The debate over Strategy’s (MSTR) recent dilutive transaction resurfaced, this time with Strategy Executive Chairman Michael Saylor and Strike and Twenty One Capital (XXI) CEO Jack Mallers, Wednesday at BTC Prague, as the two weighed in on how investors should assess the company’s increasingly complex capital structure.
Mallers asked Saylor how he defines multiple-to-net asset value (mNAV), noting that some investors include out-of-the-money securities in their calculations and asked if he agreed with that approach. (Strategy currently has $6.7 billion of out-of-the-money convertible debt, meaning the securities are not expected to convert to equity at the current $115 share price).
Mallers also challenged Saylor’s view of dilution and asked for an example of a dilutive transaction where the issuance of equity for cash is not considered dilutive.
Saylor responded that mNAV can be calculated by including the face value of convertible debt, common equity and preferred equity. However, he argued that mNAV is only one valuation framework. Investors can also assess gross assets per share and net assets per share, which may exclude preferred equity or convertible debt from the calculation. According to Saylor, the distinction matters less when debt and preferred equity make up only a small portion of the company’s total asset base.
On dilution, Saylor argued that issuing equity for cash is not inherently dilutive because shareholders receive a tangible asset in return, be it cash or bitcoin. He said raising capital strengthens the balance sheet, expands the capital base and improves creditworthiness. As an example, Saylor pointed to Strategy’s recent addition of about $100 million to its U.S. dollar reserves, bringing the total to about $1 billion.
