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64 sats \ 4 replies \ @freetx 8 Jun \ parent \ on: Shorting Strategy's Strategy (Bloomberg, Money Stuff, Matt Levine) econ
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....
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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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.
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My understanding, too. It's remarkably safe... ish, since the preferred stocks don't work like that. Though, those he can decide against paying at any time
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