Understanding MicroStrategy’s Stock Premium in the CeFi market
Adam Back, CEO of Blockstream, recently addressed concerns regarding the premium on MicroStrategy’s (MSTR) stock. He explained that the premium is reasonable, considering the company's consistent bitcoin accumulation strategy and its impact on net asset value (mNAV).
How Fast Does MicroStrategy Double Its bitcoin Per Share?
According to Back, MicroStrategy typically takes 16 to 18 months to double its per share. This time frame supports a stock trading at approximately twice its mNAV at various intervals. "It turns out in the case of MicroStrategy it’s been 16 months, 18 months," he told podcaster Stephan Livera at BTC Prague.
Is the Premium Justified?
Back highlighted that if the company continues this growth rate, after about a year and a half, investors would be effectively derisked by reaching an equivalent of 1 mNAV. "So you can see that that’s not an unreasonable premium," he said. He emphasized that this premium has a solid foundation, calling it a "hard currency base."
MicroStrategy’s Current market Position and
Presently, MicroStrategy holds roughly 592,100 Bitcoins valued at about $60.89 billion. The company leverages financial instruments like at-the- equity offerings and convertible senior notes to increase bitcoin holdings. Despite a recent 7.45% drop over the past month with shares closing at $369.70, the premium remains significant — about 1.7x on basic shares and nearly 1.9x on diluted shares per MSTR Tracker data.
Investor Considerations: Risk and Yield in bitcoin Treasury Companies
Back advised investors to evaluate whether premiums are reasonable when investing in bitcoin treasury firms. "One way to think about the premium is how many months does it take to overcome the premium," he explained. Higher mNAVs come with increased risk but also higher yields, presenting both opportunity and volatility.
market Fluctuations and Examples from Other Firms
Using Japanese investment firm Metaplanet as an example, Back described fluctuations between mNAV values of 5 and 10 as potentially "a nervous experience" for investors but noted a tendency for recovery over time. Metaplanet recently boosted its bitcoin holdings to 10,000 BTC, becoming one of the largest publicly traded companies by bitcoin treasury size.
Conclusion: Evaluating Strategy Premiums in CeFi Markets
Adam Back's insights provide valuable context for understanding why MicroStrategy's Strategy premium is not only reasonable but backed by consistent bitcoin acquisition results. For investors navigating the CeFi , balancing risk against potential yield in treasury companies is crucial for informed decision-making.
