Strategy’s Magic Number 1.22

You may have seen the number 1.22 frequently in materials related to Strategy and STRC.

Basically, for a DAT, even if mNAV is only above 1, issuing common stock through an ATM and using the proceeds to purchase the underlying digital asset should increase the number of digital assets per share. So why does Strategy say that mNAV needs to exceed 1.22?

1. A slightly different grammar

Strategy is a complex financial engineering company. It raises capital not only through simple stock issuance, but also through various methods such as preferred stock and convertible bonds.

Therefore, the way it calculates mNAV or BPS is different from other companies.

1.1 mNAV

For a typical DAT company, mNAV is usually calculated by dividing the company’s market capitalization by the size of its digital asset reserve. In Strategy’s case, however, debt and preferred stock must also be taken into account.

Strategy defines mNAV as “Enterprise Value / BTC Reserve,” where Enterprise Value is a value that takes into account debt, preferred stock, and cash holdings.

This usually has the effect of making mNAV somewhat higher than the method used to calculate mNAV for a typical DAT company.

1.2 BPS

For a typical BTC DAT company, BPS, or BTC per share, is calculated simply by dividing the number of BTC held by the number of shares. In Strategy’s case, however, the denominator is not the number of common shares, but ADSO, or Assumed Diluted Shares Outstanding.

Here, ADSO includes not only the number of common shares, or Basic Shares, but also the number of shares assuming convertible bonds, convertible preferred stock, options, and so on are converted into common stock.

2. The magic number 1.22

Now let’s look at where the value 1.22 comes from. Before that, for convenience, let’s define the symbols as follows:

• B = The No. of BTC
• D = ADSO
• S = Basic Shares
• P = MSTR Stock Price
• Q = BTC Price
• L = Debt + Preferred - Cash

When Strategy issues common stock by ΔS, the company can acquire an additional PΔS/Q worth of BTC, and BPS changes as shown on the left side of the equation below. For BPS to increase, this must be greater than the existing BPS value of B/D.

Multiplying both sides by D(D+ΔS) and rearranging gives the simplified inequality below.

Intuitively, this means that the amount of BTC that can be purchased by selling one share of MSTR on the left must be greater than the existing amount of BTC per one share of MSTR on the right.

Now let’s bring back the mNAV formula. mNAV is defined as follows:

Rearranging this equation to isolate P,

and then dividing by Q gives the following:

Substituting this into the BPS increase condition from earlier, P/Q ≥ B/D, and rearranging gives the following equation.

In other words, the breakeven mNAV we need to find is derived as follows.

Strategy announced during its Q1 2026 earnings call that calculating this produced 1.22. Therefore, MSTR’s mNAV must be at least 1.22 for Strategy to stably raise capital and play the game of increasing BPS.

3. The magic number is now 1.3, not 1.22

Let’s actually calculate the breakeven mNAV.

• Basic Shares, as of 5/31: 352,527
• ADSO, as of 5/31: 382,756
• Debt, as of 6/5: $6,754M
• Preferred, as of 6/5: $15,482M
• Cash, as of 3/31: $2.21B
• BTC Reserve, as of 6/5: $52,875M

Since the price of BTC is currently much lower than it was at the time of the Q1 earnings call, calculating this gives a breakeven mNAV of 1.3. In other words, when mNAV is below 1.3, it is difficult for Strategy to raise capital through common stock ATM issuance.

Due to Strategy’s recent sale of 32 BTC, BTC, MSTR, and STRC are all in a difficult situation. Let’s watch to see whether Strategy can successfully get through this hardship.