Strategy's Custom mNAV Metric Flawed; Bitcoin Holdings May Be Tapped as Funding Model Stalls

According to the Wall Street Journal, Strategy's self-created mNAV metric—used to measure its valuation premium relative to Bitcoin holdings—contains systematic flaws. The company calculates enterprise value using the face value of debt and preferred shares rather than market value, artificially inflating the numerator. On June 26, Strategy reported an mNAV of 0.99; using market values, the actual figure would be 0.89. As of last Thursday, the official reading was 1.09 versus a corrected value of approximately 1.04.

Strategy's stock has declined 75% over the past year. With mNAV dipping below 1 last month, the company's leverage-driven strategy of issuing premium-priced shares to buy Bitcoin has stalled. While the board authorized sales of up to $1.25 billion in Bitcoin reserves for share buybacks and dividend payments, the company estimates its $2.55 billion cash reserve can sustain interest and dividend payments for only 17 months. If mNAV remains below 1, Strategy may ultimately be forced to liquidate Bitcoin holdings.