Michael Saylor announced on August 18 that Strategy (formerly known as MicroStrategy) has made changes to its stock issuance policy in response to the current downward trend in the financial markets.
Prior to this update, the company had strict limitations on selling stock below 2.5x market-to-net asset value (mNAV) in order to cover debt interest or preferred share dividends. With the new policy in place, Strategy now has the flexibility to issue stock below this threshold for strategic purposes.
The market-to-net asset value (mNAV) ratio is a measure of how the market values the company relative to its assets, which include Bitcoin holdings and operational resources. The previous limit was set to protect shareholders from dilution.
By relaxing this restriction, Strategy now has more options to raise capital and expedite Bitcoin acquisitions, demonstrating a willingness to take advantage of opportunities in a volatile market.
Meanwhile, the adjustment comes as the price of MSTR shares has fallen approximately 15% over the past month, closing at $363.6, its lowest level since April, according to data from Yahoo Finance source.
As a result, Strategy Tracker information indicates that the company’s NAV premium is currently at 1.59, the smallest gap between market price and Bitcoin-equivalent net assets this year.
Despite the recent decline in share price, Strategy remains the largest corporate holder of Bitcoin in the world, with 629,376 BTC valued at around $72 billion at the time of writing.
Reactions from Investors
The change in Strategy’s policy has received mixed reactions from investors.
James Chanos, a well-known short seller who has bet against the Saylor-led company, criticized the decision, arguing that it weakens protections against shareholder dilution and suggests limited demand for the company’s preferred shares.
On the other hand, some market experts view the policy adjustment as a strategic move that could facilitate Strategy’s acquisition of more Bitcoin.
Cern Basher, Chief Investment Officer at Brilliant Advice, pointed out that as long as the mNAV remains above 1.0, issuing new equity could increase the amount of Bitcoin per share, benefiting existing shareholders.
According to Basher:
“If Strategy is now able to issue new equity at mNAVs all the way down to 1.0, they effectively have two methods (issuing preferred stock & common stock) to acquire more Bitcoin (each one helping the other). Think of it as having two separate faucets to fill up a bathtub – allowing you to fill up the tub faster.”
However, Basher also acknowledged the risk of Strategy acquiring too much Bitcoin too quickly, but highlighted that shareholders should be interested in the company becoming a strong financial entity rapidly as it would open up more opportunities in the market.
