Debate over Strategy’s recent capital increase and fears of potential dilution reignited at the BTC Prague event on Wednesday. During a panel, Strategy’s Executive Chairman Michael Saylor and Strike and Twenty One Capital CEO Jack Mallers discussed the criteria investors should use when evaluating the company’s increasingly complex capital structure.
What is included in the mNAV calculation?
Jack Mallers pressed Saylor on how he defines the multi Net Asset Value ratio, or mNAV. Mallers highlighted that some investors include securities trading below the strike price in their calculations, and questioned whether this approach is appropriate. According to figures cited in the discussion, Strategy currently holds $6.7 billion in outstanding convertible debt, but with its shares trading at $115, these instruments are unlikely to convert to equity under current market conditions.
Mini glossary: mNAV measures how many times over a company’s market cap trades relative to its net assets, indicating a premium or discount. Convertible debt refers to bonds that can be exchanged for shares under certain conditions; if trading below the conversion price, converting may be uneconomical.
In response, Saylor argued that mNAV can be calculated by factoring in the nominal value of convertible debt, common equity, and preferred shares. However, he emphasized that this is just one framework for valuation. Investors can also examine metrics like gross asset value per share or net asset value per share, selectively including or excluding preferred shares and convertible debt from these alternative calculations.
Saylor explained that mNAV is merely one of several possible metrics, and investors should also consider alternatives such as gross or net assets per share when assessing company value.
Balance sheet defense in dilution debate
Mallers then asked what would truly constitute a dilutive transaction if an equity issuance in exchange for cash is not itself considered dilutive. This question became the focal point of the panel. Formerly known as MicroStrategy, Strategy is closely watched in the crypto space for holding significant Bitcoin reserves on its balance sheet.
Saylor countered that issuing shares for cash is not inherently dilutive, because shareholders receive concrete assets like cash or Bitcoin in return. He maintained that raising capital in this way strengthens the company’s balance sheet, increases its equity base, and supports its creditworthiness.
Saylor maintained that as long as Strategy receives cash or Bitcoin in return for share issuances, this process is not automatically dilutive and can, in fact, reinforce the company’s financial position.
Underscoring his point, Saylor noted that Strategy recently bolstered its US dollar reserves by roughly $100 million, bringing the company’s total dollar holdings to around $1 billion. In Saylor’s view, as long as debt and preferred shares form only a minor part of the overall asset base, the specific method of calculation becomes less critical to the company’s financial health.
The BTC Prague discussion underscored that Strategy’s capital structure should be analyzed not solely through its Bitcoin holdings, but in the context of its debt, preferred shares, and equity composition. Investors are urged to pay close attention to which components they include when evaluating ratios like mNAV.
