TLDR
- NYDIG researchers call mNAV metric for bitcoin treasury companies “misleading” and want it eliminated
- The metric ignores operating businesses and incorrectly treats convertible debt as equity
- Strive Asset Management’s acquisition of Semler Scientific marks first bitcoin treasury company merger
- Combined entity now holds over 10,900 BTC in treasury reserves
- Many bitcoin treasury firms currently trade below mNAV, suggesting more mergers possible
A major crypto research firm is calling for the elimination of a widely-used valuation metric for bitcoin treasury companies. NYDIG’s global research head Greg Cipolaro says the market-to-net asset value (mNAV) metric should be “deleted and forgotten” due to serious flaws.
The controversy emerges as Strive Asset Management completed the first acquisition between two bitcoin treasury companies. Strive bought Semler Scientific in an all-stock transaction, creating a combined company with more than 10,900 BTC.
Bitcoin treasury companies use mNAV to compare market capitalization against crypto holdings. Companies worth less than their bitcoin are trading at discounts. Those valued above their crypto holdings trade at premiums.
“At best, it’s misleading; at worst, it’s disingenuous,” Cipolaro wrote in Friday’s research note. He argues the metric creates false impressions for investors making trading decisions.
Operating Business Value Ignored
The first major flaw involves how mNAV handles business operations. Most bitcoin treasury companies run businesses beyond crypto accumulation. MicroStrategy operates software sales while holding bitcoin reserves.
The mNAV calculation completely ignores these revenue-generating operations. This oversight creates incomplete valuations that miss important company assets and income streams.
Companies like Semler Scientific operated medical device businesses before adding bitcoin strategies. The metric fails to capture this operational value when investors evaluate stock prices.
Convertible Debt Accounting Problems
NYDIG identifies convertible debt treatment as another critical flaw. The mNAV metric uses “assumed shares outstanding” that often includes unconverted debt instruments.
Convertible debt holders typically demand cash payments rather than stock conversions. This creates heavier financial obligations than simple share issuance for companies.
“Accounting for convertible debt automatically as equity is not correct from an accounting or economic perspective,” Cipolaro explained. The debt functions as volatility harvesting through embedded call options.
This structure encourages bitcoin treasury companies to maximize stock price volatility. The dynamic creates additional risks that mNAV calculations completely miss.
Market Consolidation Ahead
Publicly traded bitcoin treasury firms currently hold over 1 million BTC collectively. Many companies trade below their mNAV values, potentially signaling more acquisition activity.
The Strive-Semler merger demonstrates consolidation trends in bitcoin treasury investing. The deal increases net asset value per share, which investors view as yield generation.
Semler Scientific traded at discounts to crypto holdings since August despite growing competition. The acquisition pattern could repeat as undervalued companies become targets.
Currently, bitcoin treasury strategies face increased scrutiny over valuation methods. NYDIG’s criticism comes as institutional adoption of bitcoin treasury models expands across public companies.
The research firm argues that net asset value matters more than market capitalization for bitcoin treasury analysis. Companies generating yield can issue equity at premiums to net asset values.
