Beware! Your CEO may be secretly watching a Saylor impersonation show.

Original author: Felix

Reprint: Daisy, Mars Finance

It all started with MicroStrategy. Nowadays, it seems that a new publicly traded company announces its accumulation of Bitcoin or other cryptocurrencies every week.

But there is a problem here: investors are willing to give these companies a high valuation premium simply because they buy Bitcoin.

What will happen if their stock does not rise as a result?

Taking the Japanese company Metaplanet as an example, it replicated Michael Saylor's Bitcoin frenzy at MicroStrategy.

10xResearch stated that its stock price is based on the trading price of Bitcoin at $596,154.

This is five times the current price of Bitcoin at approximately $106,000.

Before the company fully invested in Bitcoin, Metaplanet was an economy hotel operator that later transformed into a blockchain infrastructure provider.

With the company's rebranding and transformation into a Bitcoin reserve company, these operations have been put on hold.

10xResearch wrote in a report on May 27: "Is it time to short? The signals we are seeing now are remarkably similar to past turning points."

One of many companies

In fact, Metaplanet is one of the many companies following in the footsteps of Saylro, which has now been renamed Strategy.

On May 27, Trump Media & Technology Group (TMT) stated that it plans to raise $2.5 billion to purchase Bitcoin.

This week, the video game retailer GameStop, which has gained fame as a "meme stock," purchased 4,710 bitcoins worth approximately $513 million (based on current prices).

The stock prices of both companies have fallen.

These new Bitcoin reserve companies have adopted a relatively simple strategy: raise funds by issuing convertible bonds, and then use that money to purchase Bitcoin in large quantities.

Why have so many people suddenly emerged to imitate Saylor? In short, it has proven effective for companies.

Since the implementation of the Bitcoin purchase plan in August 2020, the stock price of Strategy has increased tenfold. The company holds over 576,000 Bitcoins, worth approximately $63 billion.

Proceed with caution

However, skeptics argue that there are ample reasons to remain cautious.

First of all, the idea that hoarding Bitcoin or any other cryptocurrency on the company's balance sheet is a surefire way to make money is simply absurd.

Renowned macro analyst Noelle Acheson stated that those who emulate Saylor are convinced that this strategy is risk-free, which is concerning. "Especially those who entered the market when Bitcoin prices were high."

When Strategy first bought Bitcoin, the trading price was about $11,000, only about one-tenth of the current $107,000.

As this strategy gains popularity, analysts and seasoned investors may focus their attention on a specific metric to eliminate noise—namely, net asset value (NAV).

NAV refers to the book value of assets held by the company.

When there is a mismatch in NAV, it means that the company's stock price is not consistent with the actual value of its assets.

For example, Metaplanet.

The company holds approximately 7800 Bitcoins valued at around 830 million dollars. However, the company's market capitalization is 5.6 billion dollars, which means each Bitcoin is worth 596154 dollars.

In other words, the price that investors pay for indirect investment in Bitcoin is five times the price of Bitcoin itself.

10xResearch analysts stated, "A dangerous NAV distortion is quietly forming."

"We should restrain our enthusiasm for such gimmicks." — Noelle Acheson

This means that the stock price of Metaplanet (which has risen 233% this month) may reverse its trend at any time.

But don't forget about the Strategy. Its frequent premiums may benefit shareholders, but they are also concerning.

According to Strategy Tracker data, in 2020, investors valued Strategy stock at more than six times its bitcoin value, which exceeded three times its value last year.

Hedge fund experts like legendary short-seller Jim Chanos have been shorting Strategy by exploiting the phenomenon of NAV misalignment and buying more Bitcoin.

Insider Selling

Meanwhile, cryptocurrency reserve strategies are gaining significant momentum.

Just this week, the parent company of Trump's social media company, Trump Media & Technology Group (TMT), plans to raise $2.5 billion to invest in Bitcoin. However, after disclosing the plan, its stock price plummeted by 11%.

Why? Some people may worry that insiders will sell their shares.

The company stated that any potential stock sale in the future may include shares from some insiders, such as those held by the trust controlled by its son, Donald Trump Jr., which holds 57% of the company's shares.

At the same time, many companies that emulate Saylor (some of which are not even cryptocurrency companies) have their valuations completely dependent on the amount of Bitcoin they hold.

Semler Scientific produces medical devices. After purchasing 581 bitcoins, its stock price soared by 30%.

Strive Asset Management, founded by former presidential candidate Vivek Ramaswamy, has stated that it has raised $750 million for the purchase of Bitcoin, with another $750 million in preparation.

Tech company ASST announced its merger with Strive Asset Management, transforming into a Bitcoin reserve company, and its stock price subsequently rose by 194%.

A new startup called Twenty One, led by Bitcoin evangelist Jack Mallers and supported by Tether, SoftBank, and Cantor Fitzgerald, has the sole purpose of absorbing as much Bitcoin as possible.

Since its establishment at the end of April, the holding company named Cantor Equity Partners has seen its stock price rise by over 300%.

The company has listed 76 risks associated with its business model, many of which are not common.

Nakamoto Inc, led by David Bailey, has merged with a healthcare company to raise $700 million to acquire Bitcoin.

Currently, macro analyst Noelle Acheson states that it is reasonable for companies to incorporate Bitcoin into their asset reserves.

However, a large number of enterprises use Bitcoin as the sole reason for their existence, which indeed raises warnings about certain excessive speculation.

The biggest risk faced by all these enterprises is macroeconomic risk. And during the Trump era, this was a huge factor.

Even Michael Saylor cannot escape the influence of geopolitics.

Tariffs, rising inflation, and the uncertain interest rate policy of the Federal Reserve have left the market nervous. Treasury yields remain high, which is particularly concerning as it suggests that investors' confidence in the dollar as a safe-haven asset may be waning.

This is unfavorable for risk-sensitive assets such as stocks and cryptocurrencies.

All of this means that Saylor's billion-dollar Bitcoin purchases, which used to boost this top cryptocurrency in the past, no longer have such an effect.

If the stock prices of companies like Strategy or Metaplanet continue to rise, other followers may emerge continuously. This may further weaken the influence of such purchases of Bitcoin.

Acheson wrote: "We should restrain our enthusiasm for such gimmicks."

"Innovative financial engineering often emerges as an attractive new tool that can yield profits, but as interest and risk become saturated, it inevitably becomes fragile."