Summary Buying Strategy today means purchasing $100 worth of Bitcoin for $150. Despite the company's increasing BTC Yield, I do not believe today's price is a compelling entry point. MSTR's long-term game to justify a mNAV premium consists of financial products like preferred shares tied to its Bitcoin. This is a good direction, but not enough yet. One day, if Bitcoin matures, demand for MSTR stock driven by retail hype may be substituted by institutional demand attracted by MSTR's financial products. We are not there yet. MSTR's significant premium to its underlying Bitcoin holdings, together with Bitcoin's lack of maturity, makes a direct Bitcoin investment more attractive, in my view. Strategy Inc ( MSTR ) is a box of Bitcoin USD ( BTC-USD ) worth $100 that currently trades for ~$150 (i.e., at a mNAV premium of 1.50X against its holding). With Bitcoin recently hitting new all-time highs, the question I am asking myself today is, does it make sense to buy MSTR rather than simply buying Bitcoin? My answer is a resounding no. In this article, I will explain why I think MSTR is unlikely to outperform Bitcoin in the foreseeable future, based on its current valuation. However, I rate the company a Hold as I believe there is still a chance Saylor could come up with more reasons to justify a long-term premium on its mere BTC holdings. What happens when you buy MSTR? When you buy $100 worth of Bitcoin for $150, you should logically hope the amount of Bitcoin in your name (the BTC you “hold” via MSTR shares) increases over time to match your $150 cost basis. Once that happens, you have reached breakeven on your investment in BTC terms. This can happen via what Strategy calls “BTC Yield”, a metric capturing how Bitcoin holdings per share increase over a certain period of time. Back in Q1, Strategy announced a 15% BTC Yield target for 2025, which it has already surpassed, as the chart below shows; MSTR achieved a 25.9% BTC Yield YTD. This is to say that an investor buying MSTR on January 1st, 2025, now has 25.9% more Bitcoin “in his name” via the MSTR shares they hold. To note, MSTR in January traded at a mNAV premium between 1.5X and 1.7X, so this hypothetical investor would not have reached breakeven. BTC metrics, MSTR (Strategy) The question then becomes: how long would it take you to breakeven with an investment in MSTR, in BTC terms? That, of course, depends on what we assume the future BTC Yield of MSTR is over time. The table below outlines the results depending on BTC Yield. Assumed BTC Yield # of Years to breakeven Assumed mNAV 15% 2.85 1.49X 25% 1.79 75% 0.71 At MSTR’s 2025 BTC Yield target of 15%, it would take almost three years to breakeven in BTC terms. That amount of time would be reduced to little more than 6 months if MSTR were to increase BTC Yield at a 75% rate (2024 metrics). Note that Strategy can only continue to increase its BTC Yield metric as long as its mNAV is higher than 1 (i.e., as long as the Bitcoin “box” keeps trading for more than $100). Should MSTR’s mNAV premium go below 1, shareholders would be stuck with whatever amount of Bitcoin they have in their shares. The long-term game The dynamic I described above is all about diluting shareholders to acquire more Bitcoin. This is a mechanic that, in my view, is not sustainable long-term. In the long run, an efficient market should eventually see a $100 box of assets trading at $100. For Strategy to sustain a longer-term mNAV premium, it needs to show a reason why its underlying business is worth more than its BTC holdings. Michael Saylor, MSTR’s founder and CEO, has offered many reasons why in the last few years. Among them: The launch of four financial products in the form of preferred stocks that distribute a dividend to holders. For example, the Strategy Inc 8.00% SERIES A PERPETUAL STRIKE PFD ( STRK ). The launch of a series of convertible bonds totaling little over $10 billion, the latest of which was issued in February this year. The launch of a Bitcoin merchandise eCommerce website. Strategy’s underlying software business , which the company recently started to market as AI-native. Of the above elements, I, personally, think the first two are those that may eventually justify a long-term mNAV premium of some sort. The reason has to do with user behavior: someone holding a significant amount of Bitcoin may want to eventually monetize their stake without selling. The presence of products like STRK (or other preferred MSTR stocks) offers such an opportunity, thanks to its artificial yield. Such a service could create the long-term demand that will justify a mNAV premium. However, this only works long-term in a world where Bitcoin matures as a global reserve asset. In a world where Bitcoin is what gold is today, financial products (or services) that can monetize large BTC stakes could be in high demand. As I discussed in my past coverage , I see Bitcoin as a great hedge against inflation and currency debasement. As an asset that is extremely scarce, I think many holders may not want to monetize it by selling but rather rely on financial products to cover their expenses. This is a dynamic similar to the concept of “ Buy, Borrow, Die ”, where wealthy people tend to loan against their assets rather than selling them to cover their expenses. Conversely, I do not see the legacy software business of MSTR as a competitive advantage worthy of any significant premium. This is a declining business that is nowhere near a winner in the AI age. I was actually disappointed when I saw Strategy starting to market it as an AI-native software business a couple of quarters ago. I think Strategy would be better off selling its legacy business and utilizing the revenue to purchase more Bitcoin. Why I am recommending a Hold and how to make money with MSTR I think that Strategy is doing well to focus on financial products tied to its Bitcoin holdings. The launch of a series of preferred stock, together with the issuance of convertible bonds for the B2B market is a promising start. This is the reason why I am not recommending a SELL, despite not seeing the company outperforming Bitcoin in the foreseeable future. The strategic direction is correct, in my view. But at the current mNAV premium and stage of maturity for Bitcoin I simply do not see enough upside to recommend a Buy. In plain terms, I do not see enough demand for products like STRK (or convertible bonds) to warrant a sustained mNAV premium just yet. This demand may manifest only if BTC matures to a global reserve asset. Should MSTR’s mNAV premium get closer to 1, I may upgrade my recommendation to a Buy (depending on Bitcoin’s maturity). Should MSTR’s mNAV premium go below 1, as it was during Bitcoin’s last bear market, I would certainly recommend a Strong Buy. Buying MSTR at a price inferior to its mere BTC holdings would be an asymmetric investment opportunity. Historically, MSTR investors made the vast majority of their returns when MSTR traded at an mNAV discount. Risks of thinking in BTC terms The most obvious risk of investing in Strategy is the fact that the company is effectively a leveraged bet on Bitcoin. Anyone not bullish on Bitcoin should avoid investing in Strategy as returns may only manifest if Bitcoin does mature into a global asset. However, risks go beyond the mere dependence on a BTC bull case. Anyone investing in Strategy should also not care about returns expressed in USD terms—at least in the short term. Since Strategy’s management is effectively diluting shareholders to buy more Bitcoin, this represents a permanent headwind to MSTR’s stock price. This is well illustrated by MSTR’s stock returns YTD, which are lagging those of Bitcoin (see chart below). MSTR vs. BTC, YTD (Seeking Alpha) In Bitcoin terms, shareholders saw an increase of Bitcoins in their name by ~25% YTD. However, in fiat terms, the company only returned ~24%, which is less than Bitcoin’s ~33% YTD performance. While shareholders should theoretically play the long-term game and only care about BTC, I find it is something easier said than done. I believe a lot of the current retail interest in MSTR is coming from the hope of short-term appreciation in USD terms behind crypto and BTC hype. Whether or not this type of demand can be substituted with a more institutional demand by Bitcoin investors wishing to monetize their holdings remains to be seen. Conclusion Once again, I find myself recommending a Hold for Strategy. I think the company is going in the right direction by focusing on the launch of financial products tied to its Bitcoin holdings, such as its series of preferred shares. However, this is not enough to justify a sustained, long-term mNAV premium in the current context of Bitcoin maturity. Only if Bitcoin matures into a global reserve asset, I think demand for MSTR shares could stabilize enough to justify a permanent mNAV premium > 1. Today, I do not see an investment case to buy $100 worth of Bitcoin at a premium of ~50% via Strategy shares. Investors who have MSTR in their portfolio may want to Hold and see how the Bitcoin situation evolves. Those who are not exposed to MSTR are better off simply buying Bitcoin, in my view. Historically, MSTR provided its best returns when purchased under a 1 mNAV premium. For me to revise MSTR into a Buy, one of two things will need to happen. Either Bitcoin matures into a global reserve asset and MSTR’s financial products drive new demand for its stock, or its mNAV goes below 1.
