In a recent critique, veteran short seller Jim Chanos took aim at Strategy Inc. (NASDAQ: MSTR) for its emphasis on the stability of its perpetual preferred shares, even as its primary stock faces significant declines. This commentary came during a Bloomberg interview where Strategy”s CEO, Phong Le, described the firm”s Perpetual Stretch Preferred Stock (NASDAQ: STRC) closing at $100 as the “story of the day,” asserting that it was “exactly how it was engineered to perform.” Michael Saylor, Executive Chairman of Strategy, echoed Le”s sentiments.
However, Chanos, known for his critical stance on Strategy”s business model, was not convinced by this narrative. He posed a rhetorical question, stating, “Can you imagine any other CEO with a plunging stock saying, “The story of the day is that our junk debt is still trading at par?”” His words reflect a skepticism about the viability of Strategy”s approach, especially in the context of a downturn.
The financial pressures on Strategy have intensified as the value of Bitcoin (CRYPTO: BTC) continues to decline. Year-to-date, the company”s Class A shares have fallen by over 16%, and more than 60% over the past year, revealing a troubling trend. Currently, Strategy”s market capitalization is at $41.99 billion, contrasted with its Bitcoin holdings valued at $48.17 billion, indicating that the stock is trading at a discount to its net asset value.
In response to these financial challenges, Saylor has maintained a firm stance, declaring that the company will not sell Bitcoin, even if its price plummets to $8,000. Instead, he has committed to refinancing the company”s debt, asserting that they possess enough cash to cover dividends and obligations for the next 2.5 years without needing to raise additional funds.
Chanos has also made headlines with his strategic approach of shorting MSTR stock while taking long positions in Bitcoin. He perceived an unjustified premium on the stock relative to its Bitcoin assets and anticipated that this premium would diminish over time, particularly as the company continues to issue common equity. Recently, his firm exited this hedged trade, remarking that the strategy had “largely played out.”
At the time of this article, Bitcoin was priced at $67,337.82, marking a 1.39% decrease over the last 24 hours, based on data from Benzinga Pro. Meanwhile, MSTR shares saw a slight decline of 0.06% in after-hours trading, following a regular session closing at $126.07, which represented a 5.21% drop. The stock”s performance indicates weak momentum across all timeframes, earning a notably low ranking in Benzinga”s Edge Stock Rankings.
As these developments unfold, the crypto market continues to grapple with volatility, and the implications for companies like Strategy Inc. could be profound.
