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We're back to this conundrum:
As I often write around here, right now the US stock market will pay $2 for $1 worth of Bitcoin. This is most famously demonstrated by MicroStrategy Inc. (or just Strategy), a company with a $60 billion pot of Bitcoins and a $118 billion equity market capitalization
So, what to do about it? We can shoooort it, i.e. betting that the gap will close. Oh, peeps are on it:
if you think “this is weird and there is no good explanation for it,” you can do more than just talk about it. You can do something about it: You can bet that, if it’s weird and there is no good explanation for it, it has to stop. Specifically, you can buy $2 worth of actual Bitcoin and short $2 worth of Bitcoin treasury company stock.

It's a "famous widowmaker trade"!

On the other hand tons of other companies really are doing a related trade — selling their stock at a premium to buy Bitcoin — and maybe that will bring down the premium for everyone. Or maybe not. This whole thing is weird and I have no good explanation for it, which means that I have no good intuition for when it will stop.
Will Chanos make it out alive?!

non-paywalled via newsletterhunt: https://newsletterhunt.com/emails/190424
They don't only accumulate bitcoin by selling shares, though. Doesn't their ability to get great borrowing terms for bitcoin purchasing factor in?
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why would their borrowing terms change? Also, per MM theorem, it shouldn't matter if they dilute shareholders or issue debt; same company, same thing, regardless of capital structure
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Ok, I've seen people talk about Saylor benefitting from loan terms that aren't available to normal people. Wouldn't that explain some premium? He can make the leverage play more efficiently than we can.
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64 sats \ 4 replies \ @freetx 8 Jun
If I had a magic box that you could invest in, and this magic box could increase the bitcoin-per-share regularly....why would the NAV of my magic box be 1:1?
Investors will invest with the expectation of what bitcoin-per-share will be over some future time horizon.
Not saying NAV should be 2:1 forever, but its basically investors front-running the expectation. Not much different than a >1 PE ratio conceptually....
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Ok, now explain how you could do this regularly/indefinitely
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Right, and, obviously, a belief that the asset of the bitcoin will more than offset the liability of the loan.
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64 sats \ 1 reply \ @freetx 8 Jun
Yes, and Saylors magic box doesn't just increase debt. Its a sea-saw. When NAV is >2 he issues shares.....when NAV is <2 he issues debt.
Last I checked his debt load was only about ~25% of his NAV, plus his debt is zero coupon and expires in 3-5 years. So in theory Bitcoin price could fall to $25K and stay there for the next 3-5 years before he had a problem.
He can, yes — more efficient than us plebs. Not more efficient than hedge funds or other wall street players
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Sounds like a good idea, but I'm always afraid of the old adage, "The market can stay irrational longer than you can stay solvent"
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Indeed
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Play stupid games, win stupid prizes. Just stack sats. No one can consistently beat Bitcoin, so why try?
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TBH, I don't think it's weird. Saylor is just playing smart here. He believes that Bitcoin is the best money and knows people will premium for the best.
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