TL;DR:
- Michael Saylor and Jack Mallers debated at BTC Prague on how investors should evaluate the capital structure of Strategy, the largest Bitcoin treasury.
- Mallers questioned Saylor’s definition of mNAV and whether issuing equity in exchange for cash represents dilution for shareholders or not.
- Strategy holds $6.7 billion in out-of-the-money convertible debt and dollar reserves of approximately $1 billion.
Michael Saylor, Executive Chairman of Strategy, and Jack Mallers, CEO of Strike and Twenty One Capital, clashed publicly at BTC Prague in a debate over how investors should interpret the company’s capital structure, which has grown increasingly complex.
The discussion centered on two axes: the method for calculating the multiple on net asset value (mNAV) and the concept of shareholder dilution. Mallers opened the debate by asking Saylor how he defines mNAV, and whether he considers it valid to include convertible securities that are out of the money in that calculation. Strategy currently holds $6.7 billion in out-of-the-money convertible debt, meaning those instruments are not expected to convert into equity at the current share price of $115.
https://twitter.com/jackmallers/status/2064836153447227446
What Did Saylor Say?
Saylor responded that mNAV can be calculated by including the notional value of convertible debt, common equity, and preferred equity, but cautioned that it represents just one valuation framework among several possible ones.
Investors can also turn to metrics such as gross assets per share or net assets per share, which in some cases exclude convertible debt or preferred equity. According to Strategy’s Chairman, these differences become less relevant when debt and preferred equity represent a smaller portion of the company’s total assets.
The Dilution Debate
Mallers also challenged Saylor’s stance on dilution, asking him to describe a concrete example of a dilutive transaction if he considers that issuing equity in exchange for cash does not qualify as one.
Saylor argued that this type of operation does not dilute shareholders because it generates a tangible asset in return, whether cash or bitcoin. He contended that raising capital strengthens the balance sheet, broadens the capital base, and improves the company’s creditworthiness. As an example, he cited the recent addition of approximately $100 million to Strategy’s dollar reserves, bringing the total to around $1 billion.
The exchange laid bare the tensions between competing visions of how to measure the real value of a company that has made bitcoin accumulation its central business model.
