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By Jonathan Guilford

NEW YORK, Sept 30 (Reuters Breakingviews) - Is crypto hoarding about the crypto or the hoarding? Among the stampede of companies refashioning their business models to become digital-coin collectors, Strive ASST.O has emerged to pick up any that fail to generate sufficiently bubbly investor enthusiasm. For its first deal, it agreed to buy Semler Scientific SMLR.O, paying a wild 210% premium to its stock price. It's mind-bending M&A merged with market mania.

The fundamental insight supplied by Michael Saylor's Strategy MSTR.O, which kicked off the corporate cryptoevangelism trade, is that equity investors will sometimes value a company holding $1 of bitcoin at $2. There is a whole edifice of digital-meets-traditional-finance built atop this aberration, which has recently started to teeter. At least some of the 71 crypto treasury firms identified by data outfit Kaiko will inevitably fall from grace, as Semler did. Until Monday, the enterprise traded at a slight discount to the value of its coin cache.

This metric, known as “mNAV” for “market net asset value,” stood at 0.9 times prior to the deal announcement. Strive, backed by biotech entrepreneur and Republican gubernatorial candidate Vivek Ramaswamy, currently trades at 2 times. It is using its wildly valued equity to acquire Semler’s undervalued shares in an all-stock deal, amassing more bitcoin without raising cash.

Digital M&A produces plenty of oddities. The strangest of them, however, is what happened to Semler’s stock. As of market close on Monday, Strive’s offer of 21.05 in its own shares for each Semler share was worth over $48. Yet the target trades at about $29.

In a typical deal, this yawning gap would be an indication of skepticism or displeasure. Here, Semler is valuable because it owns a pot of bitcoin worth about $580 million based on its price before the mooted merger was unveiled. It is contributing 46% of the combined company’s aggregate cryptocurrency, but will end up owning only about a third of the resulting corporate entity. This means the value of its bitcoin claim will fall to about $425 million.

The twist is that Semler is now worth 1.3 times mNAV, landing a premium for its bitcoin. Strive’s shares, meanwhile, have slumped. In effect, the seller is trimming its investment in bitcoin to capitalize on irrational exuberance, while the buyer is doing the reverse. Hence, the answer to the question posed earlier: it's more about the hoarding than the crypto.

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CONTEXT NEWS

Strive, a company targeting public companies trading at discounts to their market net asset value, or mNAV, said on September 22 that it had agreed to buy Semler Scientific, a medical testing device maker that has pivoted to holding bitcoin.

Under terms of the transaction, Semler Scientific shareholders would receive 21.05 shares of Strive Class A stock for each Semler Scientific share, worth $95.02 as of September 19, representing a 210% premium.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))