In a Nutshell
- Semler Scientific's stock value barely surpasses its Bitcoin holdings, as indicated by the mNAV (multiple-to-net asset value) of 1.07 on Tuesday.
- With an mNAV below one, Semler, like many Bitcoin treasury companies, may struggle to grow their Bitcoin per share.
- However, according to Matthew Sigel, head of digital assets research at VanEck, Semler can still manage to stabilize value if they prioritize shareholder interests.
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Bitcoin Treasury Companies Potentially Showing Red Flags Due to Semler Scientific's Unsettling Scenario?
Nasdaq-listed healthcare technology firm, Semler Scientific, showcased a slim premium compared to its Bitcoin holdings on Tuesday, as per its official website. The firm's mNAV, or multiple-to-net asset value, was hovering at 1.07. This implies that the $498.5 million enterprise value, which comprises Semler's market cap, debt, and cash balance, was only slightly ahead of its 4,449 Bitcoin worth $466 million.
An mNAV below one signifies that the market values the company at less than the value of its Bitcoin holdings per share. In other words, the company’s market capitalization is lower than its net asset value (NAV), with Bitcoin serving as their primary net asset for these companies. This situation may cause concern for investors as they may question the company's ability to generate additional value beyond its Bitcoin holdings.
Matthew Sigel, from VanEck, stated that Semler is now in a position where many Bitcoin treasury companies might find themselves soon: trading close to their NAV and facing pressure to demonstrate capital discipline.
When Semler revealed its latest Bitcoin purchase this month, the company shared via a regulatory filing that it had recently acquired 185 Bitcoin for $20 million. Additionally, they indicated their intention to sell $364 million worth of common stock through an at-the-market (ATM) offering program.
Ben Werkman, the chief investment officer at financial services firm Swan Bitcoin, explained earlier that a discount can unnerve investors in a Bitcoin treasury firm if they begin to suspect that the firm can no longer raise funds in a manner that benefits shareholders.
Strategies to counter such a situation can include pausing ATM issuance when the stock trades below 0.95 times [net asset value] for 10 or more trading days, among other options. Nevertheless, Sigel mentioned that legacy business issues that have deteriorated and other factors such as market cap, low liquidity, limited convertible bond issuances might be negatively impacting Semler’s mNAV.
In recent months, the mNAV has grown as a popular metric for comparing Bitcoin treasury companies, with various firms like Semler embracing this trend. Nevertheless, Semler started investing in Bitcoin last May. In April, Semler signaled a potential $30 million settlement with the U.S. Department of Justice to resolve federal anti-fraud law violations regarding its QuantaFlo product marketing.
On Tuesday, Rosen Law Firm, a global investor rights law firm, announced it would initiate an investigation into potential securities claims on behalf of Semler's shareholders. Semler's stock price dropped by 6.5%, closing at $28.30, according to Yahoo Finance. The company holds the 10th largest Bitcoin treasury by dollar value, just behind video game retailer GameStop, as per Bitcoin Treasuries.
Some analysts have warned that if Bitcoin's price falls below a certain level, it could compel companies to sell their Bitcoin, potentially reversing buying pressure this year.
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- Semler Scientific's Bitcoin holdings, valued at $466 million in Bitcoin (BTC) and Ethereum (ETH), surpass their stock value, given the mNAV of 1.07 on Tuesday.
- Semler, like many Bitcoin treasury companies, may face challenges growing their Bitcoin per share due to an mNAV below one.
- Matthew Sigel suggested that Semler, with its primary net asset being digital assets, might stabilize its value by prioritizing shareholder interests.
- Semler recently acquired 185 Bitcoin for $20 million, as indicated in a regulatory filing, adding to its existing crypto holdings.
- Strategies to counter a situation where a company's stock trades below 0.95 times its net asset value (NAV) for 10 or more trading days include pausing at-the-market (ATM) issuance.
- Investing in digital assets, such as Bitcoin and Ethereum, can pose risks to businesses, as a fall in Bitcoin's price might compel companies to sell their holdings, potentially reducing buying pressure.
