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NYDIG has called on the crypto industry to abandon the widely used market-to-net asset value (mNAV) metric for crypto treasury companies, arguing that the method misrepresents investor risk and company worth. In a research note released Friday, Greg Cipolaro, NYDIG’s global head of research, said the metric should be “deleted and forgotten.”
The call comes as Strive Asset Management finalized the first-ever acquisition between two bitcoin treasury companies, acquiring Semler Scientific in an all-stock deal. The merged firm now controls more than 10,900 BTC.
The mNAV model calculates a company’s market capitalization relative to the value of its crypto holdings. Companies trading below their holdings are considered “discounted,” while those above are seen as “premium.”
However, Cipolaro stressed that the method ignores crucial realities of crypto treasury companies. For example, firms like MicroStrategy generate significant revenue from operating businesses beyond their bitcoin reserves. The mNAV method fails to capture these activities, offering an incomplete view of company value.
“Valuations based solely on crypto holdings overlook the wider business operations that define many firms,” — Greg Cipolaro, NYDIG.
Additionally, the metric excludes non-crypto assets these companies may hold, further skewing assessments. Investors relying solely on mNAV risk undervaluing firms with diverse assets or overvaluing those with none.
A second weakness lies in how mNAV treats convertible debt. The metric often counts unconverted convertible debt as equity by including “assumed shares outstanding.”
Cipolaro explained that this approach misrepresents both economic and accounting realities. Holders of convertible debt usually demand cash repayments rather than equity, making it a heavier liability.
“Accounting for convertible debt automatically as equity is not correct from an accounting or economic perspective,” — Greg Cipolaro, NYDIG.
This dynamic also incentivizes crypto treasury companies to maximize equity volatility, exposing investors to risks that mNAV fails to reflect accurately.
The debate over valuation comes as the landscape of crypto treasury companies shifts. Publicly traded firms collectively hold more than 1 million BTC, with many trading below their mNAV values. This has created opportunities for mergers and acquisitions.
The Strive-Semler merger exemplifies this trend. By consolidating their bitcoin treasuries, the combined firm increased its net asset value per share, which some investors view as a form of yield generation.
Semler Scientific, a medical device maker, had traded below its crypto holdings since August, highlighting the misalignment between market pricing and asset value. The acquisition reflects how companies are navigating these discrepancies.
The debate around valuation underscores a broader question for crypto treasury companies: how should investors measure their worth? While mNAV remains common, NYDIG’s critique signals a push toward more comprehensive valuation standards that account for operating businesses, assets, and liabilities.
As more mergers emerge in the bitcoin treasury space, the industry’s reliance on accurate and fair valuation methods will become even more critical.
