In this conversation, Stephan Livera and Jesse Myers discuss the current state and future of Bitcoin treasury companies, focusing on Smarter Web Company’s strategies and performance. They explore the implications of PIPE deals, the importance of a solid track record in delivering Bitcoin yield, and the regulatory environment’s impact on investment strategies. 

The discussion highlights successful examples like Metaplanet and the potential for Bitcoin treasury companies to accumulate a significant portion of Bitcoin in the coming years. They also address the challenges investors face, including understanding mNAV and justifying premiums in Bitcoin investments. 

Jesse also introduces the P-Bid ratio as a new metric for evaluating these companies, emphasizing the need for a strong retail investor base and the significance of operational businesses in sustaining value. The discussion concludes with reflections on the future of Bitcoin treasury companies and their role in the broader financial landscape.

Takeaways:

🔸Smarter Web Company has over 2500 Bitcoin and a mNAV of about 1.6.

🔸The current Bitcoin yield for Smarter Web Company is 278%, significantly higher than market expectations.

🔸Many Bitcoin treasury companies have struggled to deliver consistent Bitcoin yield.

🔸PIPE deals can create headwinds for Bitcoin treasury companies due to misaligned investor interests.

🔸Successful Bitcoin treasury companies have a track record of delivering Bitcoin yield over time.

🔸Metaplanet is highlighted as a successful example of a Bitcoin treasury company.

🔸The regulatory environment in different countries affects the success of Bitcoin treasury companies.

🔸There is potential for Bitcoin treasury companies to accumulate a significant portion of Bitcoin in the future.

🔸Public companies have more capital market tools available than individual investors.

🔸Understanding mNAV is crucial for valuing Bitcoin treasury companies.

🔸Bitcoin yield is a key factor in assessing company performance.

🔸The P-Bid ratio helps unify mNAV and Bitcoin yield metrics.

🔸Retail investors play a vital role in the success of treasury companies.

🔸Many Bitcoin treasury companies struggle to deliver consistent yield.

🔸M&A activity is expected as companies trade below 1X mNAV.

🔸The fundamentals of Bitcoin treasury companies are real and promising.

🔸There is a significant opportunity for growth in this sector.

🔸The Bitcoin treasury industry is in its early stages of development.

🔸Investors should focus on well-run companies to maximize gains.

Timestamps:

(00:00) – Intro

(01:05) – What’s new at @smarterwebuk?

(03:07) – Evaluating the recent Bitcoin Treasury lull  

(05:03) – Jesse’s issues with PIPEs for Bitcoin TCs

(10:45) – What counts as a successful Bitcoin TC?

(15:36) – Regulatory environment supporting the rise of Bitcoin TCs

(19:19) – How real is the Bitcoin Treasury fad?; Building Capital markets on Bitcoin

(26:53) – Sponsors

(29:03) – Why choose BTCTC over spot Bitcoin?

(34:42) – BTC-denominated convertible notes

(41:10) – What justifies the mNAV premium of BTCTCs?; mNAV & BTC Yield 

(46:36) – The P-BYD ratio is the P/E ratio for Bitcoin treasury companies

(52:10) – What are the challenges in delivering a high Bitcoin yield?

(56:48) – The role of retail investors in Bitcoin TCs

(1:00:02) – Is M&A the way forward for Bitcoin TCs with mNAV below 1? 

(1:09:12) – How will TCs mature over time?

Links: 

• https://x.com/Croesus_BTC 
• https://x.com/smarterwebuk 
• https://x.com/Croesus_BTC/status/1945572138880041226 
• SWC analytics dashboard: https://investors.smarterwebcompany.co.uk/analytics/ 

Sponsor:

• CoinKite.com (code LIVERA)

Stephan Livera links:

• Follow me on X: @stephanlivera
• Subscribe to the podcast
• Subscribe to Substack

Transcript:

Stephan Livera (00:00)
Hi everyone and welcome back to Stephan Livera podcast. I know it’s been a little bit of a gap, but I’ve had, you know, traveling a lot of things on, but I’m excited to chat again with my guest today. Now, long time listeners of the show will have heard Jesse before and of course you’ve probably heard him on different podcasts and from his talks in the space. Jesse is head of Bitcoin Strategy now at Smarter Webco, which is a Bitcoin ⁓ treasury company in the UK.

And Jesse, think has a lot of interesting insights to share around treasury companies. So I wanted to chat with Jesse. Jesse, welcome back to the show.

Jesse Myers (00:35)
Yeah, great to be back. don’t remember the… It must have been like 2021, 2022 when I came on before, but it’s been a while. So excited to talk to you again.

Stephan Livera (00:44)
Yeah, I mean back in those days you were still under the pseudonym Croesus_BTC and now you’re ⁓ out there under your real name and face. So let’s start with SmarterWebco. Maybe give us just some of the overall picture there. Like how many Bitcoin do you have? What’s the MNAV? Like just some of those kind of high level stats and facts.

Jesse Myers (00:51)
Out of the closet.

Yeah, so ⁓ as of today, we just announced ⁓ we bought an additional 50 Bitcoin ⁓ and that puts us just over 2500 Bitcoin total. ⁓ And as of today, our MNAV is about 1.6 ⁓ and it got as low as like 1.2, just under even. ⁓ It does seem, we’ll get into this a bit more, but it does seem like, you know, we…

that there might be some recovery there in terms of MNAV, ⁓ especially given that our Q3 Bitcoin yield to date has been plus 278%. So, you know, that we’ll get into all this, you know, that I think is the big headline for SmarterWeb at the moment is we’re priced at, the market is pricing us as if we will only ever deliver plus 60%.

Bitcoin yield forever. And yet this quarter we have delivered plus 278 percent. And I think that’s just a combination of the global sector wide MNav compressions over last 10 weeks. And at the same time, our investors, savvy Bitcoin, Bitcoin Twitter investors, you who are paying attention to all these stats, see the value and are stepping in, I think.

to ⁓ capitalize on what they may view as a mispricing based on our track record of delivering Bitcoin yield at the moment.

Stephan Livera (02:46)
Of course, and as you know, I’m bullish Bitcoin and bullish on Bitcoin Treasury companies, but maybe the narrative right now is, it’s a lull. It’s, ⁓ know, Bitcoin Treasury companies are over, right? What’s your take on that? Is it just, was it a hype? Was it flash in the pan? What’s your, how do you analyze, you know, where things are right now in this so-called lull for Bitcoin Treasury companies?

Jesse Myers (03:09)
Yeah, a lot to say here. So obviously, I don’t think it is ⁓ a flash in the pan. I think there are real fundamentals here that matter and deliver a tremendous value to shareholders if you’re invested in the right Bitcoin treasury company. I think what we’ve seen over the last six months is people got too excited. ⁓ The entire sector got excited. And everybody decided to become a Bitcoin treasury company. ⁓

there were too many. Most of them never got off the ground or never really delivered a track record of Bitcoin yield, which is the whole point of a Bitcoin treasury company. And that’s a combination of small companies that said they had the intention of becoming a Bitcoin treasury company and for whatever reason, couldn’t ⁓ follow through with execution. That takes a lot, right? You have to change your business.

You have to set up the infrastructure. have to generate excitement for investors, raise capital, deploy it into Bitcoin, and then do it again and again and again and again. That’s hard. And most companies who wanted to follow this strategy haven’t been able to get to scale. I think there’s a really big filter of can you get to 1,000? Maybe it’s 2,100.

Bitcoin with a track record of delivering Bitcoin yield. ⁓ And if you look at it that way, only a handful of the, let’s say, 200 Bitcoin treasure companies in the world have actually done that. ⁓ So there’s that going on. And then the other thing that has really complicated things is we’ve seen a lot of pipe deals, which I think has been a shortcut to try to get to scale ⁓ as a Bitcoin treasure company.

But the problem with that is, you know, I think the market is learning that for two reasons in my mind, that creates tremendous headwinds that I’ve yet to see an example of those headwinds being overcome by a pipe deal funded Bitcoin treasury company.

Stephan Livera (05:22)
And just quickly for listeners who aren’t familiar, PIPE stands for Private Investment in Public Equity. Now, I guess the sentiment around that can sometimes be seen as, ⁓ kind of the richer insiders are dumping on retail, sort of. That’s kind of, that’s like one of the, let’s say that would be a critical view of that maybe. And I guess to sort of steelman the other side, it might be sort of like, well, we need to get to a certain level of scale before we can ⁓ do this play correctly.

Jesse Myers (05:38)
Yeah.

Stephan Livera (05:52)
or it’s sort of like, maybe they would frame it like, it’s a necessary evil to sort of get off the ground. I guess there’s kind of some different arguments going both ways. Can you maybe offer your comment on this ⁓ pipe phenomenon, as in Bitcoin Tradership companies using a pipe?

Jesse Myers (06:08)
Yeah, absolutely. You know, so the goal there is like, how do we get to scale quickly? And the way these deals end up getting structured is they’re offered at a discount. you know, you’ll go to institutional investors and say, we’ll give you a 10 or 20 % discount if you do this deal. And it becomes easier to raise that kind of capital for the wrong reasons though. You know, those investors, many of them, most of them,

are not interested in investing in a Bitcoin treasury company for the long term, they are instead interested in collecting that discount. Right? So you can, if you’re, if you’re that investor, you can do that deal. Yeah, you can do that deal and then immediately hedge out your exposure by, by shorting that stock. ⁓ And then what you’re left with is you get, you get your, your free 10%. You know, and that’s

Stephan Livera (06:52)
Instabyte and dump as soon as the unlock kind of thing

Jesse Myers (07:07)
a fantastic value proposition for a hedge fund. You know, if they’re tying up capital for three months, boom, they just got 10 % for a quarter of the year. That’s a really good return. And a lot of people are willing to do that. The problem, of course, is that you’re then creating sellers, right? Like day one, you have hedge funds that went out. They never planned on holding. They’re getting out. ⁓

Stephan Livera (07:35)
Yeah. So I

guess as you’re saying, it’s like this question of having investors who are really aligned and not just aligned on Bitcoin, but aligned for the long term. So I wonder then kind of a follow up. Do you believe it changes then if there is a longer term lockup, right? Like instead of just like, you know, you can instadump or like it’s a one or two month lockup. It’s like a five year lockup or, know, some kind of longer lockup.

Jesse Myers (07:36)
So that’s the…

Yeah.

Yeah, quite possibly because, know, then you filter out the, the, you know, then you’re asking a hedge fund that’s looking to do a deal like that to tie up capital for years. And if you’re gonna, if you’re gonna deliver a 10 % return over, you know, call it three years, that’s not good enough, right? Like that’s not an interesting enough deal to want to do that. but so, so then you’re left with

investors who might see the fundamental value and actually believe in the long thesis. ⁓ But again, you’re then limiting your access to capital because the vast majority of capital wants to do that discount deal and a very small minority of institutional allocators. ⁓ Take it from me, we have these conversations with institutional allocators and for the most part, they don’t see the value proposition yet of Bitcoin yield itself. They very much see the value proposition of discounts.

⁓ So that’s the tension there. The other problem with pipe ⁓ deals or just getting to scale quickly in general is that a Bitcoin treasury company’s value proposition to investors is look at our track record of delivering Bitcoin yield consistently over time. ⁓ And when you assess that track record, ⁓

every investor makes their own assumptions about whether or not that performance will continue into the future. And they can model in their expectations about how much Bitcoin yield into the future that company might generate. And that becomes their willingness to pay, right? Like how high of an MNAV you’re willing to pay is based on how much future Bitcoin yield you expect that company to generate. So if you’re a company that, you know, let’s say, puts in, you know, raises a billion dollars,

and buys a billion dollars of Bitcoin, ⁓ you know, day one, great, you have a ton of Bitcoin, but you have zero track record of delivering Bitcoin yield. And now, now that track record begins and suddenly you find yourself in a really tough position of you now need to raise a billion dollars again, within like three months in order to show any kind of, you know, promising ⁓ Bitcoin yield metrics.

So I think in that way, a lot of the deals we’ve seen over the last six months have been structurally wrong, at least from my perspective and my views about what generates value here. I think going back to what has been the best example of a Bitcoin treasury company of success, what does success look like in this space? It’s been meta-planet. For the last 18 months, they’ve grown from nothing.

you know, like a $10 million company to now a company with 30,000 Bitcoin or on their way to 30,000 Bitcoin. Incredible growth story. the entire model was start small, deliver a track record of Bitcoin yield and generate an enthusiasm from retail investors, grow from small to medium, start.

bringing on institutional capital and then keep growing from there, right? A sort of path-dependent process that starts with, you know, delivering, executing Bitcoin yield and building that track record. So that’s like, that’s the only real example that we’ve seen, you know, outside of strategy starting five years ago. The only real example of success is the meta planet model. And, you know, that’s what I think is the thing that everybody should want to do.

It’s just that it’s hard and it’s slow. And I think the temptation to jump to scale has been, it’s been irresistible for a lot of people. ⁓ But this is why SmarterWeb is following the meta planet playbook in the UK and seeking to follow that very established pathway to success.

Stephan Livera (12:05)
I think it makes sense and maybe those comments are, I don’t know, it depends on who you listen to, but maybe these are controversial for some people because you’re attacking other treasury companies anyway. ⁓ But I think what I find interesting, maybe it’s a timing thing, right? Like think MetaPlanet, the timing of their kind of launch, when Dylan Leclerc kind of went out of the Bitcoin magazine orbit, or I mean, he still kind of is, but into formally being a part of MetaPlanet, it was kind of like…

you know, not many people were into this whole treasury idea. it just, I think the timing was important and probably arguably also the jurisdiction, right? Japan being a very yield starved jurisdiction, but also a big financial hub. And I believe in the top four fiat currencies globally, right? So it’s not a small player, right? I think so maybe it was like a combination of like right time, right place, you know, right strategy, as you said, to do it. And that’s what maybe

that’s, you they’re now ripping the rewards of that ⁓ combination.

Jesse Myers (13:09)
Absolutely.

I totally agree with that. I think Japan was probably the best place in the world to do this playbook and they nailed it. And they were alone for a while and were able to get to scale. I do also want to say, I don’t want to be attacking any Bitcoin treasury company, but I do want to point out that that approach has not really been de-risked. I’m not aware of an example of success.

yet. And hopefully, you know, those work out because that would be better for Bitcoin. But, you know, I think that SmarterWeb is focused on the example of success for the reason that, you know, that is the pathway that has been proven. I also want to say that, you know, when strategy did their thing, when MicroStrategy, you know, started in 2020 and for years afterwards,

everybody assumed you kind of had to be s- an entity like micro-strategy for this to work. You needed to be already at scale, be a cash cow, spitting off a lot of, you know, operating income in order to service your debt, in order to make this model work, right? To lever up, ⁓ you know, your Bitcoin exposure. ⁓ and- and I think that’s a big part of why for years nobody tried to copy the model. And then, ⁓ then MetaPlanet did, you know, like,

ignoring the advice that like, you can’t do it, it only works if you’re a microstrategy type entity. They went ahead and tried it and it worked. And then I think it’s interesting now that you do see a sort of common sentiment that you need to be in a meta planet like situation for it to work. know, it’s just a bit of irony there that, but I think the reality is that Bitcoin

is the best thing, accumulating Bitcoin is the best thing that any company can do for its shareholders. And there’s a tremendous opportunity because of the arbitrage opportunity between these giant capital pools of fixed income market and equity markets and the money market where so much capital sits and little old Bitcoin, that’s 0.2 % of global asset value.

there’s still tremendous opportunity to help facilitate the flow of capital to Bitcoin. ⁓ And I think that’s true everywhere for different reasons, Like in Japan, they have a tax advantage, preferential tax treatment for ⁓ corporate owners of Bitcoin versus individuals. In the UK, we don’t have that advantage, but we have a different one. We have a few. The big one is…

that retirement account capital hasn’t had access to Bitcoin. ⁓ The FCA, the SEC in the UK hasn’t authorized Bitcoin ETFs. They are now, next month, will be green lighting ⁓ Bitcoin ETNs, which are just shy of an ETF, which is also great news for UK investors, good news for Bitcoin.

And also good news, we think, for SmarterWeb because when that happened in the US 18 months ago with the Bitcoin ETFs, ⁓ everybody thought that there would be no reason to invest in micro strategy anymore. And yet over the last 18 months, I think one of the big winners has been micro strategy because of the increased regulatory clarity that it’s OK to own Bitcoin. You can include Bitcoin in portfolios.

Stephan Livera (16:42)
Right. And just more

interest coming into Bitcoin generally is kind of like a rising tide lifts all boats, at least in these early days, right? Before Bitcoin has, you know, the world is hyper Bitcoinized. Yeah.

Jesse Myers (16:50)
Yeah.

Absolutely.

And the final point there of like, the other thing that I think people miss about, ⁓ you know, my view is that there’s going to be a leading Bitcoin treasure company in every capital market in the world. It’s going to be like a winner take most situation. There’s going to be room for others, but there’s going to be a big leader like, like strategy in the U.S., like MetaPlanet in Japan. And the reason, part of the reason for that is there are a lot of investors and funds. ⁓

and structural things that are plugged into that, you know, every particular capital market that have mandates of like, you can only invest in local ⁓ equities or, you know, offerings. And there’s a ton of capital where, you know, that’s, that’s a requirement, a lot of pension capital in particular. So I think, you know, that creates like a ⁓ structural reason why there’s going to be a winner in every capital market that’s plugged into that.

local regulatory framework.

Stephan Livera (17:54)
Yeah, and I think it makes sense as well just even thinking about the friction aspect of it, right? a lot of this is a concept just even outside of Bitcoin just in normie fiat finance, they call it home country bias, right? Like people just, you know, whatever if they’re browsing the stock app on their phone, chances are it’s going to list their local equities, right? Just obvious for obvious reasons. And it’s going to list local products. I’m with you there. think there is definitely or as

Brian Brookshire has mentioned this kind of hometown hero factor and I think that makes sense to me. ⁓ But I’m curious your view here because maybe there’s also an argument or maybe there’s different ways to slice and dice it, right? Because in one side, in one form of this analysis, it could apply globally too, right? Like there’s an advantage to be strategy, obviously, like the big, know, whatever, 600 pound gorilla in the room or whatever it is ⁓ with those 600,000 coins or whatever it is right now.

And so maybe there’s like a winner-takes-most at the global scale and then there’s also a winner-takes-most in each jurisdiction or at least the jurisdictions with a big capital market. What do you think?

Jesse Myers (19:02)
Yeah, absolutely. So a few months ago, I kind of made myself go through the analysis of like, how real is this Bitcoin treasury, you know, fad, right? Is it a fad? You know, what are, how big can this be? It was really the question I wanted to ask myself. And so I kind of, went through the management consulting approach to how you would answer this question, which, you know, comes from my…

background, four years doing that. And I kind of surprised myself when I thought through the logic of it ⁓ and the end result, and this is finger in the air really, so we’ll see how it turns out, but I can see a world where it’s possible, and this is a bit uncomfortable really, ⁓ it’s possible that Bitcoin treasury companies accumulate half.

of all Bitcoin over the next 20 years. ⁓ And, you when I, when I stepped through the logic of that, that’s, that’s what I felt possible. You know, maybe it’s half of that, but it still would be the biggest story in global finance over the next two decades. ⁓ And to quantify that a little bit. So, you know, using sailors numbers of, of $13 million a coin in 20 years, which, which are, you know, built off of some of my numbers, which is very cool.

⁓ That amounts to Bitcoin being $280 trillion asset class in 20 years. And if Bitcoin treasure companies accumulate half of that, that’s $140 trillion. I think that that strategy would, let’s say, own half of that. So, know, $70 trillion of Bitcoin in one entity. And that would make strategy the most valuable company in the history of the world by a huge margin.

But it would also mean that the rest of the Bitcoin treasury company landscape all over the world ⁓ would be the big story in global finance for the next two decades. The thing that nobody saw coming in the same way that back in the day, nobody saw private equity coming, nobody saw leveraged buyouts coming, nobody saw venture capital as a viable industry in finance 40 years ago. And the last 16 years, nobody saw Bitcoin.

come in and it’s been the big story. ⁓ Digital value, digital capital has been the big story over last 16 years. And I think going forward, because of the incentives at play and the economic motives of a public company and the access to capital raising tools the public company has that individuals don’t have, I can see a world where these entities

are the main conduit of value flowing from the fixed income market in particular into Bitcoin. the way it looks is like strategy today. ⁓ They have set up all their preferred equity instruments, which are targeting different slices of the fixed income market ⁓ and now the money market with stretch. And they’re going to keep coming up with new products to target more subsets of those pools of capital.

And then I think that can happen in every capital market in the world, you know, for the local ⁓ dynamics and, and, you know, the, the same story playing out locally all over the world. ⁓ what that amounts to is like, who’s going to be the buyer for Bitcoin 10 plus years from now, 20 years from now, when, ⁓ when Bitcoin is $5 million a coin. Right. And, and I think it’s going to be the big buyer is going to be.

strategy and then other Bitcoin treasure companies who have unlocked the next trillion dollars in the fixed income market. You know, there’s there’s over 300 trillion dollars in fixed income getting, you know, risk adjusted mid single digit returns at best. you know, and in real terms, losing value, I think, you know, if true inflation is seven, eight percent.

Stephan Livera (23:20)
negative.

Jesse Myers (23:26)
and you’re holding a 10 year US Treasury bill getting four and a half percent, you’re destroying two and a half percent every year just holding that in real purchasing power. And so I think there’s gonna be an exodus of value as value is always seeking greener pastures. think Bitcoin is the thing that fixed income capital is really looking for, but a lot of it won’t.

be, you know, it- it- it’s a tall order to- to ask ⁓ a- a bond portfolio manager to say, you know what, I’m gonna sell these bonds and I’m gonna buy a Bitcoin. That’s outside of their mandate. That doesn’t- it’s not really possible. But what’s possible is for strategy to come to that portfolio manager and say, we’ll give you 10 % a year with our extremely over-collateralized balance sheet.

And you just give us the capital and then we’ll go buy Bitcoin with it and we’ll make 29 % cake over the next 20 years. So, you know, we’re splitting the upside with you. You got 10 % of it, we get the rest. And that’s an irresistible value proposition. You know, if you’re accustomed to getting 4.5 % and somebody comes along and offers you 10 % and it’s just as low risk, if not lower risk because of how over collateralized

strategy’s balance sheet is, in my opinion. And that story is just going to play out in the US and everywhere over the next 20 years. And we’re going to see the fixed income market deflate relative to other asset buckets. And Bitcoin is going to massively inflate relative to other asset buckets. And I think what’s happening is that strategy is the piping, the plumbing.

that’s facilitating this flow of capital, it’s pumping capital out of fixed income, out of the money market, out of equity markets where everything’s a bit overvalued and towards Bitcoin. And that’s what the leading Bitcoin treasury company in every capital market in the world will also be doing.

Stephan Livera (25:34)
So yeah, and I mean, I agree with you. I think the way I’m understanding that and you Michael has explained this on various podcasts and talks, but it’s like the idea that not everyone wants just straight oil, they need it packaged in the right format. All right. And that’s kind of the analogy of not everybody can just buy Bitcoin, can or will just buy straight Bitcoin. And there are people who want sort of higher voltage or kind of higher octane forms of it and

Jesse Myers (25:48)
Right.

Stephan Livera (26:02)
⁓ weaker forms of it, let’s say. ⁓ And so that’s this analogy of structuring different products to allow them.

Jesse Myers (26:07)
Yes.

Yeah, he’s

got that, that great oil. He thinks of strategy as an oil refinery and it’s, you know, refining, refining crude oil into all, all sorts of financial products that various buyers want. Right. And that’s good. I like that. I just find it more visual, ⁓ to think of it as like capital being pumped from one bucket to another. ⁓ but yeah, but you know, obviously he’s, he’s, he’s the goat in terms of these, sort of engineered metaphors.

Stephan Livera (26:34)
Yeah. With these analogies. And

one other kind of point, I’m interested to hear your reaction. So when we talk about this idea of winner takes most, or let’s say it’s kind of like maybe top three in each market or something like that, right? Like they’re gonna get most of the gains. The funny thing might be that even if you’re not in that top three, just doing the strategy, like at least…

Having a lot of Bitcoin on your balance sheet and even if you are let’s say in that hypothetical Let’s say you’re borrowing it eight to ten percent and you’re and Bitcoin is carrying whatever forty percent and you know I’m a fan of power law But let’s say it’s at forty percent per year now and it’s kind of coming down on average over the next ten years It’s gonna be thirty percent it’s gonna make sense for a lot of people to do this play and it might be that a lot of people do that play and Maybe they don’t even end up in the top three, but they still end up

big in fiat terms, kind of growing or kind of entering the index in their local home market just because they were holding all this Bitcoin and Bitcoin was going up so much.

Jesse Myers (27:42)
Yeah, absolutely agree. mean, yeah, the best thing that any company can do for its shareholders is accumulate Bitcoin ⁓ because it’s the only asset out there that’s going to grow at 30 % a year and companies don’t grow at 30 % a year. ⁓ you know, if you’re acquiring, yeah. So if you’re…

Stephan Livera (27:58)
Yeah, not in a sustained way. Yeah. But I guess the

other if I had to steal man though, like if we had to steal man, could I could imagine maybe one still man could be well, look, Jesse and Stephan even to myself, they could say, look, why can’t this individual investor or you know, why can’t they just go out and take debt to buy Bitcoin themselves instead of buying your company? Because maybe the MNAV is too high, right? At times in the cycle, maybe MNAVs have gotten kind of a bit too hype. ⁓ How

can the premium be justified? I think that’s probably, that would be more of an intelligent steel man ⁓ argument against this view, right? How would you respond?

Jesse Myers (28:38)
Yeah, okay, yeah. Let’s unpack. So we’ll address like why can’t you as an individual, like how is it different, um, do this strategy as an individual? Uh, I guess the- the simple answer is like there are simply more capital market tools available to a public company, um, that- that simply aren’t available to an individual. Uh, a public company can go out and, you know, raise $100 million at, you know, 6 % interest rates or something like that and-

I would, as an individual, would love to do that. You know, if I could get a five-year dated hundred million dollars and have to pay that kind of, you know, service that debt, I would do that. But I, but nobody’s, I’m not credit worthy enough to do that as an individual, right? But a public company can be. On top of that, you know, there’s, the bread and butter for, for MetaPlanet over the last 18 months was to use their ATM facility, right? They’re moving strike warrants.

to raise capital just by selling directly into the market, selling shares directly into the market, which is basically taking advantage of the liquidity and volume traded ⁓ for your stock as a source of capital raising. And that’s like the most important source of capital raising because, specifically because it scales linearly with ⁓ volume traded or stock price, right? So like, you know, it-

it’s easy to raise $10 million, it’s harder to raise a billion dollars, but you know, if you’re scaling linearly, that ATM facility can do that, ⁓ depending on how valuable you are and how much volume is being traded. ⁓ And then on top of all that, there’s, you know, there’s the volatility of your stock is valuable, there’s option value to the volatility of a stock and-

you know, that can be used to help raise money. That’s part of our SmarterConvert, which is our Bitcoin denominated convertible note instrument, ⁓ which as far as I’m aware actually is the lowest risk way to outperform Bitcoin because investors keep holding Bitcoin and they simply are purchasing an option to convert into SmarterWeb shares.

if SmarterWeb significantly outperforms Bitcoin. And so, you know, that’s kind of a win-win, right? Where, you know, as an investor, you’re still holding Bitcoin ⁓ until you decide to, you know, to convert into shares. ⁓ So, and that’s all based on option value, right? And that’s something that a stock has that an individual doesn’t have. So those are some of the reasons why, you know, ⁓ public company can do this in a way that an individual just can’t.

and of course the, probably the simplest explanation is like, you know, smarter web can, depending on the structure of, of the instrument, we can raise it 0 % interest rates. and an individual can’t, right? An individual can, yeah, can, can raise it 12%, you know, maybe 20 % depending on, on the type of debt they’re taking. ⁓ and that-

Stephan Livera (31:49)
Only dreams of that level, yeah.

Jesse Myers (31:59)
That becomes harder to service. And also, if Bitcoin’s growing at 29 % a year, but you’re raising it 20%, it stops making that much sense, right? You’re taking out its own risk.

Stephan Livera (32:09)
It’s not as much of

a premium, let’s Now, on the convertible note question, let’s talk a little bit about that. So as I’m understanding what some of these treasury companies are doing, and ⁓ I’m not as familiar on the details for your specific case, but as I understand some of these treasury companies, at least historically, have gone out and asked, okay, are there like, Arb desks who want to lend us money at very low…

Jesse Myers (32:13)
Yeah.

Yeah.

Stephan Livera (32:38)
rates like 0 or 1 % or something like this, but also embedded is some kind of option at a certain premium above the current equity price. So it is 0 % debt, but it’s also there’s a bit of dilution built in if the stock price were to go, whatever, 40 % above or 50 % above or whatever that rate is set at. So can you talk us through a little bit? How are you viewing that? Because as I understand it, it’s like,

Michael Saylor and Strategy are sort of moving away from that. Like they want to sort of move away from the convertible debt because they see it like preferred shares is the path, that’s the future. ⁓ But you could also argue that maybe it’s a life cycle thing. Like maybe some of the younger, smaller treasury companies, maybe it makes sense for them to do convertible debt, ⁓ but maybe not for the larger ones. Or here’s the other one. Maybe it’s just more like what are the terms you’re being offered? Right, like maybe just at the bull hype season of treasury companies.

There’s more people offering this kind of deal and maybe right now, maybe not as many. How do you summarize it?

Jesse Myers (33:40)
Yeah, you you got most of it right there and it’s all out a bit more and then we should get back to ⁓ what commands a MNAV premium like why is that deserved because that’s a really fun topic we can get into but ⁓ You’re right. So so when I’m talking about our smarter convert Convertible notes, they these are Bitcoin denominated convertible notes ⁓ and they’re quite different from

fiat denominated convertible notes. This is the world where ⁓ Bitcoin treasury companies get offered a lot of these deals because they are very attractive to hedge funds ⁓ who are going to engage in what’s called a convertible arbitrage. So, you know, in particular, if you’re offered like a 6 % coupon convertible note, ⁓

What’s really happening there is the investor wants to give you the money and then they want to short your stock ⁓ in order to hedge out their risk because they have the option value if the stock does well where they can convert into equity so they have like long exposure. ⁓ And they have the coupon, 6 % in there that they’re gonna collect. ⁓

And then all I need to do is short your stock in order to hedge out that long exposure. So now all they have is risk-free 6%. Right. And that’s what hedge funds want. That’s, you know, most of these deals are really about trying to get that. ⁓ Or, or they, you know, or it’s structured in a different way where it’s like 0%. And then they have an incredibly large kicker ⁓ for an upside scenario where they get, you know,

10 % of the company I’ve seen stuff like that, ⁓ snuck into proposals where it’s like, this is not, this is not a serious deal, but some people are desperate and they’ll take it. ⁓ so, you know, that, that’s, think, you know, that’s what’s going on with a lot of these fiat convertible notes. And, ⁓ and yeah, you’re right that it’s like, the, the bigger you are, the more credit worthy you are, the more legit the offers become. ⁓ but still what strategy has moved away from.

are any of these, you know, they started out with fiat convertible notes and they’d still have some on their balance sheet, but Saylor ⁓ is not a fan of them. And he actively advises against them now. And I think it’s for the reasons we’ve talked about and also the reality that like these are debt holders that have a lot of power. You know, they are thorns in your side for years. And as debt holders, they have some seniority over

equity holders and they can be obstinate and ⁓ obstructionist ⁓ and real pain in your butt. And Saylor has had to deal with that, I think. And I think that’s been part of why that plus the fact that these things mature and you then have to pay them back and in some big event, you know, of scraping together the capital and paying back this thing. ⁓

For those reasons, he came up with the preferred equity model of perpetual duration where you never have to have the event of paying these things back. they’re equity instruments, so they aren’t debt and they don’t sit senior on the balance sheet and they don’t have all these traditional debt covenants that allow them to be thorn in your side. so Saylor basically created a solution for all of the headaches that

have come from the fiat convertible debt instruments that they’ve engaged in. ⁓ But those are IPOs. Those are expensive things to do. And you need to have a certain credit worthiness, really meaning a certain size of pristine Bitcoin balance sheet in order to go down that path. So our view at SmarterWeb is there are lifecycle stages that a Bitcoin treasure company has to.

progress through. You have to start small in our view with the sort of meta-planet approach. Start small, raise capital with private placements, generate excitement, get to a certain scale where you can launch an ATM facility because you have enough liquidity in your stock, you have enough excitement. You know, do that plus other fundraising sources for, you know, for however long it takes to get to 10, 20, maybe more.

thousand Bitcoin on your balance sheet the way that MetaPlanet has and then graduate into sort of these preferred equity instruments and evolve into something more like strategy is today. And so, you know, they’re pretty discrete phases of growth that you have to get through, I think, in order to get to that place that everybody wants to be at. Everybody wants to be strategy. But you have to grow to that place with a pristine balance sheet and have that balance sheet be large enough.

that it makes sense to ⁓ offer these preferred equity instruments because you’re credit worthy enough that you can offer only 10 percent instead of having to offer 20 percent in order to entice investors on the other side.

Stephan Livera (39:13)
Gotcha. Yeah. Yeah, I think that makes sense. Let’s get to the MNav question because I think this is a big one that a lot of people criticize. They’ll say, well, hey, why should you, as an example, if the MNav is two, why pay $2 for $1 of Bitcoin? Right? Like that’s probably the standard form of the argument that we have heard many times. I believe some level of premium is justified, but really the real debate is how much premium is justifiable.

⁓ And the way I’m understanding it is maybe when you’re a smaller younger Bitcoin Treasury company You know you can justify a higher MNAV because you’re growing so quickly because of the law of large numbers or because of diminishing returns but as you get bigger once you get to strategy size it just becomes harder and harder to sort of escape that gravity of One MNAV but but I think the real maybe the long run is it kind of settles a bit above one But it just kind of depends on various factors. ⁓ How are you seeing this question? What?

is a justifiable premium to &F for these Bitcoin treasure companies.

Jesse Myers (40:16)
Yeah, this has sort of become my favorite topic because I think there’s so many misconceptions here. obviously I’ve been living in this trying to understand it. And ⁓ I think it makes sense to me. ⁓ And we were just in New York ⁓ last week for the Bitcoin Unconference and had a bunch of ⁓ meetings with Wall Street investors. And they’re all missing it.

Everybody’s focused on MNav and basing their perception of something as being overvalued or undervalued just on MNav, which I think misses the real point in the bigger picture. yet again, ⁓ Bitcoin and Twitter investors, I think, are ahead of institutional allocators, ahead of Wall Street in understanding a very important new part of Bitcoin.

⁓ you know, Bitcoin treasure companies and how to value them. So, you know, it’s, it’s kind of awesome that that’s the case. It’s a little surprising that Wall Street seems to be kind of lost in terms of understanding like why would something trade at a premium? And yet it’s, and yet it’s pretty simple math. So the way I see it, is that there are two things that matter for valuing a Bitcoin treasure company. It is the MNav.

⁓ and the expectation of future Bitcoin yield delivered. So those two things are the variables that, that weigh heavily and should be treated rather equally. ⁓ yep.

Stephan Livera (41:54)
Gotcha, and let’s just quickly explain the terms just in case

anybody’s not familiar. So what is MNAV and what is Bitcoin yield?

Jesse Myers (42:00)
Yeah, so MNAV is your multiple to NAV. ⁓ And that means your Bitcoin holdings for a Bitcoin treasure company that ends up meaning your Bitcoin holdings minus debt. ⁓ You know, as your NAV and then your market cap divided by that is your MNAV multiple. So if you’re trading

Stephan Livera (42:24)
Right, so just

silly example, let’s say you’ve got $100 million of Bitcoin and ⁓ no debt and your market cap of the company is 200 mil, it’s a simple 2X MNAV, But then I guess there’s also other complications on things like diluted MNAV, basically like assuming full dilution based on some other instruments and full conversion and this kind of thing.

Jesse Myers (42:34)
2x MF, that’s right.

Yeah, exactly. ⁓ and then the other variable, Bitcoin yield is the growth of Bitcoin per share over time. ⁓ and that’s the whole goal here.

Stephan Livera (42:57)
Right. But that’s also accounting

for the dilution, right? Like the point is you are only counting Bitcoin yield if it’s accretive. That’s the whole point of like accretive is accretive, right? ⁓

Jesse Myers (43:01)
Yes, you’re adding more shares over time.

That’s right.

Yeah. Yeah. And,

and just some, some quick math that, cause you know, this is a weird concept too, but how is it a creative? So if you’re trading at, let’s say a five X NAV, which would be a high, but not crazy NAV. ⁓ and you issue 10 % more equity. So you just, you know, 10 % dilution right there. ⁓ but that 10 % dilution is that equity, those funds are used to buy Bitcoin. You just increased your NAV.

by 50%. So you had 10 % dilution, but 50 % growth of your NAV. And that nets out to a 36 % growth in Bitcoin per share, after you balance out the dilution plus the growth of NAV. So that’s what you’re hoping for. That’s what you’re looking to do with this model is grow your Bitcoin per share over time. And that is what Sailor has defined as Bitcoin yield. ⁓

And that’s what’s possible through these, you know, it’s financial engineering using fiat capital market tools and arbitraging, you know, fiat to Bitcoin. ⁓ And that’s the most important thing really. you know, people think on Wall Street, they seem to think that they’re buying a commodity. They’re, you know, they’re purchasing the Bitcoin on the balance sheet, ⁓ but they’re forgetting about the reality that these are productive assets.

⁓ in an unexpected way, right? Like a Bitcoin treasury company.

Stephan Livera (44:37)
Right. Productive in

our sense means they can accumulate Bitcoin. Not in the they are building widgets sense.

Jesse Myers (44:41)
Yeah.

Right.

This is not a real world productivity. This is Bitcoin ownership productivity, right? The point is you’re purchasing a vehicle that has the machinery in place and the intention and the goal of growing Bitcoin per share. So you can compound your Bitcoin ownership over time through that vehicle. And how do you value a productive asset? It’s…

the price versus the amount of productivity into the future. Those are the two things that matter, right? And that’s MNav, the premium that you’re paying is your price and the future productivity is what you have to account for. ⁓ So SmarterWeb, we put out a ⁓ research piece on this ⁓ a few months ago introducing a new metric to try to unify these two things called ⁓ the P-Bid ratio. And the idea here is to…

to combine ⁓ everything you need to see, ⁓ meaning MNav and Bitcoin Yield, ⁓ to ⁓ value these companies amongst themselves, but also more importantly, I think, against traditional equities. So in the traditional equity world, we have the P-E ratio, price to earnings ratio. And really what that is returning is

a number of years it will take for future earnings to equal the premium you’re paying today for that stock. Right? So, you know, that’s 20, 30, 40, 53 for Nvidia as of two months ago. And that’s what people are accustomed to paying for equity exposure. Now, if you were to do the equivalent for Bitcoin Treasury Company, which I think is, we think is the P-Bid ratio,

which gets a little complicated actually because there’s log terms to account for, but the net of it is how many years will it take for the most recent rate of Bitcoin yield continued into the future? How many years will it take to grow into your MNav premium? ⁓ Meaning how many years to pay back? And then anything beyond that becomes Bitcoin gained for the investor.

And when you look at the numbers for strategy for meta planet for smarter web, strategies like is under two years. You know, in, 2025 year to date, as of now, they’ve delivered 26 % plus 26 % Bitcoin yield. And so if you were to extrapolate that into the future, you know, based on their, their MNav, which is now down to like 1.5, I think. So it’s actually.

you know, about, it’s about a year for them now. So they’re, as opposed to a 20, 30, 40 P-E ratio, they’re a one. So there’s, if you view it that way, which I think is the right way to view it, there’s incredible value in a well-run Bitcoin treasury company in the global equities landscape because of how quickly payback is achieved. And for smaller Bitcoin treasury companies,

they’re able to deliver more yield faster because they, you know, of large numbers, they have a smaller base that they’re starting from. It’s easy to add more Bitcoin. They’re able to achieve more Bitcoin yield. And so, you know, I haven’t actually run the numbers for MetaPlanet recently, but I think there’s something like a quarter of a year, maybe half a year to return their MNav. And SmarterWeb is the same right now. So, you know,

When you look at the global equities landscape, where is there value? I think it might be right now, think the sector that might be the most undervalued in the world is a well-run Bitcoin treasury company.

Stephan Livera (48:49)
Yeah, as you said, I think ⁓ that is a good explanation of why there’s kind of this justifiable premium. In many cases, kind of what’s underlying that? Well, it’s access to the field printer, right? It’s there’s some reason that they have cheap access to capital or things like index inclusion that allow them to sort of access this capital that then allows them to turn around and turn that into BTC yield, which in turn, in your metric, you’re calling it P bid.

Ratio, what was it?

Jesse Myers (49:19)
Yeah, yeah, price to Bitcoin yield delivered. ⁓ It’s basically, it’s the log of your MNAV over the number of periods in a year times log of your Bitcoin yield delivered in the most recent period. So it normalizes to the year based on, you you can do it over a month, over a quarter, over six months or a year, ⁓ and it’ll all normalize ⁓ to an ⁓ output in number of years.

Stephan Livera (49:22)
Gotcha.

And so,

right, and then that is the number of years, as you’re saying, to grow into their current premium to MNav, let’s say.

Jesse Myers (49:53)
Yes,

right. And that’s payback, right? That’s where you reach your return on investment. And then anything beyond that is gain, is Bitcoin gained in this case. And so, yeah, know, people, why are you…

Stephan Livera (49:56)
It’s like payback period in Bitcoin terms, yeah.

Gotcha. So you could think of it like, I guess

as an example, if a company, Bitcoin treasury company is stacking and you know, whatever, it’s one year, then it’s kind of like after one year, you’re now in profit in Bitcoin terms, loosely speaking.

Jesse Myers (50:18)
That’s right.

And, and you know, and like in, if you go to business school and you sit through finance classes, like you get accustomed to hearing about projects that are, you know, pay, you know, return on investment in three years, 15 years, you know? Yeah. And, and, ⁓ and, and that’s pretty normal. ⁓ and so these, you know, Bitcoin treasure companies offer outstanding value. The ones that, the ones that have the.

Stephan Livera (50:29)
Right, we talk about payback period, right? It’s going to be three years for this project to start making us money or whatever. Yeah.

Jesse Myers (50:47)
have what it takes to continue delivering yield into the future, which is surprisingly small number because not many of the purported Bitcoin treasury companies have actually built a track record of delivering yield. know, a lot of them are only just starting and haven’t built that track record. So, you know, I don’t think there will be many of them.

Stephan Livera (51:07)
Yeah. So where would you say some of them are falling

down then? Is it a thing around? Is it around, as you said, not consistently delivering? Is it the wrong structure? Is it losing? I don’t know, they lost all the retail interest and they were they kind of lost a flywheel per se. Like, what are what are the main or maybe they took on bad debt terms? What do you see as like the common reasons that they don’t achieve that?

Jesse Myers (51:35)
Yeah.

Stephan Livera (51:35)
Bitcoin yield or yeah, yeah, Bitcoin yield.

Jesse Myers (51:38)
I

think it’s kind of all of what you mentioned and really any misstep can screw it up, right? I think unfortunately a lot of these are structured from the beginning in a way that makes it hard to execute. And I think that broadly people have undervalued the importance of retail investors in the success of this model. you need to start from

⁓ your, your retail investor base, ⁓ and, treat them with respect, ⁓ and you do right by them and get them excited. You know, like they need to have an investment case that gets them excited so that they invest and give you the premium that you need to run the playbook. Right. And then they are the number one promoters of what you’re doing to let other people know. ⁓ and so I think, you know,

SmarterWeb has the third largest Bitcoin, Twitter, Bitcoin treasure company community, approaching 4,500 people there, which is, know, it’s number one is strategy. Number two is MetaPlanet. Number three is us. And I think that’s, obviously that’s a, that’s a metric that’s downstream of everything else. It’s a secondary thing. But I think it’s an indicator of.

of, you know, having the right fit, the right excitement, the right communication cadence, the right everything to get, you know, a retail investor interest in your, in your company. ⁓ and, and I think that’s like the number one place where people go wrong is by not focusing on developing that. ⁓ and, and there are all the other things that you can do to screw it up too. You know, if you take the wrong deal.

And, you know, it, suddenly, ⁓ people lose confidence in your strategy going forward and they, and they bail. ⁓ you know, then you lose your MNAV and you lose the ability to keep running the playbook. So it all, it all matters ultimately. and I think we’re finding out that, you know, there’s been a lot of experimentation and a lot of attempts at shortcuts. ⁓ I think.

we’re finding out that you have to still do everything. You have to not only execute, but communicate well with your investors, spotlight the success that, you know, the metrics that you’ve been delivering on. ⁓ And also, you know, treat your investors with respect ⁓ and get them excited, right? Ultimately, this is about generating excitement for the machinery that you’ve built and put in place to try to…

deliver Bitcoin yield into the future.

Stephan Livera (54:36)
I see. Now, I think kind of tying back to what we were saying earlier about maybe some of the pipe deals that have gone on with treasury companies, where maybe the price had fallen quite a lot from that level because, know, hypothetically, some of the, you know, the big boys who got in on the pipe deal, their unlock happened and they sold and dumped and kind of all the quote unquote retail bag holders got wrecked kind of thing. So, but at the same time, like what you’re saying, retail, it matters having them.

At least for a young treasury company, maybe you could argue once you’re bigger, it’s maybe you know, it’s a different story that you have institutional capital and other forms of capital that you can tap ⁓ but it’s an interesting dynamic because ⁓ some of the criticisms of these treasure companies has been that yeah, look, it’s like greedy insiders kind of pumping up a company and then kind of exit liquidity onto onto unsuspecting retail just like

Jesse Myers (55:09)
Right, right.

Stephan Livera (55:33)
the shit coin ICO days, right? So that’s maybe the criticism that we’ve seen ⁓ of some treasury companies. ⁓ So how do you sort of ⁓ thread the right needle there of having retail involved, but it not being, quote unquote, extractive of them or kind of dumping on them at an overhyped price?

Jesse Myers (55:56)
Yeah, it’s a great question because I think we’re going to learn a lot more collectively as an industry about the ways in which you can do it, the ways in which it works. ⁓ SmarterWeb, founded by Andrew Webley, who’s born and raised Brit from Bristol. ⁓

loved micro strategy and what was happening in the U S wanted that in the UK didn’t see it for years, kept looking for years, eventually said, okay, I will take my small private company public and I will do this strategy in the UK for UK investors like me. Right. And so from the beginning, he’s had a, a mindset of like, this is for retail. Like I’m doing this for UK retail investors like me. And, and I want them to have a fair shake.

And I want to, you know, not offer discounts to institutional investors. ⁓ and this is, this is about having a vehicle that can, that can do for UK investors, what strategy as a public company is able to do for us investors. ⁓ and that mindset has kind of guided smarter webs approach, approach to the entire market and especially to, you know, how to interface with retail investors.

And, you know, it’s, it’s, it’s worked well. You know, I think that Andrew’s message, ⁓ and entire ethos resonates a ton with retail investors, especially in the UK. ⁓ cause he’s one of them and he’s, you know, his integrity and authenticity about like, this is really for, you know, this is for us. shines through and, and I think that’s, you know, it’s intangible, right? Like it’s, it’s hard to.

value that, but it has clearly worked ⁓ because he really means it, you and we haven’t taken discounts. We haven’t done deals at a discount for institutional investors. ⁓ And so, you know, there’s been a lot of wealth generated for SmarterWeb retail investors over our five month history, and we want to keep doing that for our investors. And, you know, I think that is what people…

understand and they can sense it and they want to invest in a mission like that and believe in leaders like that. ⁓ And so that model has worked. I think that’s, frankly, I think that’s a bit more articulated version of retail first than MetaPlanet ever had. just sort of organically happened, I think, for them. ⁓ And it’s been a ⁓ priority.

for our version in the UK and has seemed to resonate very well.

Stephan Livera (58:54)
Yeah One other topic because obviously it’s this one is very topical It’s a news in the news M &A now many people have spoken about this concept of okay What happens when some of these treasure companies are below 1x M nav? Is there going to be M &A action or just in general? Will there be M &A action amongst these Bitcoin treasure companies and we’ve seen arguably the first big example with this strive acquisition of semla scientific now, I know

You probably haven’t like dived deep into it, but I’m just curious if you have any broad thoughts. What does that mean? What is your reaction on that? ⁓ And do you think it was early for this to happen? Like were you expecting it to happen so soon?

Jesse Myers (59:38)
Yeah, a little earlier than I would have guessed. ⁓ If you had forced me to guess who would be the first company to make an acquisition like this, I would have guessed Drive. I think it’s sort of in their DNA to be creative here and find discounts. And it’s in their wheelhouse as capital markets veterans with Matt Cole and Vivek running it. ⁓ But definitely sooner than I expected. I think…

What’s, I think this will happen. This will continue to happen. I ⁓ people aren’t broadly aware that like, if you, if you, if you think about a Bitcoin treasury company that is not generating yield, right? So it’s not, if you, if your flywheel stops, ⁓ where should you trade, you know, in terms of your MNav? The reality is you should trade under 1X MNav because unless you have a

operating business that covers the expenses for the entire operation. ⁓ If you don’t have that, then basically you’re going to have to cover your costs by selling Bitcoin. And that’s a drag on the value proposition and the ownership value of a slice of that Bitcoin. ⁓

Stephan Livera (1:00:59)
Although modular

if they do have a an operational company like similar does or did let’s say

Jesse Myers (1:01:04)
Yeah, right. And that’s where, you know, maybe there was a mispricing here of like, if they were able to, if they were going to be just fine covering their costs with their operating business. ⁓ It is kind of strange if you, if you trade under a one XM nav, but I think that kind of comes back to like.

Stephan Livera (1:01:21)
Yeah, but I guess that’s I guess one

other point on that is, and I’m curious to get your reaction here, the reason I’m jumping in here, because is it that some investors are having trouble kind of disaggregating the operational business from the Bitcoin financial engineering side of it. And that’s why like the MNav numbers can, I guess it just depends how you count MNav.

Jesse Myers (1:01:40)
Yeah, we think about this a fair bit. ⁓ And of course, we’re biased about SmarterWeb. But we think that it clearly is a detriment if you don’t have ⁓ a cash flowing, profitable operating business at all. If you have none of that, that’s a problem. Because it’s a drag on your treasury in the event that you stop generating new ⁓ fundraising.

⁓ But you can also be, I think, too large of an operating business where, you know, how do you allocate capital? You know, where is management attention being spent? ⁓ You know, I think there’s a sweet spot where you want an operating business that can cover expenses, but that’s it, right? And hopefully that’s small relative to your Bitcoin treasury so that the focus is really on the Bitcoin treasury. That’s the case with SmarterWeb. ⁓ I’m actually less familiar with, you know,

the scale of Semler’s operating business relative to their Bitcoin treasury. But I know that it’s significantly bigger than, way, way bigger than SmarterWeb.

Stephan Livera (1:02:44)
Interesting. Yeah. And I think we probably

agree that as you get bigger, like take the example of strategy, right? They’ve got over $70 billion of Bitcoin. I don’t know how much they’re operating, ⁓ you know, the software side of the micro strategies business, what that’s earning is like $100 million a year. Like, I mean, that’s obviously immaterial when they’re balance sheets, well over $70 billion. So maybe there’s a point at which it kind of

Jesse Myers (1:03:07)
Yeah. Right.

Stephan Livera (1:03:13)
It doesn’t matter like what your Bitcoin balance sheet is so large that unless you have like some phenomenal operating business, it’s just going to be a small fraction of your balance sheet.

Jesse Myers (1:03:23)
Yeah, yeah, that’s

right. And, you know, when strategy started this, I think their market cap was like a billion dollars. So let’s assume, you know, the operating business is still worth a billion dollars. That’s a tiny fraction, you know, compared to 70 billion. But, you but it did help them in 2022 when, you know, in the bear market, strategy traded under 1X MNAV and everybody, and there was like swirling narrative of like,

Stephan Livera (1:03:44)
Right, in the bare cycle, yeah.

Jesse Myers (1:03:49)
know, sailors going to capitulate and they’re going to have to sell corns, they’re going to get margin called or whatever. But they didn’t and they didn’t have to do anything because they were still running a profitable operating business. And I think that helped their narrative, you know, and helped them find the floor. ⁓ So, you know, it mattered then. It probably doesn’t matter now anymore. Like they’ve made it through a full cycle. They’re much, much larger now.

Stephan Livera (1:04:10)
I guess it’s like once you get through that

gauntlet, now you’re big enough and you can get away without it. I don’t know. I guess it’s a debatable point, but yeah, go on.

Jesse Myers (1:04:13)
Yeah.

Yeah, that’s all. Yeah, right.

Stephan Livera (1:04:20)
Yeah, so I guess back to &A in the space and where you

see that, like, do you see more opportunities? I think probably both of us agree there that we’re going to see more of this kind of thing and especially in a case where a company is below 1x MNAV, but we could see it in other scenarios too, right?

Jesse Myers (1:04:37)
Yeah, that’s right. I think we’re definitely gonna see more of this. ⁓ We’ve sort of talked about like, it’s hard to get to scale, right? It’s hard to get your flywheel going and keep it going and get to a certain scale, call it 2100 Bitcoin, 1 % of 1 % of all Bitcoin and keep going from there. ⁓ And so most Bitcoin treasure companies won’t make it there, right? And de-risk enough that, you

they have a high probability of keeping their flywheel going. ⁓ So most flywheels will stop. Most will end up, because of that, ⁓ with investors selling to get out and taking a loss and driving the MNAV under 1X. And then they become targets, right? They become opportunities for the right buyer to do a deal.

And you know, it’s going to look like strive. are going to be other creative ways to structure deals like this. We’re going to see a lot of consolidation just based on like these things becoming targets if they don’t work. You know, the mechanics cause them to trade under 1XMNAV and then that’s an opportunity for somebody else. However, yeah, however, like I think that one of the things that retail investors aren’t really aware of is like, it’s really messy.

Stephan Livera (1:05:50)
Yeah, and I guess, it gone?

Jesse Myers (1:06:00)
to do ⁓ &A, it’s a whole can of worms. ⁓ And even if on paper, like, ⁓ one company is trading at 0.7 MNAV, like that’s buying Bitcoin at 70 % of the current price, right? Like that’s a great deal. But if it can come with, you’re acquiring the whole balance sheet, you’re acquiring potentially an entire mess.

and you’re acquiring, you know, a shareholder base that may not have the same ⁓ outlook as you. You know, maybe they’re coming from a different industry as you originally. ⁓ You’re also inheriting, you know, the infrastructure of the business, the personnel, the management team, the personalities. And all of this comes with a lot of legal work to sort out and a lot of time. It can pause things for six months to do a deal like that. And that can-

hard that can hurt the acquiring the Bitcoin Treasury Company ⁓ because they are less able to do things for six months. That’s an age ⁓ in this landscape. So I think there are more reasons why it doesn’t make sense to do a deal than many retail investors are currently thinking. However, there will be lots of deals because there are opportunities with this and there are probably ways to structure it creatively to get rid of lot of that downside.

Stephan Livera (1:07:18)
Gotcha.

Yeah, interesting. think maybe the other surprise factor here, let me put it this way. It could be that part of what made this happen, the Semler and Strive deal is because both companies and both sets of leadership were very kind of aligned on kind of the Bitcoin maxi vision. And if that were not the case, it might not have been so easy to sort of

to get everything aligned to make this deal happen. And maybe we’ll see what happens in the future in the next few years with all the treasury companies and &A activity. It depends on kind of how aligned they are ⁓ on some of these things. But yeah, I guess it’s an open question and we’ll just sort of have to see what happens there. So I guess any other ⁓ closing thoughts on Bitcoin treasury companies, MNAV, justifying a premium or anything else you want to close out with?

Jesse Myers (1:08:19)
Yeah, I guess I just sort of in closing thoughts, I mean, I think that, you know, first of all, it’s very interesting that many, many, many Bitcoiners are extremely skeptical of this space. And I think that’s because, you know, people have seen enough ⁓ altcoins, ICOs, know, BlockFi, Genesis, Celsius, these things, ⁓ and are very wary. ⁓ But I think…

At the same time, these fundamentals are real. The point of these businesses is to accumulate Bitcoin, which we all agree is the best asset. And so there’s a lot of potential value to be delivered here. And as a result of that, I think this is here to stay. This is also how Bitcoin matures. This is the next step in its evolution and maturation as an asset. ⁓ This is how Bitcoin will eat TradFi.

as these Bitcoin treasury companies recapitalizing the world with digital capital. ⁓ And so I think this is bigger than people realize as a trend for Bitcoin and for the world. And I think it’s going to be a major story that plays out over the next few decades. And it’s the first year of that. Saylor was on stage in New York making this point. This is year one. He’s been doing this for five years.

but he’s saying that this is year one of the Bitcoin treasury industry. And it’s because, you know, he stumbled into it and now it’s been articulated and now we really know what’s going on. Like it’s happening now and it’s only just starting. So, you know, I think that it’s worth paying attention to basically. And I think it’s, I think it may not be the right, you know, thing for everybody’s portfolios, but, you know,

I asked this question of sailor, gosh, was 12 months ago now. ⁓ you know, ⁓ I, you know, I said to him, I, I live by the rule you have of never sell your Bitcoin. and I’m a hundred percent Bitcoin, but now there are these Bitcoin treasury companies, ⁓ that are enticing. Like, you know, what do you say to, to Bitcoiners who are already a hundred percent Bitcoin? ⁓ and he said, he cut right through it and said, ⁓ you’re for

For Bitcoin maximalists, the risk-free rate is holding Bitcoin, but there’s still a place in portfolios for risk capital. And, you know, I’ve been stewing with that for ever since. And, you know, I think he’s right that maybe for some Bitcoiners, maybe they want a hundred percent of their portfolio to be cold storage Bitcoin. And that’s great. For some Bitcoiners,

maybe they want to have 20 % exposure to risk assets whose goal is to grow their Bitcoin ownership. And that’s kind of where these companies fit in. And I think they represent potentially tremendous value in the investable landscape because they’re currently not well understood and the mechanics of Bitcoin yield are greatly undervalued. know, everybody thinks about MNav.

why would I pay 2X to own Bitcoin and seems to forget the reality of compounding Bitcoin over time and how quickly that generates a return and the gains that come beyond that return. So I think there’s a big opportunity for people to do their homework now and pay attention to this space as it continues to evolve because I think we’re at the outset of what will become the most valuable industry in the world.

by total value if this becomes a $140 trillion industry the way I think it might 20 years from now.

Stephan Livera (1:12:22)
Yeah, I think I agree with you there. it’s interesting that as you said, some people have been against some Bitcoiners are against these treasury companies in a way and maybe they point to like recent price moves or price drops. But to me, the way I think about it, just like you, is there a fundamental business model here? Right? Like can you if some of these companies are borrowing at 10 % or 8 % or even less, and they’re buying Bitcoin growing at 30 or 40 % per year?

It’s a clear business model. Now, of course, you have to understand the risk. And as you said, I agree with you, I think it’s going to be when it takes most. So if you’re investing in these treasure companies, you ideally want to be kind of in that top one, two or three, or ideally the top one in the jurisdiction ⁓ to really maximize your gains. ⁓ But of course, it’s difficult to predict how it all plays out. So listen to check out the website. It’s a smarter web company dot co dot uk. ⁓ Jesse ⁓

Jesse Myers (1:12:48)
There you go. Yeah.

Stephan Livera (1:13:17)
Thanks for joining me today and of course I’ll link your social media in the show notes. Thanks for joining me.

Jesse Myers (1:13:24)
Awesome.

Thank you, Stephan.