Strategy has been in the market’s sights for its sharp fall in the stock market.
Despite Hougan’s optimism, the CEO of Strategy has revealed that they could sell bitcoin.
The market remains in suspense due to the recent fluctuations in the shares of Strategy (MSTR), the publicly traded company that holds the largest amount of bitcoin (BTC) in its treasury.
The alarms went off due to a sharp drop in the price of its shares and the possibility of being eliminated from the MSCI stock indexes.
However, Matt Hougan, investment director at Bitwise, offers a perspective reassuring. According to him, “Strategy will not sell its bitcoin” due to market pressure.
The market’s concern: MSCI and forced selling
The main concern among investors is summarized in two crucial questions: “Will it eliminate [Strategy] of MSCI, creating a forced sale of shares? “Will he be forced to sell his bitcoins?” Hougan says.
Strategy has been in the market’s sights due to its sharp drop in the stock market of 25% in the last month and 50% in the last six months, which was aggravated by the position of MSCI, one of the main stock indices. MSCI announced that it was considering eliminate from its list companies that, like Strategy, maintain large treasuries in digital assets.
Hougan details that MSCI’s opinion is that companies with bitcoin treasuries “are more like holding companies than operating companies. MSCI investment indices exclude holding companies such as REITs [fideicomiso de inversión inmobiliaria que cotiza en bolsa y está obligado a repartir la mayor parte de sus beneficios en forma de dividendos].
Since many [empresas con tesorerías de activos digitales] “They only buy and hold cryptoassets, MSCI considers that they do not deserve a place in the index.”
“I don’t know what MSCI will decide,” says the Bitwise analyst. «As an index expert I think this can go in any direction. Given how divisive companies are with digital asset treasuries, and given that MSCI is currently leaning toward delisting them, I’d guess there’s at least a 75% chance that Strategy will be ousted.”
The real impact of Strategy’s possible removal from MSCI
Despite the high probability that Strategy will be kicked out of the index, Hougan is “not convinced that the removal will be a big hit to the stock.”
The possible forced sale of shares is estimated at about $2.8 billion, according to Hougan. However, says Bitwise’s chief investment officer, “my experience, having observed the additions and removals of indices over the years, tells me that the effect is usually smaller than is believed and will be discounted well in advance.”
The analyst considers that the market is already discounting the exit. He believes that the drop in MSTR’s value since October 10 is attributable to the market already “pricing in” its exit from the index. In the long term, the company’s value “is based on how well it executes its strategy, not whether index funds are forced to own it.”
Strategy without obligation to sell bitcoin
The fire sale argument posits that if Strategy’s share price “will collapse, falling well below net asset value (mNAV); so Strategy will be forced to sell its BTC. Hougan is categorical in refuting this hypothesis..
«The argument seems logical. Unfortunately for bears, this is completely wrong. There is nothing about the price of MSTR falling below the net asset value that forces it to sell,” explains the Bitwise executive.
The company has two relevant obligations related to its debt. Interest and renewal or conversion of specific debt instruments. “Related to its debt, it needs to pay around $800 million a year in interest and needs to convert or roll over specific debt instruments as they mature,” Hougan explains.
However, interest payments “are not a short-term concern,” as the US firm established a reservation of 1.44 billion dollars, financed by the sale of shares, not bitcoin. Furthermore, debt conversion is not an imminent problem either, since “The first debt instrument does not mature until February 2027. Even so, it is only about a billion dollars, a pittance. For context, the company has $60 billion in bitcoin.
The “fraud” in the Strategy model
Despite Hougan’s optimistic vision about the future of Strategy’s holding of bitcoin, the well-known detractor of the digital asset, economist and investor Peter Schiff, has harshly criticized the company, ensuring that “the shares are bankrupt and the business model is a fraud,” as reported by CriptoNoticias.
These criticisms arise as a result of Strategy’s creation of the new reserve. The investor interprets this move as “the beginning of the end for MSTR,” stating that Michael Saylor, president of Strategy, was “forced to sell shares not to buy bitcoin, but to buy US dollars simply to fund MSTR’s interest and dividend obligations,” and questioned the viability of the company’s business model.
Michael Saylor’s conviction and CEO’s clarification
Finally, the possibility of managers selling bitcoin if stocks continue to fall is lowmainly due to the influence of Saylor.
Saylor himself “controls 42% of the voting shares” and “you would be hard-pressed to find anyone with greater conviction about the long-term value of bitcoin,” says Hougan.
Hougan urges focusing on other ecosystem concerns, such as the slow progress of market structure legislation or the future of other “small and poorly managed” digital asset treasuries. The analyst concludes firmly: “I wouldn’t worry about the impact of MSCI’s decision on the share price… There is no plausible short-term mechanism that would force you to sell your bitcoins. “It’s not going to happen.”
However, despite Hougan’s reassuring vision, MicroStrategy itself—through the mouth of its CEO, Phong Le—has acknowledged that, under extreme and very unlikely circumstances, it would be willing to sell a small portion of its bitcoin if it were strictly necessary to preserve the company’s solvency.
This means that, despite the hope of Hougan and other investors, there are certain points of failure that could trigger and cause Strategy to liquidate (even partially) its bitcoin holdings.