99% of these crypto-holding companies are likely to trade at a huge discount to their Net Asset Value (NAV) over 60% in 1 year due to a fundamental misalignment of incentives.
The executive compensation structure is often tied to the size of the company's crypto reserves (Assets Under Management). This motivates management to perpetually issue new shares to acquire more crypto, thereby increasing their AUM and potential compensation. The costs of running the business will be super high compared with Blackrock etfs.
Consequently, they are disincentivized from undertaking shareholder-friendly actions like selling crypto to fund share buybacks when a discount to NAV appears, as reducing the reserve base would directly decrease their future pay which is main goal they are doing this.
5M$ per year with 0 work. Incentives drive results.
Great asset managers always traded at a discount, even generating 15-17% IRRs. Companies that have massive XRP holdings, like SBI Holdings $TFG.AS $TFG.LN, trade at discounts.
MSTR, with their preferred scheme, will be fine trading at a premium because they will have the cheapest, most efficient type of leverage.
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