**Jim Chanos Critiques Michael Saylor’s Valuation Model for Strategy**
In a recent interview, renowned short-seller Jim Chanos criticized Michael Saylor, the executive chairman of Strategy, for employing a misleading valuation model for his cryptocurrency-focused firm. Chanos reiterated his stance on shorting Strategy’s shares while advocating for Bitcoin as a more favorable investment.
Chanos described Saylor as an effective salesman but dismissed his argument that the company’s value should not solely hinge on its Bitcoin assets, labeling it as “financial gibberish.” He illustrated his point with an analogy, stating, “This is akin to saying my house that rose in value from $450,000 to $500,000 last year is not worth $500,000. It’s worth $1.5 million because it is worth $500,000 plus a 20 multiple on the $50,000 increase. Of course, that’s absurd. But that is the claim he is making.”
Chanos also highlighted the limited market for preferred shares, which Saylor has promoted as a viable capital-raising avenue. He noted that this market is significantly smaller compared to common shares. Since 2024, Strategy, formerly known as MicroStrategy, has raised approximately $35 billion through various securities to finance Bitcoin acquisitions, including $33 billion in common shares and convertible bonds, alongside around $2 billion in recently issued preferred units.
Chanos pointed out the inherent risks associated with these preferred shares, quoting Saylor’s own words that suggest buying them would be irrational. He emphasized that the dividends are not guaranteed and that the shares are perpetual, meaning they do not have to be redeemed. “Who in their right mind institutionally would buy these preferreds?” Chanos questioned.
Currently, Chanos noted that Strategy’s market-adjusted net asset value (mNAV) stands at about 1.8 times its Bitcoin holdings, approaching its historical average, which he believes should be at 1. He had advised clients to engage in shorting when the mNAV was between 2.2 and 2.3 times. Saylor has previously indicated that if the premium decreases significantly, Strategy would consider repurchasing its common shares. Chanos stated, “I can assure you that if it trades below 1, I will have covered my shorts.”
In the same discussion, Chanos revisited his bearish position on Carvana Co., a used car retailer, which he initially established in 2022 and 2023. He expressed concern over the company’s reliance on subprime loans for approximately 70% of its operating income while noting a decline in revenues from car sales. Additionally, he flagged a notable increase in insider selling over the past two months as a potential red flag.
In summary, Chanos’s critique of Saylor’s valuation methods and his insights into the risks associated with Strategy’s financial instruments underscore the ongoing debate surrounding cryptocurrency investments and the broader implications for investors.
**FAQ**
**What is Jim Chanos’s stance on Michael Saylor’s valuation model?**
Jim Chanos criticizes Michael Saylor’s valuation model for Strategy, calling it misleading and advocating for shorting the company’s shares while recommending Bitcoin as a better investment.