Strategy's enterprise value falls below bitcoin holdings as crypto sentiment sours

By Shashwat Chauhan

June 29 (Reuters) - Strategy's enterprise value has fallen below the value of its bitcoin holdings for the first time, a milestone that threatens to weaken investor confidence in the Michael Saylor-founded company's long-running cryptocurrency bet.

Investor focus has been on the company's "mNAV" metric, which is its enterprise value relative to its bitcoin holdings, ever since CEO Phong Le's remarks late last year that the company may consider selling bitcoins if the ratio drops below 1.

Its shares, however, were up 4.9% on Monday, set to snap an eight-day losing streak, after the company announced a share repurchase program and authorized as much as $1.25 billion in bitcoin sales, building a liquidity cushion for the largest corporate holder of the cryptocurrency.

"This is a responsible move from Saylor, and the market is seeing it as a positive development," said Nic Puckrin, cross-asset analyst and founder of Coin Bureau.

As of last close, Strategy was trading at over two-year lows and was the second worst-performing stock on the Nasdaq 100 index so far this year.

Strategy reported its first bitcoin sale since 2022 in a filing earlier this month.

Co-founder Saylor has spent years championing bitcoin as a long-term store of value, repeatedly backing a buy-and-hold approach, despite sharp market downturns.

As of last close, Strategy's mNAV ratio stood at 0.99 -- implying that the company's enterprise value is lower than the value of the bitcoin it holds on its balance sheet, according to its website.

"From here there are two paths: Strategy starts selling bitcoin, or its shares fall far enough that someone buys the stock to take control and get the bitcoin below market value," said Andrei Grachev, managing partner at market maker DWF Labs

"Either way, for serious investors that uncertainty itself becomes a reason to wait — and for now, money is flowing into AI, not crypto."

SHARES FOLLOW CRYPTO MARKETS LOWER

Its market capitalization as of last close was $29.54 billion, less than half of its all-time high valuation of over $71 billion clocked in 2024. Its shares have slumped more than 45% so far this year.

It reported a bigger first-quarter loss on May 5, hammered by a slump in bitcoin prices that weighed on the value of its sizeable crypto holdings.

Strategy last held 847,363 bitcoin per its website, which would be worth around $50.4 billion based on bitcoin's Sunday closing value of $59,577.82.

The company has also leaned on preferred stock offerings to raise capital for bitcoin purchases, extending its long-running effort to use financial markets to expand its crypto holdings.

Its preferred shares are Stretch, Stride, Strife and Strike -- all four are trading near record lows as of last close.

"Strategy expects to remain disciplined in its use of common equity issuance, particularly when the company's common stock trades at or near 1x mNAV per share," it said on Monday.

Bitcoin was last trading near its 20-month lows at $59,831.4, having halved in value from its all-time high of $126,223.18 in October last year.

Crypto markets have been in doldrums this year amid heightened market volatility, investor hype around expected big IPOs and persistent outflows from exchange traded funds (ETF) that track the assets.

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Devika Syamnath)