TBR #258: Are mNAV and Bitcoin yield real things?
Plus a couple observations from the wide world of woke
Gooooooood morning TBR! Let’s make today another heroic journey. The shower is cold, the coffee is black, the diet is meaty and the money is orange.
How to sound like an idiot on the 4th of July
You love my neighbors. I know you do. So many liberals, so little time. Well, not exactly so many, but enough, and since liberals can never keep their stupid mouths shut about their opinions, they dominate the air around you. Like an army of oxygen thieves.
It’s the 4th of July. We had a parade in the neighborhood. Cute. Kid from down the street sang the national anthem. A fire truck led the way. All good Americana stuff. There was a young German au pair with one of our friends. She just got into America the week prior. She was very excited. She was having fun.
Do you remember Virtue Signal By Proxy Mom from a couple weeks ago? Out there making sure her boy chalked rainbows against hate in the blistering heat while she sipped an iced latte? I wished her a happy independence day. She said same back to me, and then added, because she is a giant moron that can’t control her mouth, “what’s left of it.” Oh, shut the heck up you retard.
A few minutes later, after getting the hell away from that stupid as fast as I could, I bumped into her husband. Nice guy. Had never mentioned any politics to me before. Turns out, he’s retarded too, just better at hiding it than his wife. Poor guy. Imagine being married to that.
He asked who the young lady was on my lawn, chatting with my wife. I told him. And no shit, this guy, this guy…. He says to me, “she was able to get through immigration here with all they’re doing to shut it down?”
She’s a fucking German on a visa. She is legal. I think it will be OK. But you never know, ICE might mistake her for MS-13 and take her away any minute.
These clowns. These total clowns. Don’t know their ass from their head. Just listen to the idiotic things they say and you’ll see what I mean.
Bitcoin Yield is what exactly?
So, as many of you know, I am a MSTR 0.00%↑ shareholder. It’s a nice thing. Yet I maintain a daily stack of the real deal Holyfield of money, the seventh Orange Wonder of the World, Bitcoin and Bitcoin only in self custody. So, I’m mostly a maxi.
Shareholders of MSTR are familiar with something called Bitcoin Yield. Bitcoin yield is the percentage change in the amount of Bitcoin held per share of stock issued. In other words, let’s say a company has 100 shares outstanding and 1 BTC in reserve. That’s a btc/share of 1/100 or 0.01 bitcoin per share.
If that company raises enough capital to buy 0.1 BTC and does this by only diluting the shares outstanding by 5%, you’ll end up with these numbers: 1.1 BTC / 105 shares or 0.01047 bitcoin per share. In other words, the amount of Bitcoin per share increased by 4.7%
That’s the yield. And due to the ever increasing yield (in a bull market), investors are willing to chase more and more mNAV. What’s mNAV you ask? That’s a fancy way of saying the premium paid for a share of the company compared to the market value of all the Bitcoin it holds. In other words, if a company costs $2 but the Bitcoin it holds is worth $1, their mNAV is 2.0. The higher the mNAV, the greater the premium being paid.
Now I’m not going to argue about the sustainability of this. That’s another post. Some Bitcoin maxis ask if any of it actually matters at all. Why do they ask this? Well, none of the Bitcoin in Microstrategy’s treasury are redeemable by shareholders. So we don’t own any Bitcoin, so therefore why would it matter how many Bitcoin per share the company has? It matters because the company is the responsible party here, not the shareholder. I dismiss this concern as counterparty risk. I’ve already accepted that risk and don’t need to be reminded about it every 3rd Bitcoin maxi tweet.
But there’s something else about MSTR 0.00%↑ that actually bothers me. What if the increase in Bitcoin treasury companies causes investors to chase Bitcoin yield from other stocks? And what if that leads to an overall reduction in mNAV? Could it lead to Bitcoin outperforming MSTR during a bull market run?
Yes, it could. But we’ll have to see how it plays out.
It could if MSTR’s mNAV contracts, even as it buys more Bitcoin, and the Bitcoin price continues to rise. There could be a situation where a company’s mNAV goes from, say, 2.0 to 1.5 during a bull market, and Bitcoin rises enough during that time that it actually outperforms the company’s stock.
I’m not sure it is likely though. MSTR’s mNAV has been contracting for the last six months, but this has been a sideways market during that time. We don’t know yet if there is enough BTC Treasury company competition to really depress MSTR’s mNAV during a bull market run.
My suspicion is, not this cycle, but next cycle it could be a problem.
Take care out there and enjoy the weekend!
TBR