Blockstream CEO Adam Back says Michael Saylors Strategy (MSTR) stock premium is within reason, considering how quickly the firm doubles its Bitcoin per share, which reduces risk for investors.It turns out in the case of MicroStrategy its been 16 months, 18 months, he told Bitcoin podcaster Stephan Livera at BTC Prague on Saturday, referring to the typical time it takes for Strategy to double its Bitcoin (BTC) per share, noting that the stock has traded at a 2x multiple on and off.MSTRs track record justifies its premium, says BackSo you can see that thats not an unreasonable premium, he said.
Back explained that if Strategys Bitcoin per share keeps growing at the same rate, after about a year and a half, investors would be at an equivalent of the market net asset value (mNAV) meaning the stock price would align with the value of its underlying Bitcoin holdings.So, youre derisked actually, he said.Its got a hard currency base at that level, he added.
MSTRs net asset value premium is currently about 1.7x based on basic shares and around 1.9x when calculated on a diluted share basis, according to MSTR Tracker.
Strategy uses leverage, using financial instruments such as at-the-market equity offerings (ATM) and convertible senior notes to increase its Bitcoin holdings.
Saylor Tracker data shows the firm holds 592,100 Bitcoin at the time of publication, worth approximately $60.89 billion.MSTR is down 7.45% over the past month.
Source: Google FinanceMSTR closed the trading day on Friday at $369.70, down 7.45% over the past 30 days, according to Google Finance data.Back reiterated that when investing in Bitcoin treasury companies, its important for investors to consider whether the premium is reasonable.
He added:One way to think about the premium is how many months does it take to overcome the premium.Back said that investors face a higher risk when the mNAV is elevated.
It can be a bit speculative when you get higher mNVAVs, but the treasury companies with high mNAVs also have a very high yield, he said.MNAV significant fluctuations are going to be a nervous experienceBack said that although Japanese investment firm Metaplanet has experienced more volatility with its mNAV, it has generally managed to recover each time so far.Related: Nakamoto Holdings secures $51.5M to expand Bitcoin treasury strategyMetaplanet has fluctuated generally between 10 and 5 mNAV, then of course, if you hold it at 10, then it quickly drops to 5, thats going to be a nervous experience, he said.But so far, its tended to bounce back after that, he said.Meanwhile, Metaplanets latest 1,112 Bitcoin purchase on June 16 has tipped its total Bitcoin holdings to 10,000 BTC, surpassing Coinbase as the seventh-largest publicly traded company with a Bitcoin treasury.Magazine: Arthur Hayes doesnt care when his Bitcoin predictions are totally wrong