Semler Scientific Trades Near Bitcoin Holdings Value, Faces Fundraising Challenges

Semler Scientific, a Nasdaq-listed healthcare technology firm, was valued at a narrow premium compared to its Bitcoin holdings on Tuesday. The firm’s mNAV, or multiple-to-net asset value, was recently 1.07, indicating that the company’s $498.5 million enterprise value was slightly above that of its 4,449 Bitcoin worth $466 million. This situation highlights a potential warning sign for Bitcoin treasury firms, as a mNAV below one can make it challenging for a company to increase its Bitcoin per share by selling stock and using the proceeds to buy more Bitcoin.

Matthew Sigel, head of digital assets research at VanEck, noted that Semler is now in a position where many Bitcoin treasury companies may find themselves in the coming quarters: trading close to NAV and facing pressure to demonstrate capital discipline. This situation can be concerning for investors, as it may indicate that the firm can no longer raise funds in a way that benefits shareholders. However, Sigel also mentioned that the company has several strategic levers it can pull to stabilize value, and if management prioritizes shareholders, the risk/reward at current levels is favorable.

In a recent interview, Ben Werkman, chief investment officer at financial services firm Swan Bitcoin, explained that a discount can spook investors in a Bitcoin treasury firm if they start to suspect that the firm can no longer raise funds in a way that benefits shareholders. This is a critical point, as Bitcoin treasury companies seek to maximize shareholder value by growing the amount of Bitcoin they own per share. When a company's mNAV falls below one, it can no longer grow its Bitcoin per share by selling stock and using the proceeds to buy more Bitcoin.

Semler recently acquired 185 Bitcoin for $20 million and signaled that it could sell $364 million worth of common stock through an at-the-market, or ATM, offering program. However, Sigel suggested that Bitcoin treasury firms can adopt safeguards, including pausing “ATM issuance if the stock trades below 0.95 times [net asset value] for 10 or more trading days” and prioritizing share “buybacks when BTC appreciates,” among other options. These safeguards could help stabilize the value of the company and reassure investors.

In recent months, mNAV has become a popular metric for comparing Bitcoin treasury firms, as various companies have seized on the trend. However, Semler is not a new face in this space, having purchased its first Bitcoin last May. The company has the 10th largest Bitcoin treasury by dollar value. Sigel noted that “legacy business issues which have worsened” may be weighing on Semler’s mNAV, along with a small market cap, low liquidity, and limited convertible bond issuances. These factors could contribute to the company's current situation and may require strategic adjustments to stabilize its value.