The key performance indicators (“KPI”) the company has made up out of thin air, which in no way, shape or form follows GAAP guidelines, are a joke and meaningless. The mNAV is manipulated in such a fashion as to make the Bitcoin NAV premium appear much lower than it actually is. This I'm sure is done to make the company appear less leveraged and more undervalued.
When calculating mNAV and reporting Enterprise Value (EV), MSTR uses the principal amounts of its debt — not the market values. And it excludes the notional value of preferred shares. This is clearly indicated in their methodology disclosures and runs afoul of GAAP methodology.
When calculating their market cap, they fail to use the assumed diluted shares outstanding, as if no more employee options will vest ever or the convertibles will not convert to shares even if they are already in the money.
Enterprise Value (EV) is typically calculated using the market value of debt — not just the face value or notional principal owed. And mNAV should be calculated in the same way. This gives a more accurate picture of what it would cost to acquire or replace the company’s capital structure today, which is what EV is meant to represent.
By using notional debt, under counting common shares and excluding the preferreds from the metric, MSTR's reported mNAV is artificially suppressed, making the stock appear to trade closer to Bitcoin NAV than it would in a full market-based assessment. This gives investors a false reading and makes it appear to be trading lower than a 2x mNAV premium. This is very misleading, if not downright shady accounting.
Using the GAAP approved method to calculate Enterprise Value, MSTR currently clocks in at $131.5 billion, $16.8 billion higher than what they are reporting. That equals an mNAV of 2.16 vs the 1.87 they are showing.
But that's only the half of it... Each quarter they should be accruing interest on debt, accrued dividends and accrued CAMT IRS liabilities on BTC gains. That could add up to almost $1 billion per quarter if they were properly accruing, because these debts must be paid regardless of what else happens. That gives an Enterprise Value of $135.5 billion.
That means the real-world mNav premium is 2.22x the value of their BTC holdings, with BTC at $106,000.
And if you think I'm inflating that number, then you don't understand how another company would compute the actual cost to purchase MSTR at $374.47 per share, which is zero premium above Friday's close.
BTC Gain, BTC Yield and BTC $ Gain are all inflated to look better by these same omissions. Again, the lawsuit writes itself.
When a company has to play smoke and mirrors with their numbers, that is a gigantic red flag. Good balance sheets sell themselves. They don't need some fake or made up phony metric to draw your attention away from the real story. Do your own research. Don't buy the hype and fall for the okie-doke this company is pushing.