The Leveraged Bitcoin Business Model Is Worth Nothing, The Premium Has To Compress

Trade Record:

Current Position:

Cumulative P/L: # Does not include the STRC and SATA dividend income, about $5,200.

Business model: Leveraged bitcoin + selling overvalued stock

• Leveraged bitcoin: Issue preferred stock at 13% interest, then use the borrowed money to buy bitcoin. If bitcoin appreciates faster than that interest, the extra is the company's profit. But the business model itself does not make any sense, because anyone can do it, and an individual's borrowing rate is far below the rate on their preferred. So this business model is worthless in essence.
• The company's actual value: Given that this company's leveraged bitcoin business carries no value at all, the company's value to a common shareholder can be worked out very easily: it should equal the market value of all assets minus the market value of all liabilities. Those liabilities should include the preferred as well.
• Selling overvalued stock: The company does in fact have one real line of business, deceptive as it is, that carries value: the overvalued share price itself. Take right now: we think the company is only worth 1B, but its market cap is 2.6B. So when it dilutes the stock at this point, every 2.6 dollars it sells means selling a one-dollar thing for 2.6 dollars, which comes to 1.6 dollars of profit.

A different way to compute mNAV: For these Bitcoin Treasury companies, the mNAV going around the market is generally misleading. They wrongly use assets rather than net assets, without deducting the debt or the preferred. The right calculation should put the company's current market cap in the numerator and, in the denominator, all of the net assets that end up belonging to common shareholders. We call that the Common Residual mNAV.

Common Residual mNAV calculation: On the asset side, 24,999.68 bitcoin × $75,379 = $1,884M ＋ cash $204.2M (8-K) ＋ the MSTR STRC held $49.8M ＝ total assets $2,138M; senior claims SATA 10.4M shares × $100 = $1,040M ＋ other liabilities $29M ＝ $1,069M; residual ＝ 2,138 − 1,069 ＝ $1,069M; market cap ＝ 94,968,764 basic shares × $27.59 ＝ $2,620M; residual per share $11.26; Common Residual mNAV ＝ 2,620 / 1,069 ＝ 2.45x; Claims % (net claims ÷ BTC NAV) ＝ 43.2%; BTC beta (＝ BTC NAV ÷ residual, that is, the hedge ratio) ＝ 1.76x; the residual goes to zero at BTC ≈ $32,600 (−57% from the current price).

• Calculation basis: SATA is taken at the $100 liquidation face value, not the market price (the dividend accrues on the face value, a falling market price does not lighten the cash burden, and a market-price basis manufactures a false mean-reversion signal in a credit event); other liabilities at book value; a convertible is judged on "conversion price vs residual per share", counted as principal in the claims above it and converted into shares below it; the share count uses basic shares to line up with CEBE Tracker, known to be about 2% understated because of RSUs that are left out; Semler's $16M of intangibles are left out; the 26,596,010 warrants @ $27.00 are left out, because the strike is far above the $11.26 residual per share and exercise is accretive to existing holders - the trigger threshold is a residual per share > $27.00, which means BTC ≈ $138K, with $718M of potential funding; once the SATA dividend is deferred or cut, the main basis switches to discounting the actual cash flows. | The formal name in the industry is CEBE mNAV (proposed by Bobby Tierney), cebetracker.io has a historical series on a consistent basis, and its 2026-09-11 reading is 2.33x, the difference coming from the $27.03 share price and the $29M of other liabilities it leaves out.
• Our view: Sure enough, we are not the only ones who have noticed how misleading the ordinary mNAV calculation is. We have moved our own basis closer to theirs, though on some of the details we see it differently.

Stock community:

• SA comments
• r/StriveASST: Plenty of emotion, but some rational analysis too.

Current view: Fund yourself with preferred stock paying 13% interest, then hope bitcoin rises faster than 13%. That business model is worthless, so this company's price should be the price of all its assets minus the price of everything it owes, the preferred included. Right now the market cap is 2.43 times that residual, which is not sustainable. It is almost exactly the MicroStrategy of back then. We intend to design a trade that profits from this premium compressing. We think that has to happen.

History repeating: Hegel said: the only lesson humanity has learned from history is that humanity learns nothing from history. That line is famous, but the second half never traveled as far: each period is in circumstances so particular that it can only be judged out of itself.

• Compared with the MSTR of the past, today's ASST really does have something particular to it. It is more foolish, less reasonable.

Danger signals: # Signals that should make us re-examine our view and the risks.

• The Common Residual mNAV has not widened, and yet our paired strategy is taking losses.
• The Common Residual mNAV keeps widening. That means we lose money, but it feels like it is actually a chance to add. Hard to say.

Working title: The leveraged bitcoin business model is worth nothing, the premium has to compress

Current decision: Add up to 5%. If bitcoin keeps running from here, the current 140% premium may well hold or even go higher. Our plan is that as long as the premium is above 100%, we will keep adding over time. For now we are considering taking the combined absolute position up to 50%.

Current Position: