MicroStrategy's Capital Game: How Does Leverage Drive High Premiums?

Author: Will Owens, Galaxy

Compiled by: AididiaoJP, Foresight News

Original Title: The High Premium Mystery of MicroStrategy: The "Perpetual Motion Machine" of Leverage Effects and Capital Games

Companies that include Bitcoin on their balance sheets have become one of the most talked-about narratives in the public market for 2025. Although investors have various direct ways to gain exposure to Bitcoin (ETFs, spot Bitcoin, wrapped Bitcoin, futures contracts, etc.), many still choose to gain Bitcoin risk exposure by purchasing shares of Bitcoin reserve companies that are trading at a significant premium to the Bitcoin net asset value (NAV).

This premium refers to the difference between a company's stock price and the value of its Bitcoin holdings per share. For example, if a company holds Bitcoin valued at $100 million and has 10 million shares outstanding, its per-share Bitcoin NAV would be $10. If the stock price is $17.5, then the premium rate would be 75%. In this context, mNAV (i.e., the multiple of net asset value) reflects how many times the stock price is compared to the Bitcoin NAV, while the premium rate is the percentage of mNAV minus 1.

Ordinary investors may wonder: why can the valuations of such companies far exceed their Bitcoin assets themselves?

Leverage Effect and Capital Acquisition Ability

The most important reason for the stock price of Bitcoin reserve companies to exist at a premium over their Bitcoin assets may be that they can leverage operations through public capital markets. These companies can raise funds by issuing bonds and stocks to increase their Bitcoin holdings. Essentially, they act as high-β proxy instruments for Bitcoin, amplifying Bitcoin's sensitivity to market fluctuations.

The most commonly used and effective means in this strategy is the "market price issuance" ( ATM ) stock issuance plan. This mechanism allows the company to gradually issue stocks at the current stock price, and it has minimal market impact. When the stock price has a premium compared to Bitcoin NAV, the amount of Bitcoin that can be purchased for every $1 raised through the ATM plan will exceed the dilution of Bitcoin holdings per share caused by the issuance. This creates a "per share Bitcoin holding appreciation cycle," continuously amplifying Bitcoin exposure.

Strategy (formerly MicroStrategy) is the best example of this strategy. Since 2020, the company has raised billions of dollars through convertible bond issuance and secondary equity fundraising. As of June 30, Strategy holds 597,325 bitcoins (approximately 2.84% of the circulating supply).

This type of financing tool is only applicable to listed companies, allowing them to continuously increase their holdings of Bitcoin. This not only amplifies the exposure to Bitcoin but also creates a compound narrative effect, where each successful fundraising and increase in Bitcoin holdings reinforces investors' confidence in this model. Therefore, investors buying MSTR stock are not just purchasing Bitcoin, but are buying "the ability to continuously increase their Bitcoin holdings in the future."

What is the extent of the premium?

The table below compares the premium situation of some Bitcoin reserve companies. Strategy is the publicly listed company that holds the most Bitcoin globally and is also the most well-known representative in this field. Metaplanet is the most aggressive Bitcoin accumulator (its transparency advantages will be detailed later). Semler Scientific entered this trend relatively early and began purchasing Bitcoin last year. Meanwhile, The Blockchain Group from France indicates that this trend is spreading from the United States to the rest of the world.

The NAV premium rate of some Bitcoin reserve companies (as of June 30; assuming a Bitcoin price of $107,000):

Although the premium rate of Strategy is relatively mild (about 75%), the premium rates of smaller companies such as The Blockchain Group (217%) and Metaplanet (384%) are significantly higher. These valuations indicate that market pricing reflects not only the growth potential of Bitcoin itself but also a comprehensive consideration of capital market accessibility, speculative space, and narrative value.

Bitcoin Yield: Key Indicators Behind the Premium

One of the core indicators driving the premium on these companies' stocks is the "Bitcoin Yield." This metric measures the growth of the Bitcoin holdings per share of the company over a specific period, reflecting its efficiency in increasing Bitcoin holdings through fundraising capabilities without causing excessive equity dilution. Among them, Metaplanet is known for its transparency, with its official website providing [real-time Bitcoin data dashboard], dynamically updating Bitcoin holdings, Bitcoin holdings per share, and Bitcoin yield.

Source: Metaplanet Analytics ()

Metaplanet has made its reserve proof public, while other companies in the industry have yet to adopt this practice. For example, Strategy has not implemented any on-chain verification mechanisms to prove its Bitcoin holdings. At the "Bitcoin 2025" conference in Las Vegas, [Executive Chairman Michael Saylor explicitly opposed] public reserve proof, stating that this move would become a "bad idea" due to security risks: "This would undermine the security of issuers, custodians, exchanges, and investors." This viewpoint is controversial, as on-chain reserve proof only requires public keys or addresses, not private keys or signature data. Since Bitcoin's security model is based on the principle of "public keys can be safely shared," publicly disclosing a wallet address does not jeopardize asset security (this is precisely the characteristic of the Bitcoin network). On-chain reserve proof provides investors with a direct way to verify the authenticity of a company's Bitcoin holdings.

What happens if the premium disappears?

The high valuation of Bitcoin reserve companies still exists in a bull market environment characterized by rising Bitcoin prices and enthusiastic retail investor participation. No Bitcoin reserve company has had its stock price consistently below NAV. The premise of this business model is that a premium continues to exist. As [VanEck Analyst Matthew Sigel pointed out]: "When the stock price falls to NAV, equity dilution will no longer have strategic significance, but will turn into value extraction." This statement directly addresses the core vulnerability of the model; the ATM stock issuance plan (the capital engine of these companies) essentially relies on stock price premiums. When the stock price is above the per-share Bitcoin value, equity fundraising can realize an appreciation of the Bitcoin holdings per share; however, when the stock price falls near NAV, equity dilution will weaken rather than enhance shareholders' Bitcoin exposure.

This model relies on a self-reinforcing loop:

1. Stock price premium supports fundraising ability
2. The funds raised are used to increase holdings of Bitcoin.
3. Bitcoin accumulation strengthens the company's narrative
4. Narrative value maintains stock price premium

If the premium disappears, the cycle will be broken: financing costs will rise, Bitcoin accumulation will slow down, and narrative value will weaken. Currently, Bitcoin reserve companies still enjoy advantages in capital market access and investor enthusiasm, but their future development will depend on financial discipline, transparency, and the ability to "increase the per-share Bitcoin holdings" (rather than simply piling up the total amount of Bitcoin). The "option value" that gives these stocks attractiveness in a bull market may quickly turn into a burden in a bear market.