The Crypto industry should stop using popular markets for net asset value (MNAV) metrics because they are inaccurate and misleading to investors, says Greg Cipolaro, global research director at Nydig.
“The industry definition of “MNAV” must be removed and forgotten,” Cipolaro wrote in a note on Friday. “The original definition of ‘Mnav’s Bitcoin/digital asset value market capitalization is a useful metric for anything.”
He added that MNAV does not account for other finance companies that operate other businesses that purchase and hold enormous amounts of crypto, and does not adequately represent the company’s conversion obligations.
Traders and investors use MNAV, also known as the multiple of net asset value, to determine the value of a company, determine when to buy and sell stocks, and compare the value of Crypto Holdings with market capitalization.
Companies that hold more cryptos than they are worth are considered to trade at a discount, but their cryptos holdings are more valuable than trading at a premium.
Metrics are “misleading” investors
“At best, it’s misleading. At worst, it’s dishonest,” Chipolaro said.
According to Cipolaro, MNAV “doesn’t give credit” to cryptocurrency companies that have operations and assets besides crypto, such as the software sales of Strategy Inc., so there are two reasons for this.
“NAV (net asset value) is important in the game of increasing digital assets/stock, not enterprise value or heavenly market capitalization,” writes Cipolaro.
He said that if Crypto Treasury Company can create another important indicator for investors, yield, it can issue stocks at a premium of net asset value.
No obligations are recorded by using MNAV
Cipolaro argued that another reason for ceasing to use MNAV is that the metric uses “stopped stocks with unpaid shares.”
“When you peel off the convertible debt section, things get clear,” he wrote. “From an accounting and economic perspective, stocks are automatically incorrect, so take into account convertible liabilities automatically.”
Convertible debt holders “require cash rather than stock in exchange for stock,” Chipolalo said.
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“This is a much more troublesome responsibility for DAT (Digital Assets Treasury) than simply issuing shares,” he added. Convertible debt is “essentially a volatility harvest,” and cryptocurrency companies are “incentivized to maximize the volatility of (their) stocks.”
It’s hard to predict whether or not you’ll try, Semler mergers are a significant deal
Cipolaro’s memo comes after Strive Inc. announced on Monday it had acquired Semler Scientific.
In the transaction, Semler shareholders earned 21.05 shares of Strive for each share of Semler, and the shareholders explained, “stepping up with NAV/SHARE – “yield”, essentially.”
Cipolaro said the transaction “works for both, albeit after some work,” as Semler’s shareholders “value the above” the per share net asset value of both the existing shares formed in the merger and the new company.
Strive’s net asset value per share was $1.14 as of Friday, but the combined company’s NAV per share could be $1.32.
“It’s hard to predict when it comes to where this stock will ultimately trade,” Cipolaro said.
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