The article is quite long. If you're not a fan of math, just check the conclusion at the end.
For those who love math, check out the table first. If you're confused, look for explanations in the article. If you have any objections or doubts, please drop a comment; Brother Bee is eager to learn.
┈➤Method 1: MSTR market cap/BTC reserves, might not be quite right
First, divide the $MSTR market cap by the total BTC reserves of MicroStrategy.
This method might not be quite right.
Because the funds MicroStrategy uses to buy BTC come from common stock, preferred shares, and convertible bonds.
You can't just attribute all the BTC bought by three traders to MSTR, right? This method completely overlooks convertible bonds and preferred shares, so it clearly underestimates the mNAV value.
┈➤ Method two: MicroStrategy's calculation method is a non-market perspective
MicroStrategy's method using enterprise value divided by BTC is scientific, but since MicroStrategy also has a software business, this may slightly overestimate the mNAV value.
┈➤ Method three: Only consider the mNAV value calculation of BTC reserves
Brother Bee made some adjustments to treat MicroStrategy's BTC strategy as a standalone company, directly applying the formulas from that article:
mNAV = (convertible bonds + preferred shares + MSTR - USD reserves) / BTC reserves
Here, we’re talking about all liabilities, preferred shares, common stocks, and cash related to BTC.
Preferred shares and convertible bonds use face value, while MSTR uses market value.
When calculating, don't forget STRE, which are the preferred shares issued by MicroStrategy for the European market.
mNAV
=[6,714 + (1284 + 713 + 10489.5 + 1402.1 + 1402.4) + 45,066 - 1000] / 53,500
= 1.235
This does not take into account MicroStrategy's software business for the mNAV.
However, this method actually distributes the premium brought by BTC among preferred shares, convertible bonds, and common stocks.
Convertible bonds before conversion, as well as preferred shares, are MicroStrategy's financing tools, providing fixed or floating income, and they can't really gain more from premiums or lose income from discounts.
So next, Brother Bee innovated a more scientific calculation method.
┈➤ Method four: Convertible bonds and preferred shares do not bear premium or discount
First off, convertible bonds can be crypto-inclusive, but I reckon there won't be any conversion to shares before March 2027. I'll write more about that later. So for now, treat these convertible bonds as non-convertible, meaning they won’t participate in the premium or discount distribution.
╰✦ Long-term/static perspective (10 years)
From a long-term perspective, just calculate based on the static logic of assets and liabilities.
Assets = Liabilities + Owner's Equity
⇒ BTC reserves + USD reserves = convertible bonds + preferred shares + MSTR aligned value
MSTR aligned value
= 53,500 + 1000 - 6,714 - 15,291
= 32,495
Here's the explanation: this method effectively divides BTC's value into three parts. The first two parts are allocated to convertible bonds and preferred shares at face value, while the third part goes to MSTR.
The so-called aligned value is the portion of BTC allocated to MSTR. MSTR only needs a market cap of 32,495 to align with this part of BTC's value.
Clearly, MSTR's current market cap is 45,066, which exceeds this aligned value.
mNAV
= MSTR actual value / MSTR aligned value
= 45,066 / 32,495
= 1.39
╰✦ Medium-term/dynamic perspective (4 years)
From a medium-term dynamic perspective, preferred shares don't need to return principal, so they are calculated based on total dividends for the future N years, as these total dividends equate to liabilities.
Using dividends for the next four years, as four years is one cycle.
It's important to note that the longer the dividend cycle selected for the future N years, the higher the calculated mNAV. So, I opted for four years instead of a longer time.
BTC reserves + USD reserves = convertible bonds + future four years of preferred shares dividends + MSTR aligned value
MSTR's aligned value
= 53,500 + 1000 - 6,714 - 6633.6
= 41,152.4
mNAV
= MSTR actual value / MSTR aligned value
= 1.095
╰✦ Short-term (1 year)
Preferred shares dividends calculated for the next one year.
BTC reserves + USD reserves = convertible bonds + future one year of preferred shares dividends + MSTR aligned value
MSTR's aligned value
= 53,500 + 1000 - 6,714 - 1658.4
= 46127.6
mNAV
= MSTR actual value / MSTR aligned value
= 0.977
┈➤ Written in conclusion
This mNAV calculation method, researched by Brother Bee, has three advantages:
First, only consider assets, liabilities, and equity related to BTC reserves, without accounting for MicroStrategy's enterprise software business.
Secondly, this method takes into account both convertible bonds and preferred shares, dividing the BTC assets into three parts, allocated to convertible bonds, preferred shares, and MSTR respectively.
However, convertible bonds and preferred shares are calculated at face value, as they are unlikely to reduce yields due to BTC's ups and downs before conversion.
The remaining volatile part of BTC's value is allocated to MSTR. By dividing MSTR's market cap by this portion, you get mNAV.
Thirdly, preferred shares are perpetual, and calculating them separately for long-term or short-term can yield different conclusions.
╰✦ Is MSTR at a premium or discount? The results are as follows
In the short-term scale, if MicroStrategy can only operate smoothly for one year, then MSTR is slightly discounted. mNAV = 0.977
In the medium-term scale, if MicroStrategy can operate smoothly for four years, MSTR is at a premium. mNAV = 1.095
In the long-term scale, if MicroStrategy can operate smoothly for ten years, MSTR is at an even greater premium. mNAV = 1.39