{ "episodeId": "SLP691", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "jesse_myers": { "name": "Jesse Myers", "role": "guest", "tag": "JESSE" } }, "segments": [ { "speaker": "stephan", "time": "00:10", "start": 10.43, "text": "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 and 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 He's head of Bitcoin strategy now at Smarter Webco, which is a Bitcoin, treasury company in the UK, and, Jesse, I 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!" }, { "speaker": "jesse_myers", "time": "00:46", "start": 45.68, "text": "Yeah, great to be back. I, I don't remember the, it, it was, must've been like twenty twenty-one, twenty twenty-two when I came on before, but, it's been a while, so excited to talk to you again." }, { "speaker": "stephan", "time": "00:55", "start": 54.59, "text": "Yeah, I mean, back in those days, you were still under the pseudonym, Crysus, and now you're, you're out, out, out there under your real name and face. So, let's, yeah, let's start with, Smarter Web Co. maybe give us just some of the overall picture there. like, you know, how many Bitcoin do you have? What's the mNAV? Like, just some of those kind of high-level stats and facts." }, { "speaker": "jesse_myers", "time": "01:19", "start": 79.44, "text": "Yeah, so, as of today, we just announced, we bought an additional, fifty Bitcoin, and that puts us just over, twenty-five hundred, Bitcoin total. and our, as of today, our mNAV is about one point six. and it got as low as like one point two, just under even. it does seem, and we'll get into this a bit more, but it does seem like, you know, we- That, that, there might be some recovery, there in terms of mNAV, especially given that our, our Q3, Bitcoin yield, to date, has been plus two hundred and seventy-eight percent. So, you know, that, that, and we'll get into all this, but, you know, that I think is the, the big headline for Smarter Web at the moment is our, we're, we're priced at, the market is pricing us as if we will only ever deliver plus sixty percent Bitcoin yield forever, and yet this quarter we have delivered plus two hundred and seventy-eight percent, and I think that's just, combination of, of the global sector wide mNAV compressions over the last ten weeks and, and at the same time, our investors, savvy Bitcoin, Bitcoin Twitter investors, you know, who are paying attention to all these stats, see the value and are stepping in, I think, to, to, you know, m- Capitalize on what they may view as a mispricing based on our track record of delivering Bitcoin yield at the moment." }, { "speaker": "stephan", "time": "02:56", "start": 176.24, "text": "Of course, and as you know, I'm bullish Bitcoin and bullish on Bitcoin treasury companies, but maybe the narrative right now is, \"Oh, it's a lull. It's, you 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" }, { "speaker": "jesse_myers", "time": "03:20", "start": 199.66, "text": "Yeah, a, a lot to say here. So, so obviously, I don't think it is, a flash in the pan. I think there are real fundamentals here that matter and, and deliver a tremendous value to shareholders if you're, if you're invested in the right- Bitcoin Treasury Company. I think what we've seen over the last six months is, you know, people got too excited, the entire sector got excited, and everybody decided to become a, a Bitcoin Treasury Company and, There were too many. most of them never got off the ground or never really delivered a track record of, of Bitcoin yield, which is, which is the whole point of a Bitcoin treasury company. and, and that's a combination of- Small companies that, you know, said they had the intention of becoming a Bitcoin treasure company and for whatever reason couldn't, e-follow through with execution. You know, that, that takes a lot, right? You have to, you have to change your business, you have to set up the infrastructure, you have to, you know, generate excitement from 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, you know, wanted to follow this strategy, haven't been able to, to, to get to scale. I think there's a, a really big filter of can you get to a thousand, maybe it's twenty-one hundred Bitcoin with a track record of delivering Bitcoin yield? and, you know, if you, if you look at it that way, only a handful of the, let's say, two hundred Bitcoin treasury companies in the world have actually done that. so, you know, there's that going on, and then the other thing that would, that has really complicated things is we've seen a lot of PIPE deals, which I, you know, I think are, has been a shortcut to try to get to scale. as a, you know, as a Bitcoin treasury company. But the problem with that is, you know, I think the market is learning that for, for two reasons in my mind, that creates tremendous headwinds that, that I've yet to see an example of those headwinds being overcome by a PIPE deal funded Bitcoin treasury company." }, { "speaker": "stephan", "time": "05:32", "start": 332.17, "text": "And just quickly for listeners who aren't familiar, PIPE stands for, private investment in public equity. Now, the, I guess, the sentiment around that can sometimes be seen as, \"Oh, like, 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 the, and I guess to sort of steelman the, 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, or it's sort of like, maybe they would frame it like, oh, it's a necessary evil to sort of get off the ground. I guess there's, there's kind of some different arguments going both ways. Can you maybe offer your comment on this," }, { "speaker": "jesse_myers", "time": "06:19", "start": 378.6, "text": "Yeah, absolutely. You know, so, so the goal there is to, like, how do we get to scale quickly? And the way these deals end up getting structured is they're offered at a discount. So, you know, you'll, you'll go to institutional investors and say, \"We'll give you a ten or twenty percent discount.\" if you do this deal, and it becomes easy to, easier to raise that kind of capital for the wrong reasons, though. You know, the, those investors, many of them, most of them, aren't 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" }, { "speaker": "stephan", "time": "07:03", "start": 422.99, "text": "and dump as soon as they unlock. Yeah, you" }, { "speaker": "jesse_myers", "time": "07:05", "start": 425.07, "text": "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 ten percent. you know, and, and, and that's a fantastic- Value proposition for a hedge fund, you know, if they're tying up capital for three months, boom, they just got ten percent for, for a quarter of the year. That's a really good return, and, 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're, you, you have hedge funds that want out. They, they never planned on holding, they're, they're getting out." }, { "speaker": "stephan", "time": "07:46", "start": 465.67, "text": "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, 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 insta-dump or like it's a one or two month lockup, it's like a five year lockup or, you know, some kind of longer lockup?" }, { "speaker": "jesse_myers", "time": "08:08", "start": 488.44, "text": "Yeah, quite possibly, because, you know, then you filter out the, the, you know, then you're asking a hedge fund that's looking to do a, a deal like that to tie up capital for years, and if you're gonna, if you're gonna deliver a ten percent return over, you know, call it three years, that's not good enough, right? Like that, 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, you know, again, you're, you're then limiting your access to capital because the vast majority of capital wants to do that discount deal, and a, and a very small minority of, of institutional allocators, take it from me, I, you know, we, we have these conversations with institi-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, you know, that's, that's the tension there. The other, the other problem with With, you know, pipes, pipe deals or, you know, 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, you know, when you, 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 the, how high of an mNAV you're willing to, to pay is based on how much future Bitcoin yield you expect, that company to generate. So if you're a company- 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, 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, you know, what generates value here. I think, you know, going back to, what has been the, the, the best example of a Bitcoin treasury company of success? What does success look like in this space? It's, it's been MetaPlanet. You know, for the last eighteen, eighteen months, they've grown from nothing, you know, like a ten million dollar company to, to now, a company with thirty thousand Bitcoin or, or on their way to thirty thousand Bitcoin. Incredible growth story. I, and it- The, the entire model was start small, deliver a track record of Bitcoin yield and generate en-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 Metaplanet 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, and I think the temptation to, you know, jump to scale, has been, you know- It's been, it's been irresistible for a lot of people, but, you know, this is why Smarter Web is following the, the, the Metaplanet playbook in the UK and, and seeking to follow that, that very established pathway to success." }, { "speaker": "stephan", "time": "12:16", "start": 735.52, "text": "I think, 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 I think Meta Planet, the timing of their kind of launch, like when, you know, when Dylan Leclerc kind of went out of the Bitcoin Magazine orbit, or I mean, he still kind of is, but into, you know, formerly being a part of Meta Planet, it was kind of like, you know, not many people were into this whole treasury idea, like 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 know, they're now reaping the rewards of, of that, combination." }, { "speaker": "jesse_myers", "time": "13:19", "start": 799.29, "text": "Absolutely. Totally agree with that. I think Japan was probably the best place in the world to, to do this playbook, and, and they nailed it. and they, and they were alone for a while and were able to get to scale. I, I, I do also wanna say, like, I, I don't want to be attacking any, Bitcoin treasury company, but I do wanna point out that, like, their, that approach is-- has not really been de-risked. I, I'm not aware of a, an example of success yet, and hopefully, you know, those, those work out, because that would be better for Bitcoin. But, but, you know, I, I, I think that Smarter Web is focused on the example of success, for, for the reason that, you know, that is the pathway, that has been proven. I also wanna say that, that, you know, when Strategy did their thing, when MicroStrategy, you know, started in twenty twenty, and for years afterwards. everybody assumed you kinda had to be, s- an entity like MicroStrategy for this to work, that 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, the advice that like, \"You, you can't do it, it only works if you're a MicroStrategy type entity.\" they went in a-- they went ahead and tried it, and it worked, right? And then I think- It's interesting now that we're, you do see a sort of, common sentiment that you need to be in a metaplanet like situation for it to work. You know, it's just this bit of irony there that-- but I think the reality is that, that, you know, Bitcoin is the best thing, accumulating Bitcoin is the best thing that any company can do for its shareholders. And, and there's a tremendous opportunity because of the, you know, the arbitrage opportunity between these giant capital pools of fixed, fixed income market and, and equity markets and, and the money market where so much capital sits and little old Bitcoin, you know, that's zero point two percent of global asset value There's still tremendous opportunity to help facilitate the flow of capital to Bitcoin, and, and I think that's true everywhere for different reasons, right? Like in Japan, they, they, they have a tax advantage, preferential tax treatment for, corporate owners of Bitcoin versus, individuals. in the UK, we don't, we don't have that a-advantage, but we have a different one, you know, we have- A few. the big one is that retirement account capital hasn't had access to Bitcoin. the FCA, the, the SEC in the UK, hasn't authorized Bitcoin ETFs. they, they are now, next month, will be greenlighting, 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 Smarter Web, because, when that happened in, in the US, eighteen months ago with the Bitcoin ETFs, everybody thought that, you know, there would be no reason to invest in MicroStrategy anymore. and yet over the last eighteen months, I think one of the big winners has been MicroStrategy because of the increased regulatory clarity that it's okay to own Bitcoin. Bitcoin, you can include Bitcoin in your portfolio. And just more" }, { "speaker": "stephan", "time": "16:54", "start": 1014.29, "text": "interest coming into Bitcoin generally, it's kind of like a rising tide lifts all boats, at least in this, in these early days, right? before Bitcoin has, you know, the world is hyper Bitcoinized. absolutely. And," }, { "speaker": "jesse_myers", "time": "17:05", "start": 1024.87, "text": "and, and, and the final point there of like, the other thing that I think people miss about, you know, my, my view is that there's gonna be a leading Bitcoin treasure company in every capital market in the world. It's gonna be like a winner-take-most" }, { "speaker": "jesse_myers", "time": "17:20", "start": 1039.96, "text": "Leader, like, like Strategy in the US, like MetaPlanet in Japan, and the reason-- part of the reason for that is there are a lot of, in, in investors and funds, and s-- 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, a structural reason why there's going to be a, a winner in every capital market that's plugged into that local regulatory framework." }, { "speaker": "stephan", "time": "18:05", "start": 1084.69, "text": "Yeah, and I think it makes sense as well, just even thinking about the friction aspect of it, right? Like 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 gonna list their local equities, right? Just obvious, obvious reasons, and it's gonna list local products. I, I, I'm with you there. I think there is definitely, or as, Brian Brookshire has mentioned this kind of hometown hero factor, and I think, 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 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, you know, whatever, six hundred pound gorilla in the room or whatever it is, with the six hundred thousand coins or whatever it is 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, the jurisdictions with a big capital market. What do you think?" }, { "speaker": "jesse_myers", "time": "19:12", "start": 1152.12, "text": "Yeah, absolutely. So a, a few months ago, I kind of made, I made myself go through the analysis of like, how, how real is this Bitcoin treasury, you know, fad? Right? I-, is it a fad? You know, what are-- how big can this be? It was really the question I wanted to ask myself, and, and so I kind of, I went through the, the, the, management consulting approach to how you would answer this question, which I, you know, comes from my background, four years doing that, And, and I kind of surprised myself when, you know, when I thought through the logic of it, and, and the end result, you know, and this is, this is finger in the air really, so, you know, we'll see how it turns out, but I can see a world where it's possible, and, and this is a bit uncomfortable, really, it's possible that Bitcoin treasury companies accumulate half of all Bitcoin over the next twenty years, and, you know, when- When I, when I stepped through the logic of that, that's, that's what I, that's what 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- Sailor's numbers of, of thirteen million dollars a coin in twenty years, which, which are, you know, built off of, some of my numbers, which is very cool." }, { "speaker": "jesse_myers", "time": "20:43", "start": 1242.79, "text": "That, you know, that amounts to Bitcoin being two hundred and eighty trillion dollar asset class in, in twenty years, and if, if Bitcoin treasury companies accumulate half of that, that's a hundred and forty trillion dollars, I think that, that strategy would- Would let's say own half of that, so you know, seventy trillion dollars 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, you know, the, the rest of the Bitcoin treasury company landscape all over the world, would be the, the big story in global finance for the next two decades, the thing that nobody saw coming. in the same way that, you know, back in the day, nobody saw private equity coming, nobody, nobody saw leverage buyouts coming, nobody saw venture capital as a viable industry in finance, you know, forty years ago. and, and, and the last 16 years, we saw Bitcoin coming, 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, of a public company and, and the access to capital raising tools that a 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, and the, and the way it looks is, you know, like strategy today. they have set up all their preferred equity instruments. Which are targeting different slices of the fixed income market, and, and now the money market with Strach, and they're gonna keep coming up with new products to target more subsets of, of, you know, those pools of capital, and then I think that can happen W- in every capital market in the world, you know, for the local, dynamics and, and, you know, the, the, the same story playing out locally and all over the world. what that amounts to is like, who's gonna be the buyer for Bitcoin ten plus years from now, twenty years from now, when, when Bitcoin is five million dollars a coin? Right? I, and, and I think it's going to be the big buyers 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 three hundred trillion dollars in fixed income getting, you know, risk adjusted mid-single digit returns at best. You know, in, in, in, in real terms, losing value, I think. You know, if, if true inflation is seven, eight percent. And you're holding, you know, a ten-year US Treasury bill getting, four and a half percent, you're, you're destroying two and a half percent every year just holding that in, in real purchasing power. And so I think there's gonna be, you know, an exodus of value as value's always seeking greener, greener pastures. I think Bitcoin, you know, is the thing that, 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, a bond portfolio manager to say, \"You know what? I'm gonna sell these bonds.\" And I'm gonna buy 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 ten percent 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 twenty-nine percent K over the next twenty years.\" So, you know, we're sh- we're splitting the upside, you know, with you. You, you get ten percent of it, we get the rest. And, and that's an irresistible value proposition, you know, i-if you're accustomed to getting four and a half percent and, and somebody comes along and offers you ten percent, and it's just as, as low risk, if not lower risk, because of how overcollateralized strategy's balance sheet is, in my opinion. and, and that story is just gonna play out, you know, in the US and everywhere, over the next twenty years, and we're going to see the fixed income market deflate relative to other asset buckets, and, and Bitcoin's going to massively inflate relative to other a-asset buckets, and I think, I think what's happening is that, you know, 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, in, in towards Bitcoin. and, and that's what the leading Bitcoin treasury company in every capital market in the world will, will also be doing." }, { "speaker": "stephan", "time": "25:44", "start": 1544.1, "text": "I see, yeah, and I, I mean, I agree with you" }, { "speaker": "stephan", "time": "25:48", "start": 1548.32, "text": "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, right? And that's kind of the, the, 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, you know, weaker forms of it, let's say, and so that's this analogy of like structured- Different products to allow them- Yeah, he's" }, { "speaker": "jesse_myers", "time": "26:20", "start": 1580.34, "text": "got that, that great, oil- He, he thinks of strategy as an oil refinery, and it's, you know, refining, refining crude oil into all but, all sorts of financial products that various buyers want, right? And that, 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 his, with his engineering metaphors. And" }, { "speaker": "stephan", "time": "26:49", "start": 1609.38, "text": "one other kind of point, I'm, I'm interested to hear your reaction. So this episode is brought to you by CoinKite, the makers of my favorite Bitcoin hardware wallet, the Coldcard Q. Now, some people think self-custody is too hard, but it's really about taking responsibility for your Bitcoin wealth and understanding that self-custody gives you a true feeling of liberty. The Coldcard Q has a full keyboard and" }, { "speaker": "stephan", "time": "27:12", "start": 1631.72, "text": "A gap, allowing you to go fully airgapped using QR codes from seed generation to transaction signing. You can power the device using three triple A batteries, so you don't even have to plug it into the wall for power. You can easily use it with Sparrow Wallet for PC or Nunchok on mobile, and you can dial it into the right level of security and complexity that you choose. If you want a simple setup, just use twelve words and single signature. If you want passphrases, easy. If you want to add multisig or co-signing features, you've got those too. card or other devices and level up your self custody today. When we talk about this idea of winner takes most, or let's say it's kinda like maybe top three in each market or something like that, right? Like they're gonna get most of the, the gains. The, the funny thing might be that even if you're not in that top three, just, just doing the strategy, like, 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 caguring, whatever, forty percent, and, you know, I'm a fan of Powell 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 or kind of growing or kind of entering the, the index in their local home market just because they, they were holding all this Bitcoin and Bitcoin was going up so much." }, { "speaker": "jesse_myers", "time": "28:44", "start": 1724.42, "text": "Yeah, absolutely agree. I mean, yeah, the, the, the best thing that any company can do for its shareholders is accumulate Bitcoin, because it's the only asset out there that's gonna, you know, grow at thirty percent a year, and companies don't grow at thirty percent a year, so yeah, not in a sustained way," }, { "speaker": "stephan", "time": "29:02", "start": 1741.91, "text": "yeah. Yeah. But I guess the, the other, if I had the steel man though, look, if we had the steel man, I could, I could imagine maybe one steel man could be, well, look, Jesse and Stephan," }, { "speaker": "stephan", "time": "29:14", "start": 1753.96, "text": "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, at times in the cycle, maybe mNAs 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 deal man, argument against this view, right? How do you-- How would you respond?" }, { "speaker": "jesse_myers", "time": "29:40", "start": 1780.04, "text": "Yeah, okay, yeah, let's unpack. So we'll, we'll address like, why can't you as an individual, like, how is it different, do this strategy as an individual?" }, { "speaker": "jesse_myers", "time": "29:52", "start": 1791.85, "text": "I guess the, the simple answer is like, there are simply more capital market tools available to a public company, that, that simply aren't available to an individual. a public company can go out and, you know, raise a hundred million dollars at, you know, six percent interest rates or something like that. And, I would, as an individual, I would love to do that. You know, if I could get a five year dated hundred million dollars and, and have to pay that kind of, you know, and service that- debt, I would do that, but I-- but nobody's, I'm not credit worthy enough to do that as an indi-individual, right? But a public company can be. On top of that, you know, there's, the, the bread and butter for, for MetaPlanet over the last eighteen months was to use their ATM facility, right? They're, 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, 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, it's, it's easy to raise ten million dollars, it's harder to raise a billion dollars, but, you know, if, if you're scaling linearly, that, that ATM facility can, 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, of, of a stock, and, you know, that can be used to help raise money, That's part of our Smarter Convert, which is our Bitcoin-denominated convertible note instrument, which, as far as I'm aware, actually is, is the, the lowest risk way to outperform Bitcoin, because it- Investors keep holding Bitcoin, and they simply, are purchasing an option to convert into, Smarter Web shares if Smarter Web significantly outperforms Bitcoin. And so, you know, that, that's kind of a win-win, right, where, where you're, 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, you know, something that a stock has that an individual doesn't have. So those are some of the reasons why, you know, a, a public company can do this in a way that an individual just can't. And, and of course, the probably the simplest explanation is like, you know, Smarter Web can, depending on the structure of, of, of the instrument, we can raise it zero percent interest rates and an individual can't, right? An individual only dreams" }, { "speaker": "stephan", "time": "32:51", "start": 1971.27, "text": "of that level, yeah." }, { "speaker": "jesse_myers", "time": "32:52", "start": 1972.41, "text": "Yeah, can, can raise it twelve percent, you know, maybe twenty percent, depending on, on the type of debt they're taking. and that, that becomes harder to service, and also, you know, if, if Bitcoin's growing at twenty-nine percent a year, but you're raising it twenty percent It doesn't, it, it stops making that much sense, right? It's not as much of a," }, { "speaker": "stephan", "time": "33:13", "start": 1993.23, "text": "a, a premium, let's say. now on the convertible note question, Let's talk a little bit about that. So as I'm understanding, some, what some of these treasury companies 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 wanna lend us money at very low, you know, rates like zero or one percent or something like this, but also embedded is some kind of option at a certain premium above the current equity price. So it is zero per- percent debt, but it's also there's a bit of, dilution, built in if the stock price were to go, whatever, forty percent above or fifty percent 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 wanna sort of move away from the convertible debt because they see it like preferred shares is the, is the path, that's the future, and but you could also argue Cycle thing, like maybe some of the, the, the younger, smaller treasury companies, maybe it makes sense for them to do convertible debt, but maybe not for the larger ones. Or, 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, 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?" }, { "speaker": "jesse_myers", "time": "34:43", "start": 2082.98, "text": "Yeah, you, you, you got most of it right there, and then I'll add Commands a, a, a mNAV premium, like why is that deserved? 'Cause 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, they-- these are Bitcoin-denominated convertible notes. and they're quite different from fiat-denominated convertible notes. This is the, 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, in what's called a convertible arbitrage. So, you know, in particular, if you, if you're offered like a six percent coupon, convertible note, what, what's really happening? Happening there is the investor wants to give you the money and they want, and, and then they wanna short your stock, in order to hedge out their risk because they have the, the option value if the stock does well, where they can con-convert into equity, so they have like long exposure, and they have the coupon, you know, six percent in there that they're, they're gonna collect. and then, then all I need to do is short your stock in order to hedge out that long exposure. So now all they have is, is risk-free six percent. 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 zero percent and then they have a, an incredibly large, kicker, in, for an upside scenario where they get, you know, ten percent of the company. I've, I've seen stuff like that, snuck into proposals where it's like, \"This isn't, this isn't a serious deal,\" but some people are desperate so, you know, that, that's, I 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 creditworthy 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 still have some on their balance sheet, but Sailor, is not a fan of them. He, and he, 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, they are thorns in your side for years, and- And as debt holders, they have some seniority over equity holders, and, and they can be obstinate and, obstructionist, and, and, and a real pain in your butt. and Saylor has had to deal with that, I think, and, and I think that's been part of why, that plus the fact that you-- these things mature and you then have to pay them back in, in some big event, you know, of, 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 and their 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 a thorn in your side. so they-- so Sailor basically created A solution for all of the headaches that have come from the fiat convertible debt instruments that, that they've engaged in. but those are, those are IPOs, like those are expensive things to do, and you need to have a certain creditworthiness Really, meaning a certain size of pristine Bitcoin balance sheet in order to go down that path. So, our view at Smarter Web is, you know- There are life cycle stages that a Bitcoin treasury company has to progress through. You have to start small, in our view, with the sort of meta-planning 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 ten, twenty, maybe more thousand Bitcoin on your balance sheet the way that MetaPlanet has and then graduate into sort of these preferred equity instruments and, and, and evolve into something more like strategy as today. and so, you know, they're pretty discreet, 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, that it makes sense to, to offer these preferred equity instruments It's because you're, you're credit worthy enough that you can, you know, offer only ten percent instead of having to offer twenty percent, in order to entice, investors on the other side." }, { "speaker": "stephan", "time": "40:15", "start": 2414.86, "text": "Gotcha. Yeah, yeah, I think that makes sense. let's get to the mNAV question because I think this is a, 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 two dollars for one dollar of Bitcoin?\" Right? Like that's probably the, the standard form of the argument that we have heard many times. I believe some level of premium is justified, but really the, 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 kinda depends on various factors. how are you seeing this question? What is a justifiable premium to mNAV for these Bitcoin treasury companies?" }, { "speaker": "jesse_myers", "time": "41:18", "start": 2477.72, "text": "Yeah, this, this is-- has sort of become my favorite topic because I, I think there's so many misconceptions here. And, you know, obviously I've been living in this, trying to understand it, and, you know, I, I, I think it makes sense to, to me. and, and we, we were just in New York, last week for the, the Bitcoin Unconference and, and you know, had a bunch of, meetings with Wall Street investors, and, they're all missing it. Everybody's focused mNAV and, you know, and, and, and basing their perception of something as being overvalued or undervalued just on mNAV, which I think misses the, the real point, the, in, in the bigger picture. So, yet again, Bitcoin 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 treasury 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 treasury company. It is the mNAV a-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. Gotcha. And let's just quickly" }, { "speaker": "stephan", "time": "42:57", "start": 2577.08, "text": "explain the terms just in case anybody's not familiar. So what is mNAV and what is Bitcoin yield?" }, { "speaker": "jesse_myers", "time": "43:02", "start": 2581.98, "text": "Yeah, so mNAV is your multiple to NAV, and that means your, your Bitcoin holdings for a Bitcoin transaction company that ends up meaning your Bitcoin holdings Things minus debt, it, you know, a-as, as your NAV, and then your, your market cap divided by that is your MNAV multiple. So if you're, right. So just, just" }, { "speaker": "stephan", "time": "43:28", "start": 2607.62, "text": "silly example, let's say you've got a hundred million dollars of Bitcoin and, no debt, and your market cap of the company is two hundred mil, it's, it's simple, two x MNAV, right? That's MNAV. That's right. 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 the, you know, full conversion and this kind of thing." }, { "speaker": "jesse_myers", "time": "43:49", "start": 2628.83, "text": "Yeah, exactly. and then the other variable, Bitcoin yield is the growth of Bitcoin per share over time. All right. But that's also" }, { "speaker": "stephan", "time": "44:01", "start": 2640.86, "text": "accounting for the dilution, right? Like, the point is, you're adding more shares. You're only counting Bitcoin yield if it's accretive. That's the, like, that's the whole point of like accretive, accretive, accretive is accretive, right? Yeah." }, { "speaker": "jesse_myers", "time": "44:13", "start": 2652.99, "text": "And, and just some, some quick math, 'cause, you know, this is a weird concept too, but- How is it accretive? So if you're trading at, let's say, a five x mNAV, which would be high but not crazy mNAV, and you issue ten percent more equity, so you just, you know, ten percent dilution right there, but that ten percent dilution is, that, that equity, those funds are used to buy Bitcoin, you just increased your NAV by fifty percent. So you, you, you know, had ten percent dilution, but fifty percent growth of your NAV And that nets out to a thirty-six percent growth in, in Bitcoin per share, you know, after you balance out the, the, 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 Saylor 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, and arbitraging, you know, fiat to Bitcoin. and, and that's the most important thing, really. So, you know, people think, in, 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, the, the reality that these are productive assets, in, in an unexpected" }, { "speaker": "stephan", "time": "45:39", "start": 2739.01, "text": "way, right? Like a Bitcoin treasury product. Productive in our sense means they can accumulate Bitcoin, not in the, they are building widgets sense. Right." }, { "speaker": "jesse_myers", "time": "45:47", "start": 2746.59, "text": "W- this is not a real world productivity This is Bitcoin, ownership productivity, right? You're-- the, the point is you're purchasing a vehicle that has the machinery in place and the intention, the, and the goal of growing Bitcoin per share so you can compound your Bitcoin ownership over time through, through that, through, through that vehicle. And how do you value, you know, 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, the, the premium that you're paying is your price, and, and the future productivity is what you have to account for. we put out, so Smarter Web, we, we put out a, a research piece on this, a few months ago, introducing a new metric to try to unify these two. Two things called, the, the P/B ratio. And the idea here is to, to combine, everything you need to see, you know, meaning mNAV and, and Bitcoin yield to value, how, you know, value these companies amongst themselves, but also more importantly, I think, against traditional equities. So, you know, in the traditional equity world, we have the PE ratio, right? 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 twenty, thirty, forty, fifty-three for Nvidia, as of two months ago. And, and that's what people are accustomed to paying for, for equity exposure. Now, if you were to do the equivalent for a Bitcoin treasury company, which I think is, we think is the, P/B ratio, which, you know, it gets a little complicated actually 'cause there's log terms to, to, to account for, but the, the net of it is how many years will it take for- The, the most recent rate of Bitcoin yield continued into the future. How many years will it take to grow into your pre-- your mNAV premium? meaning how, 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 MetaPlanet, for Smarter Web, strategy is like, is under two years. you know, in, in twenty twenty-five, year to date, as of now, they've delivered twenty-six percent plus twenty-six percent 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 one point five, I think, so it's actually, you know, about, it's about a, about a year for them now. So they're, as a, as opposed to a twenty, thirty, forty, PE ratio, they're a one. So there's in-- 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, law, law 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, the numbers for MetaPlanet, recently, but I think there's, there's something like a quarter of a year, maybe half a year. To, to return their mNAV, and Smarter Web is, is the same right now. So, you know, when you look at the global equities landscape, where is their value? I, I think it might be right now, I think the sector that might be the most undervalued in the world is a well-run Bitcoin treasury company." }, { "speaker": "stephan", "time": "49:51", "start": 2990.85, "text": "Yeah, as you said, I think, that is the, 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, the fiat printer, right? It's, 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 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?" }, { "speaker": "jesse_myers", "time": "50:21", "start": 3020.99, "text": "Yeah, yeah, price to Bitcoin yield delivered. Gotcha. It's, it's basically it's, 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, so it normalizes to the year based on, you know, you can do it over a month, over a quarter, over six months or A year, and it'll all normalize to, to a, a, an output in a number of years." }, { "speaker": "stephan", "time": "50:49", "start": 3048.96, "text": "Right. And then that is the number of years, as you're saying, to grow into their current premium to mNAV, let's say. Yes," }, { "speaker": "jesse_myers", "time": "50:55", "start": 3055.19, "text": "right. And, and that's, that's payback, right? That's, that's like payback period where you reach your return on investment. And then anything beyond that is, is gain, is, is Bitcoin gained, in, in this case. And so yeah, so you could think of it" }, { "speaker": "stephan", "time": "51:09", "start": 3069.18, "text": "like, 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." }, { "speaker": "jesse_myers", "time": "51:21", "start": 3081.05, "text": "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, right, we talk about payback period, right? Hey, it's" }, { "speaker": "stephan", "time": "51:33", "start": 3092.77, "text": "gonna be three years for this project to start making us money or whatever, or, yeah." }, { "speaker": "jesse_myers", "time": "51:38", "start": 3097.66, "text": "Yeah, and, and, and, and that You know, Bitcoin treasury companies offer outstanding value, the ones that, the ones that have, the, have what it takes to continue delivering yield into the future, which is a surprisingly small number, because not many of the purported Bitcoin treasury companies have actually built a track record of de-delivering yield. You know, a lot of them are only just starting and haven't built that track record, so, you know-" }, { "speaker": "stephan", "time": "52:09", "start": 3128.78, "text": "Yeah. So when would you say some of them are falling down then? Is it a, a thing around, is it around, as you said, not consistently delivering? Is it the wrong structure? Is it, I don't know, losing, I don't know, they lost all the retail interest and they were, they kind of lost the flywheel per se, like, how-- What are, what are the main, or maybe they took on bad debt terms? What, what do you see as like the common reasons that, that they don't achieve that, yeah, Bitcoin yield or, yeah, yeah, Bitcoin yield?" }, { "speaker": "jesse_myers", "time": "52:40", "start": 3160.05, "text": "I think it's kind of all of what you mentioned and, 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, I think that, you know, broadly, people, people have undervalued the importance of retail investors, i-in the success of, of this model. you know, you, you, you, you need to start from, your inv- your retail investor base, and, and treat them with respect, and- You know, 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, and give you the premium that you need to run the playbook, right? And then they're the, the number one promoters of what you're doing to let other people know. and so I think, you know, Smarter Web has the third largest, Bitcoin Twitter, Bitcoin Treasury company community You know, approaching forty-five hundred people there, which is, you know, stra-- it's number one is strategy, number two is Metaplanet, and number three is us. And, and I think that's, you know, obviously that's a, like, 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 i-in your, in your company. and I, and I think that's like the number one place where people go wrong is by not focusing on developing that. and, a-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, 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, 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, you know, the, the, the metrics that you've been delivering on, and, and also, you know, Treat your investors with respect, and, 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." }, { "speaker": "stephan", "time": "55:38", "start": 3337.81, "text": "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, you know, hypothetically, some of the, you know, the big boys who got in on the PIPE deal, they, their unlock happened and they sold and dumped and kind of all the, quote-unquote, retail backholders 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-- Right, right. 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 treasury companies has been that, yeah, look, it's like greedy insiders kind of pumping up a company and then kind of exit liquidity onto- The re-onto unsuspecting retail, just like the shitcoin ICO days, right? So that's maybe the, the criticism that we've seen, of some treasure companies, so how, 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 over, overhyped price?" }, { "speaker": "jesse_myers", "time": "56:58", "start": 3418.49, "text": "Yeah, it, you know, I, it's a great question 'cause I think we're gonna, we're gonna learn a lot more collectively as an industry about like the ways in which you can do it, the, the ways in which it works. Smarter Web, so Smarter Web, founded by Andrew Webley, who's, who's, you know, born and raised Britt from Bristol. Loved MicroStrategy and what was happening in the US, 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.\" 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, a, 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 Web's, 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, because he really means it, you know, and, and, 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 f- for Smarter Web retail investors over our five month history, and we want to keep doing that for our investors, and, you know, I think that That is what people understand, and, and they can sense it, and they want to invest in, in a mission like that and believe in leaders like that and, you know, so that model has worked, and, you know, and I think that's, frankly, I think that's a, a bit more articulated version of retail first than MetaPlanet ever had. They just, it just sort of organically happened, I think, for them. and it's been a, a, a priority for our version in the UK, and s-- has seemed to resonate very well." }, { "speaker": "stephan", "time": "59:56", "start": 3596.24, "text": "I see, yeah. One other topic, because obviously it's-- this one is very topical, it's new 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 one x mNAV? 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 Semler Scientific. Now, I know you probably haven't like dived deep into it, but I'm just- I'm 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?" }, { "speaker": "jesse_myers", "time": "01:00:39", "start": 3639.71, "text": "Yeah, a, a little earlier than I would have guessed. i-if you, if you had forced me to guess who would be the first company to make an acquisition like this, I, I would have guessed Drive. I think it's sort of in their DNA to be creative here and find discounts, and, and it's in their wheelhouse, you know, as- Capital markets veterans with, with Matt Cole and, 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 think- people aren't broadly aware that like, if you, if you, if you think about, a Bitcoin treasury company that isn't generating yield, right? So it's not, i-if you, if your flywheel stops, Where should you trade, you know, in terms of your mNAV? The reality is you should trade under one x mNAV because, unless you have a operating business that covers the, the expenses for, you know, for the entire operation. if you don't have that, then Basically, you're gonna have to cover your costs by selling Bitcoin, right? It's-- and that's a drag on the value proposition, and, and the, you know, the ownership value of a slice of that Bitcoin. Although, mind you," }, { "speaker": "stephan", "time": "01:02:01", "start": 3721.77, "text": "though, if they do have a, an operational company like Semler does or did, let's say." }, { "speaker": "jesse_myers", "time": "01:02:06", "start": 3726.24, "text": "Yeah. Right. And, and that's where, you know, maybe there was a mispricing here of like, if they were able to, if, if they were gonna be just fine covering their costs with their operating business, It is kind of strange, you know, if you, if you trade under a one x mNAV, but I think that kind of- But I guess that's, I guess one" }, { "speaker": "stephan", "time": "01:02:24", "start": 3744.43, "text": "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, yeah, I guess it, it just depends how you count mNAV." }, { "speaker": "jesse_myers", "time": "01:02:42", "start": 3762.55, "text": "Yeah, yeah, we- We, we think about this a fair bit, and of course we're biased, about Smarter Web, but w-we think that it, it, it clearly is A detriment if you don't have, a cash flowing, you know, profitable operating business at all. Like if, if you have none of that, that's a problem, because it's a drag on your, 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- There's a sweet spot where you want an operating business that can cover expenses, but that's it, right? And, and hopefully that's small relative to your Bitcoin treasury, so that the focus is really on the Bitcoin treasury. And that's the case with Smarter Web, I'm actually less familiar with, you know, the, the scale of Semler's operating business relative to their Bitcoin treasury, but I know that it's bigger, significantly bigger than, way, way bigger than Smarter Web. We probably" }, { "speaker": "stephan", "time": "01:03:51", "start": 3831.87, "text": "agree that as you get bigger, like Take the example of Strategy, right? They've got over seventy billion dollars of Bitcoin. I don't know how much they're operating, you know, the software side of the micro-strategy business, what, what they're earning. Is it like a hundred million dollars a year? Like, I mean, that's obviously immaterial when their balance sheet is well over seventy billion dollars. So maybe there's a point at which it kind of, it doesn't matter, like what your Bitcoin balance sheet is so large That unless you have like some phenomenal operating business, you'd-- it's just going to be a small fraction of your balance sheet. Yeah. That's right." }, { "speaker": "jesse_myers", "time": "01:04:26", "start": 3866.51, "text": "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 seventy billion. But, you know, but it did help them in twenty twenty-two, when, you know, in the bear market, right, in the bear cycle And everybody, and there was like swirling narrative of like, you know, Saylor's gonna capitulate, and they're gonna have to sell coins, they're gonna get margin called or whatever. But they didn't, and they didn't have to do anything, 'cause 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, it mattered then. It probably doesn't matter now anymore, like they've made it through a full cycle and much, much" }, { "speaker": "stephan", "time": "01:05:13", "start": 3913.0, "text": "harder. I guess it's like," }, { "speaker": "jesse_myers", "time": "01:05:20", "start": 3920.39, "text": "Yeah, that's, yeah. So it gets back to M&A in the space and" }, { "speaker": "stephan", "time": "01:05:24", "start": 3924.59, "text": "where you see that, like, do you see more opportunities? Like, I think probably both of us agree there that we're gonna see more of this kind of thing, and especially, especially in a case where a company's below one x mNAV, but we could see it in other scenarios too, right?" }, { "speaker": "jesse_myers", "time": "01:05:39", "start": 3939.12, "text": "Yeah, that's, that's right. you know, I think we're, we're definitely gonna see more of this, you know, we've sort of talked about like, i-it's hard to get to scale, right? It's hard to, to get your flywheel going and keep it going and get to a certain scale, call it, you know, twenty, one hundred Bitcoin, one percent of one percent of all Bitcoin, and keep going from there. and so most Bitcoin treasure companies won't make it there, right? And, and de-risk enough that, We'll going. so most will, most flywheels will stop, most will end up because of that, with investors selling to get out, you know, and taking a loss and driving the mNAV under one X, and then they become targets, right? They become opportunities for the right buyer to do a deal. and, you know, it's gonna look like Strive, there're gonna be other creative ways to structure deals like this. We're gonna see a lot of cons- Consolidation, just based, based on like these things becoming targets if they don't work, you know, the, the, the mechanics cause them to trade under one x mNAV, and then that's an opportunity for somebody else. However, and I" }, { "speaker": "stephan", "time": "01:06:52", "start": 4012.58, "text": "guess, Agon?" }, { "speaker": "jesse_myers", "time": "01:06:53", "start": 4013.98, "text": "Yeah, however, like I think that one of the things that, that- Retail investors aren't really aware of is like, it's really messy to do M&A, like it's a, it's a, it's a whole can of worms. and if, even if on paper, like, oh, one company's trading at point seven mNAV, like that's, you know, that's buying Bitcoin at, at, at seventy percent of the current price, right? Like that's a great deal, but if it, it can come with, you know, you're acquiring the whole balance sheet, you're acquiring it. 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, they're coming from a different industry as you originally. you're also inheriting, you know, the, the infrastructure of the business, the, 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 could, it can pause things for six months to do, to do a deal like that, and that can harm, that can hurt the, the acquiring Bitcoin treasury company, because they are less able to do things for six months. That's a, that's an age, in, 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 a lot of that downside." }, { "speaker": "stephan", "time": "01:08:28", "start": 4108.38, "text": "Yeah, interesting. I 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 weren't 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 M&A activity, it depends on kind of how aligned they are, on some of these things. But yeah, I guess it's, 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 wanna close out with?" }, { "speaker": "jesse_myers", "time": "01:09:21", "start": 4161.51, "text": "Yeah, I guess I, just sort of in closing thoughts, I mean, I, I think that, you know, it, first of all, it's, it's very interesting that, 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, you know, BlockFi, Genesis, Celsius, these things, and, and are very wary, but I think At the same time, these fundamentals are real. Like 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, this is here to stay. This is, this is also like how Bitcoin matures. This is like the next step in its evolution, maturation as an asset. it, it, this is how Bitcoin will eat TradFi. is these Bitcoin treasury companies recapitalizing the world with digital capital? and so I think this is bigger than people realize as a, as a trend for Bitcoin and for the world. And I think it's gonna be a major story that plays out over the next few decades, and it's the first year of that. So Sailor was on stage in New York making this point, \"This is year one.\" He, 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, I asked this question of Sailor. Gosh, it 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 100% 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 100% Bitcoin?\" and he said, he cut right through it and said, \"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, you know, the maybe for, for, 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 twenty percent exposure to risk assets whose goal is to grow their Bitcoin ownership, and, and that's kind of where these companies fit in, and, and I think they, they- Represent potentially tremendous value in the investable landscape, because they're currently not well understood and, and the mechanics of Bitcoin yield are greatly undervalued. You know, everybody thinks about mNAV, why would I pay two x to own Bitcoin? And seems to forget the reality of, you know, compounding Bitcoin over time and how quickly that generates a return and, and the gains that come beyond that return. So, you know, I think, 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 hundred and forty trillion dollar industry The way I think it might twenty years from now." }, { "speaker": "stephan", "time": "01:13:24", "start": 4404.05, "text": "Yeah, I think I, I agree with you there, and 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, if some of these companies are borrowing at ten percent or eight percent or even less, and they're buying Bitcoin growing at thirty or forty percent per year? It's, it's a clear business model. now of course you have to understand the risk, and as you said, I, I agree with you, I think it's going to be winner takes most, so if you're investing in these treasure companies, you ideally wanna 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 listeners, check out, the website, it's a smarterwebcompany dot co dot uk. Jesse, thanks for joining me today, and, of course, I'll link, your social media in the show notes. Thanks for joining me." }, { "speaker": "jesse_myers", "time": "01:14:26", "start": 4466.83, "text": "Thank you, Stefan." } ] }