcement he explained the scenario when Strategy would sell its Bitcoin! Hitherto, Saylor has championed ‘hodling’ BTC and has been staunchly against the idea of selling it.
Saylor revealed that Strategy could sell its Bitcoin and Bitcoin derivatives if the mNAV, or Market Net Asset Value, falls below 1. The mNAV is calculated by dividing Strategy’s Enterprise Value (equities, preferreds, minus cash) by the fair value of its BTC holdings. The mNAV is a key performance indicator for a digital asset treasury (DAT) company, such as Strategy.
The Strategy co-founder said: “…below one times mNAV, we just get lots of questions and there are skeptics that are doubtful…”
Saylor said that the answer to the question whether Strategy would sell its Bitcoin is “…yes, we could sell bitcoin, we could also sell bitcoin derivatives.”
“We would do that [sell BTC and BTC derivatives] because that’s in the best interest of the shareholders, it’s best for the company, and therefore the Bitcoin community…”
This announcement comes as Startegy faces increasing accusations about being an unsustainable model. Moreover, BTC’s recent drop below the $90,000 mark has dampened crypto market sentiment, leaving few hints about potential recovery scenarios.
MSTR Stock Price Crashed After Phong Hinted at Bitcoin Sale
The Strategy stock price has been in a strong downward trend over the past few months, a trend that continued today as Bitcoin continued its downtrend, reaching a low of $85,000.
This sell-off happened after Phong Lee, the CEO, earlier told a podcast that the company would consider selling Bitcoin if the mNAV based on the enterprise value turned negative.
That is notable since Strategy’s mNAV has dropped below 1 based on the market capitalization. It has also plunged to 1.18 from the year-to-date high of over 8 based on the enterprise value figure.
Strategy now holds Bitcoin tokens worth $55 billion, while its market capitalization has moved to $51 billion. Its enterprise value has plunged to $66 billion.
There is a likelihood that the company’s mNAV will continue falling unless Bitcoin rebounds in the near term. Indeed, some other popular Bitcoin treasury companies like Metaplanet, Semler Scientific, and MicroCloud have all seen their mNAV metrics plunge below 1.
In his statement, Lee noted that the company would sell its Bitcoin holdings to pay its dividend to investors. While Strategy’s main shares don’t pay a dividend, its multiple preferred shares do and there are concerns on how the company will make its payments if Bitcoin continues falling.
Lee’s statement came as the company faces other challenges. For example, there are concerns that it may be excluded in indices by MSCI. Such a move will likely lead to mass selling by funds that track the company, which will put more pressure on the company.
The fear that it might be excluded from indices arose after the company received a junk rating from S&P Global. S&P noted that the company was at risk due to the mismatch between its Bitcoin holdings and its cash reserves.
Crispus is a distinguished Financial Analyst at, bringing over 12 years of expertise in cryptocurrency markets, specializing in Bitcoin and altcoins. Renowned for his sharp insights at the nexus of market trends and breaking news, Crispus delivers actionable analysis to empower investors. His work is prominently featured across leading platforms, including BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com, cementing his reputation as a trusted voice in the financial world.
