The bet was smart, the timing was fortunate. Ask any number of investors who have bet onthe price of closed end funds versus the NAV of the underlying portfolio.
Sometimes the prices converge, sometimes they don't and sometimes they do but it takes so long that you are in a rocking chair at the Old Traders Home before it happens.
From MarketWatch, November 10:
Famed short-seller’s bet that premium to bitcoin would evaporate proved successful
If it were a boxing match, Jim Chanos would have won by a knockout.
Back in December, the renowned Wall Street short-seller recommended a controversial pair trade idea to investors: short the then-booming stock of MicroStrategy, now just called Strategy, and go long its one underlying investment, bitcoin. The trade was to profit from what he believed was the inevitable contraction of the premium the company commanded over its holding in the cryptocurrency.
At the time, Michael Saylor’s flagship bitcoin vehicle was soaring at 2.5 times the market value of its bitcoin holdings. After a major correction in the shares compared to a much smaller decline in bitcoin, that market capitalization to net asset value multiple has shrunk to around 1.23 times.
Chanos first recommended shorting the mNAV of MicroStrategy in Dec 2024 at 2.5 times. Last week, it slumped to 1.23 times. - Jim Chanos, X
In a posting on X, Chanos said that he had unwound his trade last week and banked his profits. Depending on timing and entry/exit points Chanos could have made as much as 50% on the wager....
....MUCH MORE
