Issue #37 - Are Bitcoin Treasuries Companies the New "Cigar Butts"?

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"Wall Street people learn nothing and forget everything." — Benjamin Graham

For the longest time, I was a big Warren Buffett fan. Like most Buffett disciples, I loved the classics, The Intelligent Investor by Ben Graham, Security Analysis, and all the other old-school value investing bibles.

Along this journey, one concept that always stuck with me was Graham's "cigar butt" strategy. In essence, find companies trading below their tangible book value. These were businesses the market had left for dead. Companies where, if you ignored all the intangibles, you could sell off their assets, subtract the liabilities, and still come out ahead.

In the eyes of Graham, you were looking for half-smoked cigars. The business didn't have much life left, but still had at least one last good puff left in it.

I used to hunt for these businesses relentlessly. One that stands out was Bed Bath & Beyond (BBBY). In 2020, it was trading below tangible book value. The company was struggling, sentiment was awful, but when you looked at the balance sheet, the assets minus liabilities were greater than the company's market cap. So sure enough, I took a position, and it ended up being one of my better trades.

But... why am I bringing this up?

Recently, a number of Bitcoin treasury companies have begun trading at or below an mNAV of 1 — the modern-day cigar butts. mNAV, or multiple of Bitcoin net asset value, measures how a company's market cap compares to the total value of the Bitcoin it holds on its balance sheet. It matters because when mNAV drops below 1, the market is effectively valuing the entire company at less than the worth of its Bitcoin holdings.

• Cango Inc. (CANG) – 6,394 BTC worth $649 M | Market Cap: $589 M | mNAV: 0.9
• Semler Scientific (SMLR) – 5,048 BTC worth $513 M | Market Cap: $406 M | mNAV: 0.79
• KindlyMD, Inc. (NAKA) – 5,765 BTC worth $585 M | Market Cap: $301 M | mNAV: 0.51

To name a few...

My old value-investor instincts would've had me digging into balance sheets, trying to identify where to deploy capital. But today, I found myself thinking more about who else might be eyeing these discounts, and what the broader repercussions could be for Bitcoin itself.

So... what happens when the market value of these Bitcoin treasury companies drops below the value of the Bitcoin they hold?

The way I see it, firms trading below an mNAV of 1 are sitting ducks for a hostile takeover.

Why? Well, if a treasury company is trading at, say, 0.8 mNAV — let alone 0.51, as in NAKA above — a buyer could theoretically purchase the entire company and gain control of its Bitcoin at a 20% discount to the spot price (Bitcoin's current trading price in the open market). You're effectively buying Bitcoin 20% cheaper than the going market rate, simply by acquiring the company that owns it.

Now, in a best-case scenario, this buyer might be another well-established pro-Bitcoin company — decently capitalized, long-term focused, and looking to accumulate. They recognize the arbitrage opportunity and take advantage of it, but they don't actually sell the Bitcoin. It just changes hands from one hodler to another.

In this scenario, Bitcoin's price shouldn't be too heavily impacted, because those coins never touch the open market.

But...

What happens if the buyer isn't a Bitcoin advocate?

Many corporations today are sitting on substantial cash reserves, actively seeking ways to deploy them. Apple, Microsoft, and Berkshire Hathaway, alone, hold roughly $465 billion in cash on their balance sheets.

If Bitcoin treasury companies start trading significantly below mNAV, these giants might see an easy, low-risk opportunity. They could initiate a hostile takeover of these discounted Bitcoin treasuries, liquidate the Bitcoin immediately, and walk away with a tidy return.

For instance, take Semler Scientific (SMLR). It currently holds about $513 million worth of Bitcoin, yet the company's market cap sits around $406 million. That's a $107 million gap just waiting to be captured. Even after accounting for legal and administrative costs, it'll still be a profitable trade — especially when the underlying asset, Bitcoin, is among the most liquid in the world and sold off in a heartbeat.

The acquirer is not concerned with the company's mission, its employees, or the community it serves. They're not interested in Bitcoin as a long-term asset. They're simply arbitraging market inefficiencies, selling Bitcoin into the market, collecting their spread, and moving on.

To me, the irony of the whole Bitcoin treasury approach is that if we slip into a bear market, many of these companies that set out to strengthen Bitcoin could end up doing the opposite. Under pressure from shrinking valuations, creditors, or investors demanding liquidity, they might be forced to sell into weakness.

In saying all this, I don't believe this is a long-term threat to Bitcoin's integrity. Bitcoin is largely antifragile. It has survived far worse and will continue to do so. But this dynamic — where Bitcoin on corporate balance sheets becomes a honeypot for predatory acquisition — is something we should be mindful of.

The most liquid, censorship-resistant asset in the world can still be vulnerable in the short term to financial gamesmanship when wrapped inside fragile corporate structures.

So, what can we do?

Every cycle brings a new set of games. At first, they always seem like the thing that's going to send Bitcoin to the "moon" — new narratives, new structures, new promises of efficiency and scale. But history shows that these games rarely end well. They create instability, inflate expectations, and, just as fast as they pump prices up, they collapse under their own weight.

We've seen it time and time again: ICOs in 2017, overleveraged exchanges in 2022, and now, perhaps, Bitcoin treasury companies in 2025.

If I had to guess, the next big flush won't come from retail panic or regulatory overreach; it'll come from within our own ecosystem. It'll come from treasury companies that overextended themselves, took on too much debt, and now find their mNAVs slipping below one. Some may be taken over. Others may be forced to liquidate. And in that process, billions in Bitcoin could hit the market — not because people stopped believing in it, but because, as they say:

"Play stupid games, win stupid prizes."

But there's a silver lining in all of this. As individuals, moments of short-term pain remind us what truly matters. It's easy to get swept up in the hype — to believe that MicroStrategy or any other company trading at multiples of one mNAV represents the "new model" for Bitcoin exposure. But, when the dust settles, most people end up coming back to the fact that nothing beats simply owning Bitcoin, taking self-custody, and stepping outside the endless fiat games.

Thanks for taking the time to read this issue of The Qi of Self-Sovereignty. I hope you found it insightful.

I always welcome feedback and thoughts. So, do not hesitate to respond to the newsletter email, comment on the article or reach out via Twitter.

Seb