- MicroStrategy’s Michael Saylor introduced two key metrics, BPS and CEBE BPS, to evaluate if a Bitcoin treasury company can outperform Bitcoin itself.
- The difference between these metrics, termed “Amplification,” is created by taking on debt or preferred shares and can lead to either outperformance or underperformance.
- Saylor’s benchmark states a company should outperform Bitcoin if Bitcoin’s annualized return rate exceeds the firm’s cost of capital.
- Short-duration, high-cost debt creates risk, while long-duration, low-cost liabilities can generate upside for common shareholders.
MicroStrategy (MSTR) Executive Chairman Michael Saylor laid out a critical framework on Sunday for judging whether a Bitcoin treasury company can actually beat Bitcoin’s own returns. He said the starting point is a metric called BPS, or Bitcoin Per Share, measured before accounting for senior claims like debt.
However, for companies with liabilities, BPS alone is insufficient. Consequently, Saylor introduced a second metric, CEBE BPS, which measures Bitcoin per share after all senior claims are settled.
The divergence between these numbers is what Saylor calls Amplification. He wrote that this gap creates the potential to outperform Bitcoin when liabilities are present.
Meanwhile, he cautioned that not all debt is equal for creating positive leverage. Short-duration, high-cost liabilities can turn amplification into risk and underperformance.
Conversely, long-duration, low-cost liabilities can turn that same amplification into common equity upside. This framing provides a lens for evaluating MicroStrategy‘s own financial products.
Saylor summed up the entire framework with a single, definitive benchmark. “If BTC ARR exceeds the cost of capital, a well-capitalized Bitcoin Treasury Company should outperform BTC,” he stated.
MicroStrategy’s stock was up by 0.33% during after-hours trading following his comments. Retail sentiment around MSTR on Stocktwits remained ‘bearish’ over the past day.
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