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senior short seller Jim Chanos hit Strategy Inc. (NASDAQ:MSTR) for touting the stability of perpetual preferred stocks on Wednesday as core stocks continued to take a hit.
Chanos reacts to Bloomberg interview with Strategy CEO Phong Le He explained the situation of the company Continuous Stretch Preferred Stock (NASDAQ:STRC) closing at $100 as “the story of the day” and “exactly how it was designed to perform.” Michael SaylorStrategy Chief Executive reiterated this point.
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But Chanos, who harshly criticized Strategy’s business model, was unconvinced.
“Can you imagine another CEO with stocks falling and saying, ‘The story of the day is that our junk debt is still trading at the same level,'” he said.
Can you imagine another CEO facing a decline in stocks saying: “The story of the day is that our junk debt is still trading at the same level!” $MSTR #LowBar https://t.co/yenqxuAgW9
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The strategy’s finances have indeed taken a hit for the following reasons: Bitcoin (CRYPTO: Bitcoin) ongoing crisis. The company’s Class A shares have lost more than 16% of their value since the beginning of the year and more than 60% in the past year.
The market capitalization of the strategy is $41.99 billion, while its Bitcoin assets are worth $48.17 billion. This means the stock is trading at a discount to its net asset value.
But company executives have consistently defended their business model.
Saylor said earlier this week that the Strategy would not sell Bitcoin even if it fell to $8,000, instead promising to refinance debt. He added that the company has 2.5 years of cash to cover dividends and debt without raising money.
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Chanos engaged in a strategic arbitrage trade by shorting MSTR shares while taking a long position in Bitcoin, which he saw as an unfair premium in the stock relative to his BTC holdings.
Chanos believed that the premium would decrease over time as the company continued to issue common stock. In November, his firm exited the hedged trade, stating that the trade was “largely over.”
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This article Jim Chanos Critiques Bitcoin Gaming Strategy for Bragging About the Stability of Preferred Stocks: ‘Can You Imagine Stock Falling?’ originally appeared Benzinga.com
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