Strategy possesses $1.4 billion in liquid assets, zero liabilities maturing until 2027, and the Bitcoin valuation exceeds the corporation’s expenditure baseline, leading Matt Hougan to contend that a divestment is rendered improbable.
Strategy (MSTR) will not be coerced to liquidate Bitcoin to maintain solvency should its equity valuation decline, and assertions suggesting the contrary are dismissed as “fundamentally inaccurate,” states Bitwise Chief Investment Officer Matt Hougan.
“There is absolutely nothing concerning MSTR’s valuation descending beneath Net Asset Value [NAV] that will be able to compel it to divest,” Hougan asserted in a Tuesday memorandum, indicating Chairman Michael Saylor’s unwavering adherence to Bitcoin.
“It would indisputably be quite detrimental for the Bitcoin sector if MSTR were compelled to offload its $60 billion of Bitcoin instantaneously — that approximates two years of Exchange-Traded Fund inflows,” Hougan communicated. “But with absolutely zero liabilities maturing until 2027 and ample liquid assets to cover interest remuneration for the predictable future, I simply cannot envision this transpiring.”
Fears Rise Over Possible Bitcoin Sales to Protect Share Value
Apprehensions that Strategy’s voluminous Bitcoin inventory could be liquidated escalated after the corporation’s Chief Executive Officer, Phong Le, stated last week that a portion of its reserves could be divested as an “ultimate recourse” should Strategy’s market capitalization fall beneath the aggregate worth of its Bitcoin possessions.
If that materialized, and Strategy’s capitalization avenues became depleted, Le communicated that it would be deemed justifiable to divest some Bitcoin to safeguard the corporation’s “Bitcoin yield per share.”
Strategy is additionally confronting a protracted cryptocurrency market contraction, concurrently with a prospective exclusion from the MSCI equity benchmark.
Strategy Can Weather the Storm, Says Hougan
Hougan declared that Strategy’s predicament is not grievous enough for a commencement of Bitcoin liquidation, since the digital asset, fluctuating near $92,000, is positioned “24% above the mean valuation at which Strategy procured its inventory ($74,436).”
He further stated that the corporation possesses considerable latitude even if its equity declines below its Net Asset Value, as Strategy’s ledgers reveal no immediate compulsion that would necessitate Bitcoin divestment.
“MSTR has two relevant obligations on its debt: It needs to pay about $800 million a year in interest and it needs to convert or roll over specific debt instruments as they come due,”
he said.
“The interest payments are not a near-term concern. The company has $1.4 billion in cash, meaning it can make its dividend payments easily for a year and a half,”
he added.
Over the preceding thirty days, MSTR has receded by $24.69%, with trading operations being concluded on Friday at a valuation of $186.01.
A portion of that inhibitory pressure on the valuation may be attributable to the proclamation issued in October from Morgan Stanley Capital International, which stipulated that digital asset treasury corporations possessing financial statements with over $50% crypto holdings may be excluded from its indices.
Such an action would compel index-following funds to liquidate their holdings, whereby even greater strain would be imposed upon MSTR.
Hougan does not anticipate that the circumstance will ultimately be possessing a considerable effect on the prevailing attitude towards Strategy or its equity valuation, contending that such occurrences have historically proven to be less consequential than was foreseen.
“My expertise garnered from observing index inclusions and expulsions over preceding years indicates that the consequence is typically assessed as more negligible than anticipated, and is usually priced in significantly earlier,” he articulated. “When MSTR was assimilated into the Nasdaq-100 Index last December, funds tracking that benchmark were obliged to procure $2.1 billion of the equity. Its valuation barely fluctuated.”
