Jim Chanos unwinds Strategy short as stock’s bitcoin premium collapses after 50% sell-off

Renowned short seller Jim Chanos has closed his closely watched pair trade of shorting Strategy (formerly MicroStrategy) and going long Bitcoin, citing the significant compression of the valuation gap that initially made the trade compelling. Chanos unwound the position after Strategy shares plunged approximately 50% from their 2025 peak, reducing its market-implied net asset value (mNAV) multiple from around 2.5x to 1.2x. He indicated the thesis has largely played out, advising clients to cover the trade as the premium for Strategy's substantial bitcoin holdings has substantially diminished, despite Bitcoin's sustained high prices.

Analysis

Renowned short seller Jim Chanos has closed his closely-watched pair trade involving shorting Strategy (MSTR) and going long Bitcoin, citing the significant compression of the valuation gap that initially made the trade compelling. This decision follows a roughly 50% plunge in Strategy shares from their 2025 peak, which substantially reduced the premium investors paid for its underlying Bitcoin holdings.

Chanos noted Strategy's market-implied net asset value (mNAV) multiple, which compares the company's market value to its Bitcoin assets, compressed from approximately 2.5x to 1.2x. This narrowing occurred despite Bitcoin remaining near record highs, indicating the market has largely corrected the previous overvaluation of MSTR relative to its core asset.

While Chanos believes further mNAV compression towards 1.0x is likely as MSTR continues to issue common equity, he considers the primary thesis of the trade largely played out. His firm advises clients to cover the position, suggesting that the most compelling part of the arbitrage opportunity has diminished.

Key Decisions for Investors

• Investors holding MSTR should re-evaluate their position, considering the significant compression of its premium to underlying Bitcoin assets and the potential for further mNAV normalization towards 1.0x.
• Those considering a similar arbitrage strategy should note Chanos's view that the "easy money" phase of shorting MSTR's premium has concluded, suggesting diminishing returns for new entrants.
• Monitor MSTR's future equity issuance and its impact on the mNAV, as continued dilution could accelerate the convergence of its market value to its net asset value.