Strategy Revamps Bitcoin Metrics with 'Net Bitcoin Per Share'

Strategy Introduces New Metrics for Bitcoin Valuation

Strategy has unveiled a set of updated metrics aimed at providing clearer insights into its Bitcoin holdings, particularly as it transitions from convertible debt to preferred equity, termed "digital credit." These changes come in response to investor feedback for enhanced transparency.

New Key Metric: Net Bitcoin Per Share

The cornerstone of this update is the introduction of the "net Bitcoin per share" metric. This figure represents the Bitcoin available to common shareholders after accounting for $22.3 billion in debt and preferred stock claims. As a result, the net Bitcoin per share has seen a significant rise from $13 (or 44,000 satoshis) at the end of 2020 to $95 (or 143,000 satoshis), reflecting a 43% compound annual growth rate, surpassing Bitcoin's own growth rate of 16%.

Redefined Metrics and Financial Insights

In addition to the net Bitcoin per share, the company has redefined its mNAV, which is now calculated by dividing the share price by net Bitcoin per share, with a new target of 1.0x par. The term "amplification" has also been reinterpreted as an equity multiplier of approximately 1.5x, based on Bitcoin reserves relative to net reserves.

Challenges Amid Market Conditions

Despite these strategic changes, MSTR's stock is currently trading around $93, reflecting a decline from previous highs and indicating challenges as the company approaches its second-quarter earnings report on July 30. The new calculations suggest that the stock is trading at parity when using net Bitcoin per share, contrasting with previous assessments that indicated it was undervalued when gross metrics were applied.

Shift in Capital Management Strategy

The company’s pivot to "digital credit" and new capital management strategies were approved in late June. This framework allows for the sale of up to $1.25 billion of Bitcoin to enhance cash reserves, pay dividends, and facilitate buybacks, marking a shift from the previous "never sell" approach championed by Michael Saylor. In recent weeks, Strategy has opted to raise funds through the sale of MSTR stock rather than Bitcoin, maintaining its Bitcoin holdings while diluting common shareholders.