Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
Chanos Critiques Strategy Inc.
Jim Chanos, a seasoned short seller, criticized Strategy Inc. (NASDAQ:MSTR) for promoting the reliability of its perpetual preferred shares on Wednesday, even as its primary stock continues to decline.
Response to CEO’s Claims
Chanos’s comments came after a Bloomberg interview where Strategy’s CEO, Phong Le, highlighted the firm’s Perpetual Stretch Preferred Stock (NASDAQ:STRC) closing at $100, labeling it as the “story of the day.” Michael Saylor, the Executive Chairman of Strategy, supported this notion.
Chanos Skeptical of Business Model
Nevertheless, Chanos, known for his critical stance on Strategy’s business structure, remained unconvinced. He questioned, “Can you imagine any other CEO with a plummeting stock saying, ‘The story of the day is that our junk debt is still trading at par’?”
Strategy’s Financial Struggles
Strategy has faced significant financial challenges, largely due to the decline of Bitcoin (CRYPTO: BTC). Its Class A shares have dropped over 16% this year and more than 60% over the past year.
Valuation in Context
Currently, Strategy is valued at $41.99 billion, while its Bitcoin assets are worth around $48.17 billion, indicating that the stock is trading at a discount to its net asset value.
Company’s Stance on Bitcoin
Despite the downturn, executives at Strategy have stood firm in defending their business model. Saylor stated earlier in the week that the company would not sell its Bitcoin, even if it fell to $8,000, pledging instead to refinance its debt.
Chanos’s Investment Strategy
Chanos gained attention for his strategy of shorting the MSTR stock while investing in Bitcoin, believing the stock’s premium would diminish as the company issued more equity. In November, his firm closed out its hedged trade, stating that the strategy had “largely played out.”
