The “saylorization” of corporate treasury has become one of the trends of the moment. However, as more companies are copying this model, some questions arise, such as: To what extent is it sustainable? o What risks should anticipate firms that follow this path?
Before continuing, the first thing to take into account to read this article is that the term “saylorization” comes from the mind behind this Bitcoin accumulation model as a reserve asset: Michael Saylor. Strategy CEO is a Bitcoiner maximalist, who maintains that BTC is a unique asset and its price will tend to go in a predominantly bullish trend, reaching 13 million dollars in 2045.
As cryptootics has reported, its strategy is to issue debt through convertible bonds to increase your BTC holdings without the need to depend on your operational income. This purchasing approach was increasingly aggressive over time, about that it does not matter if it is a software company: the only relevant thing is its Bitcoin accumulation strategy.
Thus, it became the firm that quotes on the bag with more BTC in its treasury. Currently, it has 592,100 BTC.
In this context, more and more companies adopt the same strategy and are issuing debt to acquire BTC. While so far Saylor’s experiment works, Matthew Sigel, head of Vaneck digital asset research, He warned that Replicating this model has its risks.
Through a post in his personal account of X, he explained: “As some of these companies collect capital through large programs in the market (ATM) to buy BTC, a risk arises: if the shares are negotiated in or near the liquidative value, the continuous issuance of shares can dilute, instead of creating value. That is not capital formation. It is erosion.”
It should be clarified that ATM is the term used to define the mechanism by which companies issue actions to obtain funds quickly and flexibly. In this case, they are allocated to finance BTC’s purchases.
For its part, Christmas represents the value of the assets that a company has, divided by the amount of actions in circulation. If the actions are sold near that value, issue new may not generate a significant additional income, but simply dilute the participation of existing shareholders.
If this scenario is specified, Sigel’s recommendation is that The company announce a break in the issuance of shares via ATM. For example, if a company has BTC in its balance and the NAV is 10 dollars, but the market trades them at $ 9.50 or less, continuing to issue shares under these conditions implies selling below the real value. This causes a dilution that destroys value instead of generating it.
On the other hand, the Vaneck executive suggests that when the price of Bitcoin rises, that should translate into a rise in the price of the company’s shares. However, if that appreciation is not reflected in the stock market contribution, a shack repurchase can be an option to close the gap between the real value of the assets that the company possesses and the price to which it quotes in the market, thus benefiting the current shareholders.
The third idea that Sigel shared is to review the heading of the business: merger with another firm, divide the business into separate units or even abandon the accumulation of Bitcoinif it is considered that it no longer contributes value to the shareholders.
In that sense, Sigel highlights: “Executive compensation must be aligned with the growth of NAV per action, not with the size of the position in Bitcoin or with the total amount of actions in circulation. Once it is quoted to the liquidative value, the shareholding dilution ceases to be strategic. It is extractive. The directories and shareholders should act with discipline now, while they still have the benefit of the option.”
As cryptootics has reported, Sigel is not the only one who puts the magnifying glass on Saylor’s strategy and ask to check it carefully not to take risks. Jacob King, financial analyst, compares this model with a loop similar to a Ponzi scheme.
To illustrate your thesis, use an image in which the dynamics that revolve around a repetitive sequence are seen.
As seen in the previous image, everything starts when a company issues debt or shares, uses those funds to buy BTC (which drives its price by reducing the available supply), and that increase in Bitcoin’s value also raises the stock market capitalization of the company.
This attracts new investors – mainly retail -, which allows to repeat the cycle with new emissions. Therefore, for King, this mechanics depends on all the steps work in chain. If any fails, The model becomes unsustainable.
