According to CNBC, famed short seller Jim Chanos has closed his closely-watched bet against Strategy, the company formerly known as MicroStrategy. Chanos announced Saturday on social media that he unwound his pair trade of shorting Strategy and going long bitcoin as of Friday’s market open. The move came after Strategy shares plunged about 50% from their 2025 peak, erasing much of the premium investors were willing to pay for its massive bitcoin holdings. The software company has become the largest corporate holder of bitcoin with billions of dollars worth of the cryptocurrency. When Chanos first recommended the trade privately in December 2024, Strategy’s market-implied net asset value was around 2.5x, meaning investors paid $2.50 for every $1 of bitcoin the company owned. That multiple has since narrowed to about 1.2x as Strategy stock fell while bitcoin stayed near record highs.
The Premium Collapse
Here’s the thing about this trade – it was never really about whether bitcoin would go up or down. Chanos was betting on the premium collapsing, and boy did it ever. Strategy shares got absolutely hammered while bitcoin itself held relatively steady. That’s the dream scenario for a pair trade like this. The company’s mNAV multiple went from 2.5x down to 1.2x in less than a year. Basically, investors finally woke up and realized they were paying a huge markup just to get bitcoin exposure through a corporate structure. And when you think about it, why would you pay $2.50 for $1 of bitcoin when you could just… buy bitcoin?
What’s Next for Strategy?
Now the big question is whether Strategy can maintain even that 1.2x premium. Chanos thinks it’s inevitable the company marches toward a 1.0x mNAV, meaning the stock would trade exactly at the value of its bitcoin holdings. He’s probably right too. Strategy keeps issuing more common equity to buy more bitcoin, which dilutes existing shareholders and puts downward pressure on that premium. It’s a weird business model when you step back and look at it – a software company that’s basically become a bitcoin ETF with extra steps and higher fees. And let’s be honest, the software business itself hasn’t been the main attraction for investors in years.
The Bigger Picture
This whole saga raises some interesting questions about corporate bitcoin strategies. We’re seeing other companies like Tesla and Square dabble in bitcoin holdings, but nobody went all-in like Strategy did. The company used leverage to amass its position, which added another layer of risk. I mean, imagine borrowing money to buy volatile assets and then watching your stock get cut in half. Ouch. The thing is, this trade working out for Chanos doesn’t necessarily mean he’s bearish on bitcoin itself – he was long bitcoin as part of the pair trade. It just means he recognized an arbitrage opportunity that eventually closed. Smart money sees these disconnects and pounces.
