Legendary short seller Jim Chanos is betting against Michael Saylor.
The famed short seller said companies like Saylor’s Strategy use the crypto hype cycle to pump their own stock prices while buying Bitcoin — and that’s a huge opportunity for short-sellers.
“Strategy, and more ominously its copycats, are selling retail investors the idea that they are buying Bitcoin at a corporate structure so they should value them at a premium,” Chanos said in a May 14 interview with CNBC.
“It’s ridiculous.”
Chanos says he is shorting Strategy stock and using returns made from declines in the shares to buy more Bitcoin.
Short sellers make money by borrowing stock in a company, then selling it in the hopes that it will go down. When the price falls, they buy back the shares then return them to the lender, pocketing the difference.
“We’re doing exactly what Michael Saylor is doing,” Chanos said.
“We’re selling Strategy stock and buying Bitcoin.”He said he’s essentially shorting the spread between the company’s stock price — which trades at about $400 and is up 33% this year — and the value of the nearly $59 billion in Bitcoin it holds.
Bitcoin is up about 10% this year.
The gap between the share price and Bitcoin’s price “is a good barometer of how much retail speculation there is,” Chanos said.
In 2020, investors valued Strategy stock at more than six times its value in Bitcoin, and last year it topped three times its value, according to Strategy Tracker.
By going long on Bitcoin while shorting Strategy, Chanos is betting that the company’s stock premium will compress over time.
It’s called a relative value trade, a type of arbitrage where traders try to exploit gaps in prices of similar assets.