Bitwise chief investment officer Matt Hougan asserts that Strategy (MSTR) won’t be compelled to sell Bitcoin if its share price declines, declaring those who think otherwise are “just flat wrong.”
In a note released on Tuesday, Hougan emphasized that a drop in MSTR’s price below NAV [net asset value] does not necessitate a sale, highlighting chairman Michael Saylor’s unwavering belief in Bitcoin (BTC).
“Selling MSTR’s $60 billion worth of Bitcoin at once would severely harm the Bitcoin market — equivalent to two years of ETF inflows,” Hougan warned. “However, with no debts due until 2027 and sufficient cash to manage interest payments for the foreseeable future, I don’t foresee that happening.”
Concerns over a potential sale of Strategy’s substantial Bitcoin holdings surged after CEO Phong Le suggested last week that offloading some Bitcoin might be a “last resort” if the company’s market value fell below its Bitcoin holdings.
Le noted that if circumstances arose where financing options diminished, it would be reasonable to liquidate some Bitcoin to safeguard the firm’s “Bitcoin yield per share.”
Additionally, Strategy is navigating a prolonged downturn in the crypto market and facing a potential delisting from the MSCI stock market index.
Hougan: Strategy can endure the challenges
Hougan contended that the current situation is not dire enough for MSTR to sell Bitcoin, as the cryptocurrency is trading around $92,000, “24% above the average purchase price ($74,436).”
He pointed out that the company possesses significant flexibility even if its stock falls below its NAV, as there is no immediate pressure on Strategy’s finances to compel a Bitcoin sale.
“MSTR has two critical obligations regarding its debt: approximately $800 million in annual interest payments and the need to convert or roll over certain debt instruments as they mature,” he outlined.
“Interest payments are not a pressing issue. With $1.4 billion in cash, the company can easily sustain its dividend payments for a year and a half,” he added.
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In the last 30 days, MSTR’s stock has decreased by 24.69%, closing at $186.01 on Friday.
Part of this downward trend may stem from Morgan Stanley Capital International’s October announcement indicating a possible exclusion of digital asset treasury companies with over 50% crypto assets from its indices.
Such a decision could force index-tracking funds to sell, intensifying the pressure on MSTR.
However, Hougan believes this won’t significantly impact sentiment towards Strategy or its share price, noting that historically, such events have had less impact than anticipated.
“From my observation of index additions and deletions over the years, the effects are generally more muted than expected and are often priced in well in advance,” he said. “When MSTR was added to the Nasdaq-100 Index last December, funds tracking the index had to acquire $2.1 billion in stock, but the price barely budged.”
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