David Okoya
3 min read
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VanEck Head of Digital Assets Research Matthew Sigel has joined the wave of experts warning that the Bitcoin treasury model popularized by MicroStrategy (NASDAQ:MSTR) faces risks. Sigel said Monday on X that Bitcoin treasury firms risked eroding shareholder value if they traded near their net asset value.
Multiples to NAV have allowed Bitcoin treasury firms to raise capital for Bitcoin purchases by issuing more shares. But in recent weeks, experts have warned that these premiums will likely erode over time as the asset becomes more accessible and normalized and more treasury firms appear.
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“If the stock trades at or near NAV, continued equity issuance can dilute rather than create value,” Sigel said. “That is not capital formation. It is erosion.”
However, there may still be room for Bitcoin treasury firms to safeguard against this risk, according to Sigel.
Sigel said Bitcoin treasury firms should announce a pause of at-the-market stock offerings if shares trade below 0.95 times NAV for 10 days or more. This could temporarily prevent further shareholder dilution.
Sigel also said that firms could engage in stock buybacks when Bitcoin rises, but share prices fail to reflect the increased value. This strategy is typically employed when a firm believes its stock is undervalued, and it can often be an effective means of returning shareholder value. Still, its effectiveness is often at the mercy of broader market sentiment.
If all fails, Sigel said, firms might have to consider more drastic measures such as mergers, spinoffs, or sunsetting the Bitcoin treasury strategy.
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Meanwhile, he warned that Bitcoin treasury firms should avoid outsized executive compensation. He said compensation should reflect NAV per share growth, not the total Bitcoin position or share count.
“Boards and shareholders should act with discipline now, while they still have the benefit of optionality,” he surmised.
Sigel’s warning comes as this NAV risk looks set to become a reality for at least one Bitcoin treasury firm. At last look, Semler Scientific (NASDAQ:SMLR) is trading at 1 times NAV, according to Strategy Tracker.
