The crypto industry’s widely used mMAV metric needs to be forgotten, as its misleading investors by not giving them the full picture, NYDIG’s Greg Cipolaro argues.
The crypto industry should stop using the popular market to net asset value metric as it’s inaccurate and misleading to investors, says NYDIG’s global head of research, Greg Cipolaro.in a note on Friday.
“‘Market cap to bitcoin/digital asset value,’ the original definition of mNAV, is a useful metric for nothing.” He added that mNAV doesn’t account for treasury companies that conduct other business outside of buying and holding vast amounts of crypto, and doesn’t properly represent a firms convertible debt. Traders and investors use mNAV, sometimes also called multiple of net asset value, to determine the value of companies and when toCompanies that hold more crypto than they’re worth are considered toMetric is “misleading” investorsThe reason, according to Cipolaro, is two-fold, as mNAV “doesn’t give credit” to cryptothat have operations and assets outside of crypto, such as Strategy Inc.’s software sales. Medical device turned Bitcoin treasury firm Semler Scientific has traded at a discount to its crypto holdings since August amid a surge of competition. Source: “NAV is what matters in the game of increasing digital assets/share, not enterprise value or heaven forbid market cap,” Cipolaro wrote., another key metric for investors, it can issue equity at a premium to its net asset value.Cipolaro argued another reason to stop using mNAV is that the metric uses “assumed shares outstanding,” which likely includes convertible debt such as loan deals that are yet to be converted. “When you peel back the convertible debt part, things unravel,” he wrote. “Accounting for convertible debt automatically as equity is not correct from an accounting or economic perspective.”Related: “This is a much more onerous liability for a DAT than simply issuing shares,” he added, as convertible debt is “essentially volatility harvesting” and crypto treasury companies are “incentivized to maximize equity volatility.”announced it acquiredThe deal sees Semler shareholders get 21.05 shares of Strive for every one share of Semler, while Strive shareholders “get a step up in the NAV/share — ‘yield,’ essentially,” he explained. Cipolaro said the deal “works out for both, albeit after some work,” as Semler shareholders “are getting their stock valued above” the net asset value per share of both the existing stock and the new company formed in the merger. Strive’s net asset value per share was $1.14 as of Friday, while the merged company is likely to have a NAV per share of $1.32. “As for where this stock ultimately trades, that’s harder to predict,” said Cipolaro.”It will ultimately depend on the premium or discount to NAV that investors put on the stock.”
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