Strategy (NASDAQ: MSTR) Executive Chairman Michael Saylor pushed back hard against dilution concerns during a digital credit strategy panel at BTC Prague on Friday.
Saylor argued that equity issuances widely characterized as dilutive actually become “massively accretive” when liabilities and asset purchases are correctly factored into the calculation.
“The idea that selling equity is dilutive is a misnomer,” Saylor said, defending the company’s approach to net asset value and capital structure management.
He explained that the company’s mNAV metric is calculated as its stock market capitalization plus net debt and “nominal” preferred share capital, while acknowledging the metric carries inherent limitations.
Saylor directed investors to Strategy’s 8-K and 10-Q filings, noting they carry disclaimers that mNAV “doesn’t show the full financial picture,” and urged consideration of multiple metrics before making financial decisions.
He outlined two core conditions required to determine whether an equity-for-asset swap leads to dilution or accretion: the use of the raised funds and the level of the post-liability transaction price relative to net assets per share.
“It turns out that a billion-dollar company that issues 100 million of equity has not diluted the shareholders; it simply expanded the capital structure from 1 billion to 1.1 billion,” Saylor said, adding that shareholders retain the same assets per share.
Saylor contrasted this framework with what he described as genuinely dilutive transactions, such as overpaying for an intangible asset later written down, saying: “If I bought a Picasso for 100 million and it was only worth 25 million, that might be dilution.”
The remarks came in direct response to questioning from Twenty One Capital (XXI) CEO Jack Mallers, who challenged Saylor on whether treating out-of-the-money convertible securities as equity inflates the mNAV calculation in ways that are “more beneficial to the company.”
Mallers pointed to investor characterizations of Alphabet’s (GOOGL) recent preferred and common stock issuances as dilutive, asking whether the same logic should apply to Strategy’s capital raises.
“If I start a company, I raise 100 grand for 10% of the business, I would assume that’s dilutive, because now I own 90% of the business,” Mallers said, pressing Saylor on what would actually constitute dilution under his framework.
Saylor responded by tying the dilution question directly to capital deployment, arguing that investing raised equity into depreciating assets without sufficient cash flow offsets would meet the definition of dilution.
“If you sell a billion dollars of equity to invest in semiconductors and Nvidia chips that have a useful life of four years, then yeah, it’s probably going to be dilutive, unless you can prove the business… is going to generate cash flows that offset that dilution,” he said.
Saylor also pushed back against the characterization of preferred equity instruments, such as Strategy’s Short Duration High Yield Credit Stretch, as balance sheet liabilities, arguing they only become liabilities “in liquidation,” an event he called “impossible” absent maturing debt.
He conceded that no single agreed-upon metric currently exists for Bitcoin treasury companies, saying: “These business models are embryonic in their first year. I don’t think there’s a single metric, even though there are some that are useful.”
Strategy remains the largest corporate Bitcoin treasury holder, with Bitcoin trading at $63,877 at the time of the panel, up 0.4% over the prior 24 hours, though still down roughly 27% year to date.
MSTR shares closed up more than 3% on Friday, while retail sentiment on Stocktwits remained in the “bearish” zone with chatter at normal levels.
