Grant

Fixed Income Quant in a former life.

[Grant @JustGrant9]

I wrote a short series last year to evaluate whether Strategy offers a sensible way to get leveraged Bitcoin exposure.

With mNAV now ~1.3 (using Strategy's enterprise value method), heavy use of preferred shares like STRC, and continued BTC accumulation, it feels like a good time to revisit the core ideas.

This thread focuses on how the “BPS reactor” keeps running even as mNAV compresses. (Full article linked at the end).

[Grant @JustGrant9]

@dotkrueger Very interesting, it would allow the stripping of a bitcoin yield curve.

Any ex-Solomon alumni waiting to strip out zero coupon bonds and bitcoin discount factors?

[Grant @JustGrant9]

Hope $NAKA avoids this.

[Han Akamatsu 赤松 @Han_Akamatsu]

Reverse Splits are actually one of the worst things that can happen to a stock.

Once you see, read or hear anything about a RS, run away.

They’ll keep shorting the stock after the split.

[Grant @JustGrant9]

While ProCap and Strive management have been announcing personal share purchases, Nakamoto management has been silent. FWIW, I asked Grok for good reasons why this might be the case:

Steelman the strongest possible argument for why Nakamoto ($NAKA) management has not made personal open-market purchases of company shares, despite the stock being down ~99% from its highs, a move that could signal strong confidence. The CEO has cited material non-public information (MNPI) restrictions as a reason, but note that personal insider buying remains common in similar situations (e.g., Strive $ASST and GameStop $GME CEOs recently bought shares personally).

[Grant @JustGrant9]

Positive news?

[Nakamoto @nakamoto]

The KindlyMD Board of Directors has authorized a share repurchase program, which enhances the company’s financial flexibility and reflects leadership’s confidence in long-term Bitcoin operations.

[Grant @JustGrant9]

Realistically, $NAKA can't hit the ATM with mNAV below 1 without decreasing the amount of bitcoin per share.

The exception is if they were able to issue preferreds as in this case they are essentially trading their forward mNAV which includes the future bitcoin appreciation.

[Grant @JustGrant9]

@newstart_2024 The greatest trick the devil ever pulled was convincing the world he didn't exist.
-Verbal Kint

[Grant @JustGrant9]

@mattkratter This is more support for the ossification of bitcoin.

[Grant @JustGrant9]

@dampedspring I would be interested to see Strategy try to swap out some of their dividend obligations via an equity TRS. It would gauge the market's appetite for this type of risk transfer.

[Grant @JustGrant9]

FYI- MNPI issues restricting purchase of own shares by management.

[David Bailey🇵🇷 $2.0mm/btc is the floor @DavidFBailey]

-There’s no jet to give up. The only reason it was in my employment agreement is because my business partner and I were planning to personally buy a plane this year (from our UTXO GP carry) and I wanted ability to use it for NAKA. That hasn’t happened and there’s been no cost.

-I’ve been trying to buy an 8-figure sum of shares personally but am legally restricted from doing so at this time unless I buy them directly from the company (MNPI issues). I hope to buy shares in the market as soon as I’m legally able.

-One of the primary reasons NAKA was funded is because of the option to acquire BTC Inc/UTXO. Those businesses are how we plan to generate income and buy Bitcoin without incremental dilution. So I reject the premise of your criticism. However it’s not even within my control at this point, the option exists and it’s up to the two independent committees at each respective company to manage the process. I’m completely removed since it’s a related party transaction.

-On expenses, again compare us to any of our peers and you’ll see we’re already the most frugal.

[Grant @JustGrant9]

@JoshMandell6 You definitely don't want to sell into a down market to meet your dividend obligations!

In the credit world, this is called wrong way risk.

[Grant @JustGrant9]

@ActuallyClimber Don't like to see moves like these in the preferreds. Especially when the target is the fixed income market.

[Grant @JustGrant9]

@real_vijay Ultimately, given bitcoin's fixed supply, do you see the BTC yield of any Treasury company approaching 0?

There will be a type of equilibrium where losses / expenditures and acquisitions net out to ~0.

In this scenario, what would be the business model?

[Grant @JustGrant9]

@JoshMandell6 Does anyone know if Strategy has already tried to swap out some of the preferred dividend obligations with equity (e.g. TRS)?

[Grant @JustGrant9]

@Beautyon_ Thank you! The "unseen cost" seems like an obvious conclusion to me and I would hope a great many others.

[Grant @JustGrant9]

@stephanlivera Is shifting the default policy back to 83 bytes even on the table for discussion?

[Grant @JustGrant9]

@dampedspring 7 weeks and change left in Q4, let's see how it goes.
Sometimes the ball bounces funny in the fourth quarter.

[Grant @JustGrant9]

@LynAldenContact @KristophJeffers @RealJimChanos Yes looking like a much better deal now!

If the preferred's take off, I think even mNAV < 1 can still be btc yield positive.

[Grant @JustGrant9]

@ZynxBTC Yes, quick and easy. Strategy uses enterprise value instead, but last I checked it was only available from early 2025.

However, it does compare favorably with market cap / bitcoin nav and then you get a longer time series. Useful for playing around with mNAV statistics.