Wall Street debates Strategy's Bitcoin blueprint

Wall Street debates Strategy's Bitcoin blueprint originally appeared on TheStreet.

One of Wall Street's most famous short sellers, Jim Chanos, has made a name for himself by finding firms whose market value is way higher than it should be. Now, his eyes are set on MicroStrategy, a Virginia-based software company that has lately changed its name to "Strategy."

The company is well known for its corporate Bitcoin vault. But Chanos is clear in his criticism: the company's business model is "financial nonsense," and its shares are worth a lot more than the Bitcoin they represent.

Chanos's main point is based on a single number: market net asset value, or mNAV. This represents the value of the company's Bitcoin holdings per share, minus its debts and preferred equity, relative to the actual stock price.

Strategy now has around $77.2 billion worth of Bitcoin. However, the price of its shares suggests that each share is worth significantly more than the coins themselves. Traders call that extra gap the "premium," and Chanos thinks it's not fair.

Join the discussion with Scott Melker on Roundtable here.

Strategy's premium has been under both scrutiny and praise. The corporation doesn't just use cash reserves or issue traditional debt to get money. It also sells perpetual preferred shares, such as its STRD ("Stride") and STRC ("Stretch") offerings.

Investors in these preferreds receive regular dividends, typically ranging from 9% to 12%, which Strategy uses to purchase additional Bitcoin.

The method gives investors more power: when the market is strong, the extra Bitcoin raises returns for regular stockholders. But in poor markets, those fixed dividend obligations stay in place, which might lower value and force Strategy to keep raising money.

In favor of MSTR

Michael Saylor, the executive chairman of Strategy and the person who came up with this plan, says the extra money is well worth it. He talks about it in terms of four main benefits.

Story Continues

The first is "credit amplification," which means that the company can raise more money than its equity base would normally allow, which increases its exposure to Bitcoin.

The second is an "options advantage." Strategy's common stock, which still trades under the MSTR ticker, has one of the most active options markets tied to the price of Bitcoin. This allows investors to set up trades using calls, options, and spreads in ways that aren't easily possible with direct Bitcoin holdings.

"Passive flows" is the third pillar. MSTR is included in index funds and other investment products that follow regulations. These funds automatically acquire the stock, regardless of its cost, which keeps the demand consistent.

Lastly, there is "institutional access." Many big pools of money, such as pension funds and endowments, can't acquire Bitcoin directly. By holding MSTR shares, they can still acquire exposure to Bitcoin's price swings.

on CNBC Saylor said:

"Believe it or not, there are a lot of people who …don't want the Bitcoin return. They want 100% return. So MicroStrategy, the equity, or strategy,..We actually aim to generate 2x the Bitcoin return and 2x the volatility."

Analysis by Ryan (@ryQuant) highlights that the perpetual preferred model could drive 51% annual growth and a $1,960 fair value, allowing Strategy to keep adding Bitcoin indefinitely by paying dividends.

Join the discussion with CryptosRUs on Roundtable here.

Criticism of MSTR

Chanos and other skeptics are uncertain whether the benefits outweigh the costs.

First of all, "credit amplification" costs money. Chanos says that preferred dividends must be paid no matter how well Bitcoin does, and that individual investors can often borrow money at lower rates than Strategy does.

Skeptics also disagree with the "passive flows" thesis, arguing that index inclusions can alter the market and that the buying pressure they create is not permanent.

Critics argue that the restrictions preventing large investors from buying Bitcoin directly are diminishing, particularly with the introduction of U.S.-listed spot ETFs.

Further, holding Bitcoin through a corporate wrapper introduces "double taxation," where profits could be taxed at both the corporate and shareholder level, as per reports.

Chanos says that the biggest risk is that the premium itself might fall apart. If investors are less inclined to pay more than mNAV, MSTR's shares could drop a lot even if the price of Bitcoin stays the same.

Some traders take a short position in MSTR and a long position in Bitcoin at the same time, anticipating that the premium would go down over time.MSTR tops 1-year volatility at 91%. Source: Strategy.

At press time, Strategy's mNAV stands at up by 0.62%. Interestingly, MSTR has been 91% volatile among all assets over the last year — even more extreme than Tesla or Bitcoin.

Wall Street debates Strategy's Bitcoin blueprint first appeared on TheStreet on Aug 14, 2025

This story was originally reported by TheStreet on Aug 14, 2025, where it first appeared.

View Comments