Strategy (MSTR) will not be compelled to liquidate its Bitcoin holdings to remain viable if its stock price declines, and those who assert otherwise are “simply mistaken,” according to Bitwise’s chief investment officer, Matt Hougan.
“There’s nothing about MSTR’s price falling below NAV [net asset value] that will necessitate a sale,” Hougan stated in a memo released on Tuesday, highlighting chairman Michael Saylor’s unwavering belief in Bitcoin (BTC).
“It would indeed be detrimental to the Bitcoin market if MSTR had to liquidate its $60 billion Bitcoin holdings all at once — that’s comparable to two years’ worth of Bitcoin ETF inflows,” Hougan remarked. “However, with no debt obligations due until 2027 and sufficient cash flow to manage interest payments for the foreseeable future, I find it unlikely.”
Concerns about MSTR liquidating its substantial Bitcoin reserves surged after CEO Phong Le mentioned last week that the company might consider selling part of its holdings as a “last resort” if its market valuation fell below the value of its Bitcoin assets.
If such a scenario unfolded, and MSTR found its financing options dwindling, Le indicated that it would be reasonable to sell some Bitcoin to safeguard the firm’s “Bitcoin yield per share.”
Strategy is also grappling with a prolonged downturn in the crypto market, alongside a potential removal from the MSCI stock market index.
Hougan asserts Strategy can endure challenges
Hougan expressed that Strategy’s predicament is not severe enough to justify a Bitcoin sale, noting that the cryptocurrency is currently trading around $92,000, which is “24% above the average price at which Strategy secured its holdings ($74,436).”
He further explained that the company has considerable flexibility even if its stock value dips below its NAV, as the financial statements indicate no imminent pressures necessitating a Bitcoin sale.
“MSTR has two key obligations related to its debt: it must pay approximately $800 million annually in interest and must convert or renew specific debt instruments as they mature,” he stated.
“The interest payments are not a short-term issue. The company possesses $1.4 billion in cash, allowing it to comfortably meet its dividend obligations for the next year and a half,” he added.
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Over the last 30 days, MSTR has fallen by 24.69%, concluding trading on Friday at $186.01.
Part of this downward pressure may stem from an October announcement by Morgan Stanley Capital International, indicating that it might exclude digital asset treasury companies with balance sheets exceeding 50% in crypto assets from its indices.
Such a move would compel index-tracking funds to sell, exerting additional pressure on MSTR.
Hougan remains unconvinced that this will greatly affect sentiment towards Strategy or its stock price, arguing that historically, such events have been less impactful than anticipated.
“My experience with index additions and removals over the years suggests that the impact is typically less significant than expected and often priced in ahead of time,” he affirmed. “When MSTR was incorporated into the Nasdaq-100 Index last December, funds tracking the index were required to buy $2.1 billion of the stock, yet its price barely budged.”
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