The Bitcoin treasury business bought back 782,000 shares at a price lower than NAV. This enhances its exposure to Bitcoin and helps reduce the gap between market price and asset value.
ProCap Financial, a Bitcoin treasury firm, has increased its digital asset reserves as part of its efforts to close the gap between its share price and underlying net asset value (NAV). This shows that the company has a disciplined capital allocation strategy in the face of volatility in the crypto and equities markets.
ProCap said on Monday that it bought 450 Bitcoin (BTC) during the latest market drop, increasing its total to 5,457 BTC. The extra purchase also brought down the company’s average cost basis per coin.
ProCap also stated it bought back 782,408 of its own shares in the last 10 days at prices that were much lower than its calculated NAV per share. This brought the market price and intrinsic value closer together. Yahoo Finance said that the shares traded on the Nasdaq were up 7.17% to $2.84 per share as of Monday morning.
Last year, ProCap became a Bitcoin-native financial services company, raising more than $750 million in its first round of fundraising. It then went public through a SPAC merger.
The two actions together show that ProCap is trying to close the gap between the value of its assets and the price of its shares while also boosting its exposure to Bitcoin. Buying back shares below NAV lowers the number of shares outstanding. This can raise NAV per share and, if market circumstances stabilise, may even decrease the discount.
Source: BitcoinTreasuries.NET
Tests for NAV compression model for the Bitcoin treasury
Bitcoin treasury businesses are having a difficult time because the digital asset markets have been going down for months. This decline has led to a decrease in NAV premiums across the industry.
NAV is the total value of a company’s assets, in this case mostly its Bitcoin holdings, minus its debts, divided by the number of shares that are still out there. Investors in Bitcoin treasury firms typically look at multiple-to-NAV (mNAV), which compares a company’s market capitalization to the value of its underlying Bitcoin per share.
Shares of a firm are worth more than its net asset value when mNAV is over 1.0. When mNAV is below 1.0, shares are worth less than their net asset value. BitcoinTreasuries.NET says that ProCap’s mNAV is now about 0.24.
Some people in the business, nevertheless, wonder if mNAV really shows how much Bitcoin treasury companies are worth. Greg Cipolaro, the head of research at NYDIG, has said that the standard mNAV framework may not be complete because it doesn’t take into account enterprises that are already running or strategic objectives that go beyond just retaining digital assets.