Latest news with #Chanos
Yahoo
5 days ago
- Business
- Yahoo
Wall Street Legend Bets Against Strategy -- Says Bitcoin Investors Are Paying Double
Jim Chanos (Trades, Portfolio) is backwith a trade that's turning heads. The famed short-seller behind the Enron call is now targeting Strategy (NASDAQ:MSTR), not for its crypto exposure, but because of it. On a recent podcast, Chanos laid out what he believes is one of the cleanest arbitrage setups he's seen in years: short MSTR, long Bitcoin (BTC-USD). His reasoning? At current prices, buying the stock is like paying $220,000 for Bitcoin that trades near $110,000. That's because MicroStrategy's share price still reflects a steep premium over the company's actual Bitcoin holdings, even after the spread has started to narrow. Warning! GuruFocus has detected 8 Warning Signs with MSTR. It's not just Chanos. Hedge funds have been circling this trade since MicroStrategy transformed itself into a kind of Bitcoin-holding company. Fueled by Michael Saylor's capital-raising spree, the firm has used equity and convertible debt to amass billions in BTC. Retail investors followed, helping push the stock far beyond its net asset value. While some bulls argue that leverage and zero-fee exposure justify the premium, skeptics are betting that rising dilution and tighter spreads will eventually bring the valuation back to earth. According to Bloomberg data, when factoring in dilution and stripping out the firm's legacy software business, MSTR is still trading at nearly double the value of its underlying crypto assets. Not everyone is jumping in. Firms like Kerrisdale promoted the trade in early 2024 but have since stepped away, citing timing challenges. TD Cowen analyst Lance Vitanza, meanwhile, believes the premium might persistthanks to Bitcoin-per-share growth and MicroStrategy's unique structure. For now, the short side is cheap to maintain, with borrow costs still low and liquidity deep. But risks remain: unexpected corporate shifts, volatile BTC moves, or changes in short dynamics could all shake up the math. Chanos remains focused on the long game, saying the spread could compress meaningfully over timebut even he acknowledges this one's better suited for hedge funds than personal portfolios. This article first appeared on GuruFocus. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
5 days ago
- Business
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Jim Chanos Sees Big Short in Saylor's Strategy, But Others Aren't So Sure
(Bloomberg) -- Buy Bitcoin, short Michael Saylor's Strategy. That's the latest call from legendary short-seller Jim Chanos, who sees the arbitrage play as a no-brainer. Others aren't so sure. ICE Moves to DNA-Test Families Targeted for Deportation with New Contract Next Stop: Rancho Cucamonga! The Global Struggle to Build Safer Cars US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn NYC Residents Want Safer Streets, Cheaper Housing, Survey Says The trade has long been on the radar of Wall Street hedge funds, drawn to the premium Strategy's shares enjoy relative to the value of the company's Bitcoin holdings — a gap that topped 200% last year. The discrepancy stems from Saylor's self-styled Bitcoin treasury strategy, through which he has tapped capital markets to buy more and more of the world's biggest cryptocurrency, in turn attracting billions of dollars from retail investors. In the eyes of many arbitrage specialists, the yawning spread is unsustainable — in fact, it's already begun to narrow, but they see further opportunity to profit. 'I haven't seen an arbitrage like this in this size in years, years and years,' Chanos said during a recent interview on the Risk and Return podcast, referencing the trade he disclosed on CNBC in early May. It's one of a series of sophisticated trading strategies around the complex capital structure of Saylor's firm, formerly known as MicroStrategy, and the growing ecosystem of crypto investment vehicles. Some market players see parallels to the once-popular 'widow-maker' pair trade involving Bitcoin and the Grayscale Bitcoin Trust, but with fewer constraints. There are still risks involved, though. Chanos, known for his prescient bet against Enron Corp. 20 years ago, emphasized that his current favored trade isn't a wager against Bitcoin or Strategy, but rather a mirror of Saylor's own playbook: selling equity and raising capital to buy more digital assets. The core opportunity, he said, lies in the divergence between Strategy's market price and the company's Bitcoin-adjusted book value. 'The fact of the matter is, this is a Bitcoin holding company,' Chanos said on the podcast explaining the premium dislocation. Buying Strategy shares at their current price of around $400, he said, is effectively equivalent to buying Bitcoin at about two times its value — 'paying around $220,000 for Bitcoin that trades at $110,000. But the company is doing everything it can to close that spread, which is great — there's a catalyst.' A growing number of copycats have also started pursuing similar crypto-treasury strategies, further shifting supply-demand dynamics, Chanos added on the podcast. The investor didn't respond to a request for comment, nor did representatives for Strategy. On a basic level, the premium as measured by Strategy's market capitalization relative to its Bitcoin holding value stands at 70%, according to Bloomberg calculations. Taken a step further — adding in other dilutive securities the company has employed in its massive capital raising in the last year and removing the value of Strategy's legacy software business — and investors are paying a premium for the stock that's nearly double the value of the firm's Bitcoin holdings. If Bitcoin rises but Strategy's premium compresses — or if share dilution outpaces gains— Chanos' trade would turn a profit. Yet like any arbitrage, the spread may widen before it narrows, as seen in the GBTC trade around 2021. Premium Warranted? Some analysts and retail believers argue that a substantial premium in Saylor's firm is warranted, placing it in a unique category. First of all, Strategy offers investors exposure to a zero-fee Bitcoin vehicle, offering an edge over comparable exchange-traded funds. What's more, the company demonstrated an ability to use leverage to grow Bitcoin per share over time, an added value for investors buying the stock instead of the ETFs or underlying crypto, according to TD Cowen analyst Lance Vitanza, who believes Strategy's Bitcoin per share will increase by 26% this year. 'I expect MSTR will trade around its recent historical premium, either side of 100%, for the foreseeable future,' he said, referring to Strategy's ticker. Timing — when to enter and exit the wager— remains a key variable around returns, given the spread's ongoing volatility. In March 2024, Kerrisdale Capital Management promoted a similar pair trade in a letter titled 'Know When to HODL, Know When to FODL,' in a nod to crypto lingo. The firm still stands by its thesis, but 'I don't have the trade on now,' said founder Sahm Adrangi. 'When we put out the report, the premium was much higher and it made sense at that point. Is it going to zero? I don't really know,' he said, declining to specify when the firm closed the position. To Chanos and other fans of the trade, Strategy's ample market capitalization — now over $100 billion — and deep float make it relatively easy to maintain the short leg. For hedge funds, new borrows are being priced at a fee of 0.3 percentage point, according to data from S3 Partners. This helps to keep the cost of carry manageable while waiting for the spread to narrow. The inexpensive terms are likely to persist, given the stock's roughly 250 million free floating shares, and that only 11% is currently sold short, said Sam Pierson, director of research at the firm. But that doesn't eliminate the risk that the borrowing dynamics could change — potentially becoming more expensive and less stable, especially for individual investors, said Victor Haghani, chief investment officer of Elm Wealth and founding partner of Long Term Capital Management. There's a lot of demand for borrowing shares related to convertible arbitrage wagers and leveraged short ETFs, he added. Another source of uncertainty is the potential for an unexpected corporate event, such as a merger that might shift the company's fundamental business, complicating premium estimates and muddying the existing trade. 'Say if all of a sudden Strategy is part of something that is twice as big — then when you try to look at the valuation relative to the Bitcoin it holds, you can't really say that much anymore because now there's a business with revenues,' Haghani said. Still, he is confident of the spread's long-term convergence. 'My expectation is that in four or five years at the longest, the premium will be zero or even negative,'he said. 'I think this is a good trade, a good one possibly for hedge funds, but it's not one I'd want to put on in my personal account for the risks involved and my disadvantaged position relative to hedge funds in running the trade.' --With assistance from Tom Contiliano. Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To ©2025 Bloomberg L.P.
Yahoo
20-05-2025
- Business
- Yahoo
Famous Wall Street Short Seller Is Taking Aim At MicroStrategy: Should You Worry?
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. Jim Chanos has said he is actively shorting MicroStrategy. Chanos poked at MicroStrategy's NAV premium. Presto Research has weighed in on whether investors should worry. Long-time investors in MicroStrategy (NASDAQ:MSTR) have probably weathered it all, from early concerns over the risks of the firm's Bitcoin accumulation strategy to harsh mockery in bear markets and questions over whether the firm can sustain demand with the emergence of spot exchange-traded funds and copycat firms. But even for these investors with nerves of steel forged through many fires, it is hard not to get unnerved hearing that one of the most famous short sellers in history, Jim Chanos, has taken aim at the business. Should you worry? Don't Miss: — no wallets, just price speculation and free paper trading to practice different strategies. Grow your IRA or 401(k) with Crypto – . Chanos told CNBC in an interview on Wednesday that he was shorting MicroStrategy while longing Bitcoin. The investor most famous for finding cracks in Enron's business and successfully shorting it ahead of its eventual collapse slammed MicroStrategy's valuation at a premium to Bitcoin as 'ridiculous' even as other firms are copying its playbook of using leverage to accumulate the digital asset. Chanos told CNBC he was 'short the spread' because it was 'so levered to the price.' 'We're doing exactly what MicroStrategy and [executive chairman] Michael Saylor are doing,' he added. 'We're selling MicroStrategy stock and buying bitcoin and basically buying something for $1, selling it for two and a half dollars.' Meanwhile, this trade does not mean Chanos is bullish on Bitcoin or sees value in it. 'I don't know where bitcoin is going. A hundred thousand, a million, 10,000? I don't know, I don't think anybody else knows,' he told CNBC. 'But what I do know is it's generally profitable to short $1 for two and a half dollars or $3.' To Chanos, it is simply an arbitrage opportunity betting on MicroStrategy's premium to net asset value shrinking. The firm currently trades at 1.8 times the premium to its Bitcoin holdings, boasting a market cap of $108 billion against $59 billion worth of Bitcoin. This premium hit a high of 2.5 times the NAV in October. Trending: New to crypto? on Coinbase. In a Friday note, cryptocurrency research firm Presto Research said there was 'no reason for panic' among MicroStrategy investors over Chanos' trade. 'MSTR's periodic BTC accumulation resembles a growing balance sheet fueled by recurring income. This allows investors who view BTC as an eventual store of value to assign an earnings multiple to MSTR's BTC acquisitions,' the firm said, justifying MicroStrategy's premium. In simple terms, the argument is that if investors believe that Bitcoin will be worth more in the future, they can value MicroStrategy not just by the current price of its Bitcoin holdings but also by the expected growth of its holdings and earnings from those holdings as the price appreciates. But Presto Research noted that this valuation model may not hold in a bear market, making Chanos' trade a complex bet on a BTC downturn. 'Whether Chanos understands Bitcoin enough to make that call remains questionable,' the firm said. Chanos wound down his hedge fund in November 2023 as years-long losing shorts against Tesla and AOL weighed on his profitability. 'The marketplace for what I do has changed,' Chanos told The Wall Street Journal at the time. Read Next: A must-have for all crypto enthusiasts: . 'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. Image: Shutterstock Send To MSN: 0 This article Famous Wall Street Short Seller Is Taking Aim At MicroStrategy: Should You Worry? originally appeared on
Yahoo
15-05-2025
- Business
- Yahoo
Short seller Jim Chanos has a brutal warning for MicroStrategy investors
Famous Greek-American investment manager Jim Chanos raised concerns with MicroStrategy and other companies copying its Bitcoin game plan. Chanos stated in an interview with CNBC on May 14 that MicroStrategy is essentially using the hyped-up version of Bitcoin to artificially raise their stock prices. 'I don't know where Bitcoin is going—maybe $100,000 or maybe $10,000,' Chanos said. 'But what I do know is some companies are making money by buying Bitcoin cheap and selling their stock at a much higher price." Chanos is best known for founding Kynikos Associates, a hedge fund focused on short selling. He rose to fame for correctly betting against Enron before its collapse in 2001. Chanos specializes in identifying companies he believes are overvalued or built on shaky fundamentals — earning him a reputation as Wall Street's most prominent short seller. In the interview, he stated, "MicroStrategy, and now other imitators, is raising money from investors, spending that money on Bitcoin, and telling investors that because they own Bitcoin, they should be valued higher. 'They're buying something for $1 and selling it for $2.50,' he said. In simple terms, Chanos believes that these companies are taking advantage of the excitement of investors about Bitcoin to artificially inflate their market valuations. He cautioned that the increased stock price does not equate to the actual value of what that company owns. Chanos believes MicroStrategy's Bitcoin-strategy is 'ridiculous" and "too leveraged'. He also went on to say that he is "long on Bitcoin but short on MicroStrategy". On May 7, Strive Asset Management merged with Asset Entities to establish the first public Bitcoin treasury firm, with the goal of achieving $1 billion in tax-free BTC transactions and a NASDAQ debut. On May 12, KindlyMD, a healthcare firm, also merged with Nakamoto, a Bitcoin native, to establish a Bitcoin treasury strategy. Notably, both these companies are following MicroStrategy's playbook. Interestingly, according to The Wall Street Journal, in 2023, Chanos closed his hedge fund Kynikos Associates and returned money to investors. The market had climbed almost 20% in 2023, and Tesla - which Chanos had bet against - was up 117%. Sign in to access your portfolio
Yahoo
15-05-2025
- Business
- Yahoo
Jim Chanos is Buying Bitcoin and Shorting Strategy
Jim Chanos, the veteran investor who made his name shorting Enron, is betting on bitcoin (BTC) trade while shorting Strategy (MSTR), the largest corporate holder of the biggest cryptocurrency. In an interview at the Sohn Investment Conference in New York with CNBC, Chanos detailed the bet. 'We're selling MicroStrategy stock and buying bitcoin,' Chanos said, calling it an arbitrage move: 'Basically buying something for $1, selling it for $2.50.' Strategy started acquiring bitcoin in 2020 and has since morphed into a bitcoin proxy for investors. The firm has issued debt and equity to accumulate the cryptocurrency, and now has a 568,840 BTC hoard bought at an average cost of $69,287 per aggressive bitcoin accumulation, backed by Wall Street analysts, has made its stock sensitive not just to bitcoin's price, but also to investor appetite for risk. Strategy's shares are up 3,500% in the last five years to now trade at $416 a piece, giving it a $115 billion market capitalization. To Chanos, Strategy's valuation doesn't make sense as MSTR shares have surged more than the price of bitcoin. The fund manager argues that this rise reflects retail speculation more than fundamentals, a theme he believes is echoed by other firms now trying to replicate Strategy's bitcoin accumulation in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
