Author: Murphy
On October 15, MSCI formally approved new rules to exclude non-operating companies that do not meet the standards from its global investable market indexes. In the earlier simulated screening, MSTR had already been placed on the proposed removal list. The final result will be announced on November 11 and take effect after the close on November 30.
After the news was announced, MSTR fell sharply. Some readers asked: how should one choose between BTC and MSTR?
To answer this question, we first need to clarify the underlying logic.
First, look at the theoretical selling pressure: current estimates suggest that funds tracking MSCI-related indexes hold about 13 million shares of MSTR, worth nearly $1.8 billion based on the October 16 closing price, equivalent to 60% of the average daily trading volume over the prior 30 days.
This potential selling is indeed not small, but it is also not a scale the market is completely unable to absorb.
If MSTR is indeed removed from the index, it will certainly lose some "passive demand," but what deserves more attention is whether there will still be enough "active demand" in the future.
This leads to another question:
Now that BTC spot ETFs are already quite mature, if a company simply holds BTC for the long term, why would investors not buy the ETF directly instead of bearing additional risks such as management fees, financing costs, and share dilution?
Therefore, Strategy must prove that it can not only benefit from BTC's rise, but also, through capital operations, continuously increase the net BTC entitlement per share owned by common shareholders.
Is this possible? Of course it is!
Here is a simple example:
Suppose MSTR holds 100 BTC and has issued 100 shares in total, so each share corresponds to 1 BTC. If the market is willing to assign a 1.5x net asset valuation (i.e., mNAV = 1.5), the company can raise funds equivalent to 30 BTC by issuing 20 additional shares.
Using that money to continue buying BTC, the company's holdings increase to 130 BTC and the total share count becomes 120 shares. At this point, the BTC corresponding to each share rises from 1 BTC to 1.083 BTC, an increase of 8.33%. Even if the BTC price does not change, the original shareholders' "BTC entitlement per share" has increased.
**This is the core of MSTR's financing flywheel: using stock premium financing to make BTC reserves grow faster than the share base.** If this growth can be sustained, it will naturally have the opportunity to attract more active capital, thereby supporting the valuation premium and forming a positive cycle.
But note that there are two preconditions here:
1. The market must be willing to assign a sufficient premium (mNAV).
2. An increase in net BTC entitlement per share does not mean MSTR's stock price will necessarily outperform BTC.
Because the stock price depends not only on the BTC price and net entitlement per share, but also on how much valuation premium the market is willing to assign. If mNAV contracts sharply, it may offset the gains brought by the first two factors.
For this reason, the message Saylor most wants to convey to the market now is that "we can create returns beyond directly holding BTC through capital management."
But merely saying so is useless; it must be proven with facts. Capital has a keen sense of smell, and as long as there is indeed "profit to be made," active demand will keep flowing in.
🚩 In other words, MSTR's investment return will depend on three variables:
BTC price, net BTC entitlement per share (the amount of coin per share after deducting claims such as debt and preferred stock), and mNAV (the premium the market is willing to pay for the net BTC asset value corresponding to each MSTR share).
From this, we can derive three possible future paths for MSTR**:**
Path 1: BTC rises and mNAV expands in tandem
BTC enters a strong bull market, the market becomes optimistic about MSTR's financing capacity again, and net BTC entitlement per share continues to increase. In this case, MSTR not only benefits from BTC's rise but also gains from the expansion of the valuation premium, and has the opportunity to clearly outperform BTC.
Path 2: BTC continues to rise, but mNAV remains low
The BTC price rises, but more and more investment demand is absorbed by spot ETFs, making it difficult for MSTR to obtain a higher valuation. In this case, even if mNAV remains near 1x, MSTR may still outperform BTC thanks to the amplification effect of its capital structure and the growth of net BTC entitlement per share. Its excess return, however, would come more from asset appreciation.
Path 3: BTC rises, but mNAV continues to compress
Even if BTC rises, MSTR may still be affected by financing costs, share dilution, and changes in market preference, causing its valuation to keep declining. In this case, if the growth of net BTC entitlement per share is not enough to offset the contraction of mNAV, then MSTR may underperform BTC.
Finally, let us look at the current valuation.
On July 23 this year, Strategy revised the mNAV calculation methodology. According to the new data: it once fell to 1.01x on August 21, reached about 1.20x in early October, and stood at 1.08x as of the October 16 close.
Objectively speaking, under the new methodology, 1.08x means that MSTR's current valuation premium is relatively limited. Of course, a low premium does not necessarily mean it is undervalued.
In the future, if Strategy can restore strong financing capacity and continuously increase net BTC entitlement per share, the market may still be willing to assign a higher valuation again. Conversely, if the flywheel fails, mNAV may not necessarily return to historical highs as BTC rises.
Therefore, the key to choosing between BTC and MSTR lies in which path you believe in more.
If you are optimistic about Path 1 or Path 2, MSTR will be relatively more attractive (for Path 2, you need to judge how much MSTR's net entitlement per share can grow); if it is Path 3, then directly holding BTC or a spot ETF is the better choice.
Ultimately, buying BTC is a bet on the long-term value of BTC itself; buying MSTR, in addition to being bullish on BTC, adds another layer of betting on Saylor's capital management ability.