According to The Wall Street Journal, Strategy's self-created metric, mNAV, used to measure its valuation premium relative to its Bitcoin holdings, has systemic flaws.
This metric uses the face value of debt and preferred stock rather than their market value when calculating enterprise value, resulting in an overestimation.
For example, as of June 26, Strategy's officially reported mNAV was 0.99, while the market value was 0.89; as of last Thursday, the official figure was 1.09, revised to approximately 1.04.
The report noted that Strategy's stock price has fallen 75% over the past year, and its mNAV briefly dropped below 1 last month, reflecting pressure on its model of financing Bitcoin purchases through premium stock issuance.
The company's board previously authorized the sale of up to $1.25 billion in Bitcoin to repurchase shares and pay interest and preferred dividends. Strategy currently holds Bitcoin representing approximately 4% of the global supply.
The company expects its current cash reserve of $2.55 billion to support approximately 17 months of interest and dividend payments; if the mNAV remains below 1, it may ultimately need to draw on its Bitcoin reserves.