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Cantor Fitzgerald, a bank with some political ties, is the ninth-biggest shareholder in Strategy, a bitcoin treasury company run by Michael Saylor.
On Thursday, Cantor analysts published a note about Strategy. They were not entirely positive:
Given the pullback in Bitcoin prices, combined with the mNAV compression that MSTR, as well as every other DAT, has seen, we believe it is prudent to adjust our valuation.
The rating — overweight, ie “buy”, is unchanged — and bitcoin’s down about a quarter from early October, so what level of adjustment would be appropriately prudent?
Roughly 60 per cent?
In total, we are lowering our 12-month PT to $229, down from $560.
Its analysts write:
In addition to the pullback, we believe there is a lot of fear-mongering out there, some of which is warranted and some of which we do not think is warranted.
In the public interest, we’ve reproduced their assessment of warranted and unwarranted fears below (their emphasis):
— MSTR Will Be Forced to Sell Their Bitcoin. MSTR has enough cash to fund dividends for 21 months, and its BTC position, worth $60.7bn, compares to debt notional of $8.2bn, none of which matures until 2028. Also, MSTR can still raise cash through equity facilities should it be needed. Absent a 90% pullback from current BTC levels, This Fear is Not Warranted.
— MSCI Index Removal. MSCI is considering whether to allow companies to be a part of an index if digital asset holdings exceed 50% of their total assets. If enacted, it could result in forced selling of MSTR, given how much of its float is held by passive index funds. This is Fear is Somewhat Warranted, but with a caveat that this is more a near-term flow headwind.
— MSTR is Not Buying the Dip. MSTR’s model is to acquire Bitcoin when it is accretive to do so, irrespective of Bitcoin’s price. There have been times in the past when it was not accretive to do so, and MSTR did not buy as much Bitcoin (see 2022). The environment we are in is a repeat of 2022. This Fear is Not Warranted.
— MSTR is This Cycle’s Black Swan. We have heard that MSTR could be a big black swan event should something happen related to its Bitcoin position. As we highlighted above, we have very little reason to believe that MSTR will be forced to sell any Bitcoin. This Fear is Not Warranted.
Cantor, unsurprisingly, say that one reason for their positive outlook on Strategy is a “long-term bullish” view on bitcoin itself:
Ultimately, we see this has a healthy pullback in crypto and Bitcoin. Our long-term thesis for Bitcoin becoming a global reserve asset remains unchanged. We continue to believe that we are not far away from Bitcoin overtaking Gold’s market cap. As of today, Bitcoin’s market cap is just 6.1% of Gold’s market cap. To overtake Gold, Bitcoin would need to be priced at $1,577,860.
To contextualise that prediction of a “not far away” 15x bitcoin price gain, here’s the recent history of Cantor’s share price targets for Strategy, compared with the company’s actual performance:
Is hope-mongering also a thing?
Further reading:
In a crisis, Strategy stacks dollars
