Ark Invest Takes Swipe At MSTR, MARA, Says 'Bitcoin Treasury Companies Don't Make Sense:' 'Funding Purchases With Debt...Seems Like A Recipe For Disaster'

Bitcoin BTC/USD treasury companies like Michael Saylor‘s Strategy Inc. MSTR (formerly MicroStrategy) were in focus as Brett Winton, the chief futurist at ARK Investment Management LLC, highlighted that trouble could be brewing for such companies in the long run.

What Happened: As companies like MSTR have been issuing equity and debt to raise funds for Bitcoin purchases, Winton underscored that funding purchases with debt “seems like a recipe for disaster on the back end of this cycle.”

According to him, if the treasury companies keep doing so, “a higher debt mix” will “be the seed that grows to destroy the business-less business model.”

He explains this by highlighting the presence of an arbitrage opportunity till the time the stock prices for companies like MSTR are trading at a premium to the net asset value (NAV).

As of its May 12 SEC filing, MSTR held 568,840 Bitcoins at an aggregate purchase price of $39.41 billion, whereas its market capitalization stood at a staggering $108.55 billion.

Thus, Winton implied that BTC treasury companies could keep issuing equity until the arbitrage opportunity closes. “Competitors are now launching/raising will accelerate that process,” he said in his X post.

However, as the equity to NAV gap closes, the companies will shift to debt for funding their BTC purchases, thus concocting the “recipe for disaster,” as underscored by Winton.

Why It Matters: While MSTR is the largest BTC treasury company that has issues both equity and debt to purchase Bitcoins, Ryan Cohen‘s GameStop Corp. GME has recently announced its plans to join MSTR’s ranks.

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MARA Holdings Inc. MARA, Cantor Equity Partners Inc. CEP, Riot Platforms Inc. RIOT, and Galaxy Digital Holdings Ltd. GLXY follow MSTR in having the highest number of Bitcoins as a part of their assets.

Meanwhile, other experts think that Bitcoin prices are poised to rise. Citing Tom Lee, the head of research at Fundstrat, the Moon Show highlighted on X Friday the potential for Bitcoin’s network value to equal that of gold.

Lee argued that Bitcoin’s versatility, acting as a risk-on asset in bull markets, combined with growing adoption, fuels network value and price appreciation.

Price Action: Shares of MSTR fell 4.73% on Thursday and rose 1.03% in premarket on Friday. The stock was up 32.34% on a year-to-date basis, and 175.72% higher over a year.

Benzinga Edge Stock Rankings shows that MSTR had a stronger price trend over the short, medium, and long term. Its momentum ranking was solid at the 97.50th percentile, while the value ranking was very poor. You can check the details of other metrics over here.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were higher in premarket on Friday. The SPY was up 0.29% to $592.20, while the QQQ advanced 0.34% to $521.01, according to Benzinga Pro data.