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Veteran short seller Jim Chanos slammed Strategy Inc. (NASDAQ: MSTR ) for announcing the stability of its perpetual preferred shares on Wednesday, even as its flagship stock continues to get hammered.
Chanos reacted to a Bloomberg interview where the CEO of Strategy Phong No described that of the firm Perpetual Stretch Preferred Stock (NASDAQ:STRC) closes at $100 as the “story of the day” and “exactly how it was engineered to perform.” Michael SaylorExecutive President of Strategy, reiterated the point.
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However, Chanos, a strong critic of Strategy’s business model, was not convinced.
“You can imagine any other CEO with a stock going and saying, ‘The story of the day is that our junk debt is still trading the same way,'” he said.
Can you imagine any other CEO with a stock going and saying, “The story of the day is that our junk debt is still trading at par!” $MSTR #LowBar https://t.co/yenqxuAgW9
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The Strategy’s finances have indeed been hammered because Bitcoin (CRYPTO: BTC) continued decline. The company’s Class A shares are down more than 16% year-to-date and more than 60% in the past year.
Strategy’s market valuation is $41.99 billion, while its Bitcoin holdings are valued at $48.17 billion. This means that the stock is trading at a discount to its net asset value.
However, company executives have consistently defended their business model.
Saylor said earlier this week that the Strategy will not sell Bitcoin even if it crashes to $8,000, promising to refinance debt instead. He added that the company has 2.5 years of cash to cover dividends and debt without raising money.
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Chanos made headlines for his strategic arbitrage trade of shorting MSTR stock while going long on Bitcoin at what he viewed as an unjustified premium on the stock relative to his BTC holdings.
Chanos believed the premium would reduce over time as the company continued to issue common equity. In November, his firm exited its hedged trade, noting that the trade was “largely played out.”
Photo Courtesy: Who is Danny at Shutterstock.com
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