MicroStrategy's Dip Below Net Asset Value: Buy the Dip?
MicroStrategy’s Bitcoin Bet: Genius or Gambling?
MicroStrategy (now branded just "Strategy," which feels like a desperate attempt to shed baggage) has once again found itself in the crosshairs of crypto volatility. The stock briefly dipped below its net asset value (NAV) recently, a level not seen in two years. A stock trading below NAV is generally considered a flashing red light. For a company whose valuation is so tightly coupled with Bitcoin, it's more like a five-alarm fire.
The immediate trigger? Bitcoin's slide, fueled by (what else?) macroeconomic uncertainty. The price dipped below $95,000, dragging MSTR down with it. The market-to-NAV ratio hit a concerning 0.977x. In plain English, investors were no longer willing to pay a premium for MicroStrategy's crypto exposure. This is a stark reversal from the past two years, where MSTR traded comfortably above NAV.
Saylor's Unwavering Faith
Executive Chairman Michael Saylor, however, remains, shall we say, enthusiastic. He dismissed concerns about reducing BTC exposure, claiming they've actually "accelerated purchases." (We'll see that confirmed on Monday, apparently.) Saylor boldly predicts Bitcoin hitting $150,000 by year-end. That’s a 57% increase from the sub-$95,000 level. Wall Street analysts, oddly enough, seem to be cautiously agreeing with Saylor's bullish outlook, despite the recent drubbing. I find this fascinating. Are they genuinely convinced, or simply hedging their bets?
Here’s the rub: Saylor's personal wealth is inextricably linked to both MSTR and Bitcoin. Forbes estimates his net worth at $5.9 billion as of November 17th, a 41% drop from $10.1 billion six months prior. Protos estimates that Saylor may have lost more than $4 billion in the last six months. The bulk of this comes from the decline in his Strategy class B common stock (he owns 19,616,680 shares, giving him 43.58% voting power). These shares were worth over $3.9 billion as of Friday’s closing price, a 52% drop from their $8 billion value six months ago. He also owns a substantial amount of Bitcoin personally – reportedly 17,732 BTC as of August 2024. According to a recent report, Michael Saylor’s wealth shed $4B as MSTR and BTC slide.
The Billion-Dollar Question: What Happens Next?
This raises a critical question: How much of Saylor's unwavering optimism is genuine conviction, and how much is... well, let's call it "motivated reasoning?" The man has a lot riding on Bitcoin's success.
And this is the part of the report that I find genuinely puzzling. Saylor sold at least $370 million worth of MSTR stock in April 2024. It's not clear what he did with the proceeds. Did he buy more BTC? Did he diversify? (Doubtful.) Did he, perhaps, squirrel some away for a rainy day? The lack of transparency here is concerning. This move is not illegal, but it raises eyebrows. It's a detail that is easy to overlook, but it is worth taking note of.
Here’s the thought leap: How reliable are these wealth estimates anyway? Forbes claims to include his class B stock, BTC holdings, "plus an extra $400 million from other asset categories." But what are those "other asset categories?" Real estate? Yachts? (He owns those valuable, single-word .com domains, too, don’t forget.) The lack of specificity makes it difficult to assess the true risk profile here. Also, why haven’t there been more recent insider transaction disclosures since April 2024?
The situation reminds me of a high-stakes poker game. Saylor has gone all-in on Bitcoin, and he's daring everyone else to call his bluff. If Bitcoin soars, he's a genius. If it crashes, well, let's just say it won't be pretty. The recent dip below NAV isn't just a blip; it's a sign that the market is starting to question the wisdom of this strategy. As one report notes, MicroStrategy Falls Below Net Asset Value Amid Crypto Crash.
The Emperor Has No Clothes (Or Maybe Just a Bitcoin Wallet)
I see Saylor as a gambler who keeps doubling down, convinced his luck will turn. The data suggests a high-risk, high-reward strategy with very little margin for error. Caveat emptor.