The mNAV Trap: Why 70% Discounts Aren't Bargains

This piece is excerpted from today's BitcoinTreasuries.NET newsletter.

Why Treasury "Discounts" Are Actually Warning Signs

Companies trading at 0.50x to 0.90x mNAV look like compelling opportunities — theoretically offering Bitcoin at 10% to 50% discounts to spot prices. 

Strategy at 0.88x, Twenty One Capital at 0.81x, and Semler Scientific at 0.78x create what appears to be a pretty straightforward arbitrage opportunity. Investors buy discounted Bitcoin through equities, wait for the discount to compress toward premiums, then ultimately profit from the re-rating as management executes.

At first, the math seems simple. A company at 0.70x mNAV lets you buy $1 of Bitcoin for $0.70 — a 30% discount. If the discount compresses to 0.90x, you capture 28% gains independent of Bitcoin’s price movement. If it re-rates to a 1.20x premium, you’re up 71%.

Except 2025 proved these discounts aren’t temporary mispricings — they’re persistent valuations reflecting structural challenges that often deepen quicker than they resolve.

Times, indeed, are dire for the treasury trade, despite adding 30,000 Bitcoin to their balance sheets in December (although the bulk of that came from Strategy). Nearly 40% of Bitcoin treasuries now trade below 1.0x NAV, and more than 60% are underwater on their latest purchases. 

Understanding why requires abandoning the assumption that sub-1.0x mNAV represents market inefficiency.

The Governance Gap

Investors who see Strategy at 0.89x or Twenty One Capital at 0.81x might naturally ask: Why don’t shareholders force companies to narrow discounts through buybacks or capital returns? 

Not so fast. Corporate governance structures prevent minority shareholders from compelling asset sales regardless of how extreme a discount might become.

Management and boards control decisions, not dispersed equity holders. Even large institutional investors typically lack the voting power to force specific actions. This creates asymmetric risk. You’re betting management will voluntarily take actions that narrow spreads — buybacks at 0.70x to 0.80x, operational improvements, and, importantly, transparent communication.

But if management decides to continue issuing dilutive equity or pursuing value-destructive strategies, shareholders have no mechanism to force course correction. The “discount” persists because it reflects this governance reality.

Strategy is an example of how governance shapes outcomes at scale. The company trades at 0.89x despite $60 billion in Bitcoin and systematic accumulation. Shareholders accept this because Michael Saylor’s control enabled the treasury model, even if that same concentration eliminates shareholder recourse if strategies shift.

Dilution math

Companies at 0.70x to 0.90x mNAV face progressively difficult mathematics when raising capital. 

A company at 0.70x issuing $10 million must sell shares representing $14.3 million in Bitcoin NAV. Even buying Bitcoin with proceeds destroys value: shareholders gave up $14.3 million to acquire $10 million — a 30% loss.

This creates a doom loop where companies need capital to justify treasury strategies, but every sub-1.0x raise dilutes per-share holdings and validates market skepticism. Sophisticated investors might even sell into issuance announcements, driving mNAV lower. What begins at 0.80x becomes 0.70x after dilutive raises, then 0.60x as confidence evaporates.

Strategy at 0.88x demonstrates that scale provides partial immunity. The company continues issuing despite an 11% discount because institutional relationships and the company’s daily $2 billion volume create investor acceptance — or reluctance. A $500 million raise at 0.89x represents less than 1% treasury dilution.

Yet smaller treasuries attempting the same at 0.70x to 0.80x face 5-10% dilution per raise, quickly destroying per-share value.

Don't guess which discounts will compress — track dilution in real-time on our live dashboard. Monitor every capital raise, see which companies are destroying per-share value through sub-1.0x issuance, and identify which treasuries maintain disciplined capital allocation. Know whether your holdings are compressing discounts or widening them before quarterly reports confirm what the market already knew.

It’s a trap

Meanwhile, Bitcoin rallies create counterintuitive problems for discounted treasuries. 

If Bitcoin rises 10% but a stock only rises 5%, mNAV actually falls despite both appreciating. Let’s say a company holding 10,000 BTC sees holdings increase from $900 million to $990 million (10% gain) when Bitcoin rallies to $99,000 from $90,000.

But if the stock only rises 5%, then the market cap increases to $756 million from $720 million. Basically, mNAV drops to 0.76x from 0.80x — the discount widened from 20% to 24% despite the rally.

As premiums compress toward parity or flip to discounts, companies run into challenges when justifying the issuance of new shares that are often economically dilutive on a per-NAV basis.

For mNAV to improve during rallies, stocks must outperform Bitcoin itself — requiring investor confidence that companies can accumulate without destroying value. Many at 0.70x to 0.90x lost that confidence through buying Bitcoin above $100,000, PIPE financings that crushed shareholders, or failed communication.

When Bitcoin surges, Strategy's stock typically outperforms as investors fund additional accumulation. Weaker treasuries see stocks lag, compressing mNAVs further and eliminating their ability to raise capital accretively. The rally that should help actually accelerates bifurcation.

While 0.50x to 0.90x represents genuine ambiguity, the sub-0.50x cohort shows where discounts end up when credibility evaporates. CIMG at 0.26x, NAKA at 0.47x, Cango at 0.40x aren’t mispricings — they’re markets pricing high probabilities of an eventual Bitcoin liquidation. These extreme discounts warn what happens when companies in the 0.70x-0.90x range execute poorly.

Two roads

The sector is quickly splitting into winners and losers with a shrinking middle ground. 

Strategy at 0.88x issues hundreds of millions and finds buyers because $60 billion creates pricing power that $100 to $500 million holdings cannot replicate.

Discount investing requires knowing which companies can execute their way back to premiums versus which are sliding toward irrelevance. Our monthly reports track capital raising patterns, mNAV trajectories, and management execution across all 100+ treasuries—spot which 0.70x-0.90x companies are rebuilding credibility versus which are drifting toward the sub-0.50x point of no return.

Meanwhile, treasuries in the 0.50x-0.90x range face binary outcomes. Either execute flawlessly to rebuild confidence and compress discounts toward 1.0x, or slide toward sub-0.50x where recovery becomes increasingly more challenging. Twenty One, led by Jack Mallers, an entrepreneur quite adept at building cash-flow businesses, at 0.81x has credible management pursuing the goal of Bitcoin businesses that generate revenue. 

Building operational businesses — neo banks, lending platforms, revenue generators — could justify valuations above NAV but simultaneously contradict the “pure-play treasury” pitch. Pivoting from “we’re a treasury” to “we’re building a business” may be necessary, yet it also could represent an admission that the previous model failed.

Shareholders remain structurally dependent on management decisions they cannot control, capital raising that often destroys value, and sentiment that may never return. For all but a handful with scale and institutional support, trading below 1.0x doesn’t necessarily represent an opportunity but might instead be a stark warning that the pure-play model is failing in real-time.