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The Investor's Podcast (We Study Billionaires) - The Investor’s Podcast Network
BTC245: The Next Metaplanet? (Smarter Web Company) w/ Jesse Myers and Andrew Webley
01:06:39
Exploring Smarter Web's rise as a Bitcoin Treasury company and its vision for UK market leadership.
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- [00:01]
Preston Pysh
You are listening to tip.
- [00:03]
Jesse
Hey, everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals Podcast. In this episode, we dive into the rise of Bitcoin treasury companies with the spotlight on a company called Smarter Web, one of the UK's fastest growing public firms embracing a Bitcoin native balance sheet. Andrew and Jesse, who's been on the show a bunch of times, join me to break down Smarter Web's rapid ascent. How valuation models like M Nav are changing investor expectations and why preferred stock backed by Bitcoin may become the next frontier. We also explore what it takes to become the dominant Bitcoin treasury company in a global market. Still waking up to the opportunity. Okay, so as a Warren Buffett and Ben Graham student for many years, one of the things that I learned in that process was this. Ben Graham was really big on growth companies versus value companies. And Ben's biggest issue with a growth company was how do you know at what level is a pertinent level to pay for it? And when you look at some of these treasury companies, like the one we're talking about today, it just reminds me of this quandary or this dilemma that Ben Graham faced is because if, if that growth dies down, is the premium that you paid, you're going to kind of get obliterated in it. And so when I look at this company and the discussion that you're about to hear, this is first and forefront in my mind. And, you know, you could look at Met A Planet and you can see the huge premium that's being paid over the M Nav of the company and it continues to persist, but it's very volatile. And so I just caution, I just, I want to put this discussion point right here in the intro for people because they're going to listen to this conversation, they might get really excited about this company. But I also want to put out a word of caution that when you're buying something that's really small like this and it's going to be, you think bitcoin's volatility is violent, Owning an equity like this that's this size and that's trying to potentially become something that's worth tens, if not hundreds of billions of dollars, there's a reason that the price action is insanely volatile. So people just really need to understand all that upfront. I also need to preface this with I own common stock in this company. So I have a natural bias in, I guess, my opinion. I didn't hold common stock in this company when I did this interview. So I want everybody to know that up front. That's not me endorsing this by any shape of the imagination. I want it to be crystal clear what my financial position is. And enjoy the conversation. It's a really unique conversation and it really makes you think. And I really enjoyed Jesse and Andrew in this chat. So I hope you guys enjoy it. Comment on Twitter, and let's have the debate as to how in the world do you value something like this?
- [02:52]
Andrew
Foreign.
- [02:55]
Preston Pysh
Celebrating 10 years. You are listening to Bitcoin Fundamentals by the Investors Podcast Network now for your host, Preston Pysh.
- [03:13]
Jesse
Hey, everyone. Welcome to the show. I am here with Jesse and Andrew. Guys, I am thrilled to have this conversation. A lot of exciting stuff happening, really exciting stuff happening with the smarter web company here in 2025. And I'm excited to bring this discussion to the audience. So welcome to the show.
- [03:31]
Yeah, thanks for having me back, Preston, and excited to chat with Andrew and you about everything. We've been doing great to be with.
- [03:38]
Andrew
You, Preston, and thanks for inviting us on.
- [03:41]
Jesse
Yeah, of course. So, Andrew, let's start off here just so people can kind of understand the setup. You have a company, it's not a publicly traded company. You're over in the UK and with people. Couldn't tell from your accent there. And you have a private company. You're a bitcoiner. Obviously, you decide to become a publicly traded company, which we'll talk about the method that you went public, but your company wasn't real big. I mean, you're talking a company that's dealing in millions in revenue and net income. My understanding, and for people that are just trying to understand the basics of, like, market cap, like, what's a company like that worth? Well, it might be worth tens of millions, right? But right now, and correct me if I'm wrong, the market's valuing your company at, is it close to a billion dollars? Is that right?
- [04:29]
Andrew
It's actually more than that. It's billion pounds.
- [04:32]
Jesse
Billion pounds. Yeah.
- [04:33]
Andrew
1.3, $1.4 billion.
- [04:36]
Jesse
Yeah.
- [04:36]
Andrew
Yeah. It's been quite the ride the last couple of months.
- [04:39]
Jesse
So anybody who understands, you know, valuations, they're looking at this and they're saying, what? What did you guys just say? Like, how is that even possible? Let's walk the dog on this. And, you know, I think for people that, you know, were around in the 90s and saw the Internet boom and all this kind of stuff, they're looking at what's happening with bitcoin treasury companies, and they're like, On Edge and they're saying like this is a flashback of, you know, the late 1990s. But let's talk about the company, let's talk about what it is, what it isn't. This idea of taking a bitcoin treasury strategy. And then I want to get into Jesse, just talking about it at large. Not necessarily the smarter web company, but kind of. You have these awesome charts that you've put up online and I've got a copy of these slides. I'm going to put them up later on in the show for you to go through because they're really awesome. But Andrew, take it away with the company, the founding of the company, what the operational business is and then we'll go from there.
- [05:34]
Andrew
Yeah, so it's quite good actually that you mentioned the dot com period and then the dot com crash because I actually started my career in 1999. So I joined a small company that became one of the biggest companies in the UK. But I worked there for 10 years and the company's today still one of the biggest companies in the uk, a company called Hargreaves Lansdowne, which is the largest retail investment broker. So I did that for 10 years. 1999 for 10 years. And then I always wanted to set up my own business. So I left hl and I often describe it as a very well paid apprenticeship. You know, we listed it on the stock market but I got bored and I missed the early days of HR where it was very entrepreneurial. So I'm a programmer, I've done a little bit of programing today. Funnily enough, I don't get to do it so much anymore. But I wanted to build a system, a content management system that we could use to design and build websites for people. This is 15 years ago that I started this. So I built a system that I believe is one of the best types of systems of its kind in the world. And I built a business around it. So we design websites for people, people can update their websites, we help them marketing. It's a very sort of high margin offering, but it's also high quality with exceptional customer service. But it is, as you say, it's a very, very, very small business, or it was a very, very small business. It's pretty big business, actually. One of the biggest 250 in the UK by market cap. So I had this business and then about 10 years ago, I don't know, eight years ago, let's say, I found Bitcoin and I bought a bit, sold a bit, bought a bit, Sold a bit, and I thought it was interesting. But then about five years ago, I came across a company called Strategy, which was then called MicroStrategy, which everyone knows, of course, and for me, that was the moment when I thought, this is fantastic. So I've been investing for 25 years. I understand public markets, I've had some good investments and bad investments. I've worked in the sector and so I get investing. And then I also understood Bitcoin. But when the two came together, for me, I just thought that this was the best thing in the world from an investing point of view. And the reason why it was so good for me is in the uk, a lot of people, they've got money in certain types of product, as opposed to loads of cash in their bank accounts and these products, which we call ISAs and SIPs, one's a saving account, one's a retirement account. Often people have got a lot of capital and they've got, to be fair, relatively limited options of what they can do with that capital. So when Strategy, at the time called MicroStrategy came around, I just thought it was so incredible. And from an investor's point of view, investing in that, and then in more recent years, other similar companies, it sort of bought investing back into sort of, well, not just fun, but profitability again. So then about two years ago, I was thinking, well, why haven't we got anything like this in the uk? I love strategy and I'm very lucky that now Michael Saylor speaks to me. He spent time with me, He. He's very complimentary about what we're doing and I'm very grateful for that. But I want something that's doing that, that's a UK business. We all like things where we live, some of the things we don't like where we live, but on the whole, we like where we live, or I certainly do anyway. And I wanted a UK company to do it, but I kept looking and I couldn't find one. So then last year, in 2024, I thought, well, if no one else is going to do it, as I think it should be done, I will list my business on the stock market and I will tweak the strategy, which by tweak, I've been doing the same strategy on a much smaller scale and we'll see where it goes. So earlier this year, and it's important for everyone to be realistic that the operating business, the smarter Web company, is a small but profitable operating business. So earlier this year, we listed it on the stock market after approximately four Months of quite hard work. And since then we've grown the business by increasing the balance sheet, by raising additional capital at beneficial terms to the existing shareholders. We've got a lot of spare capital, which means that we store the capital in the very best asset in the world, which is bitcoin, and we hold that capital for the future benefit of the business and therefore its shareholders. It's gone really well. We're actually, I believe we're, if not the best, one of the best global equities this year. We're the best IPO in UK history. We're the fastest stock to ever do 100x and we've got ballpark, £150 million in our treasury, Bitcoin and a bit of cash approximate numbers. So, yeah, it's gone pretty well and we're very much looking forward to the future.
- [10:15]
Jesse
So as Andrew likes to say, we're doing okay. When really it has been, I think, the biggest sensation in modern British business history. And yeah, Andrew's quite right. There's no better performing public company in the world in 2025 than. Which is very interesting because Metal Planet was the best performing public equity in the world in 2024.
- [10:37]
Yeah.
- [10:38]
And we're repeating that path. We're taking a lot of of our guidance from the strategy that met A Planet deployed very effectively. And I think there's a ton of similarities in the circumstances of the UK and the circumstances of Japan. What Andrew was talking about is for Americans, effectively 401ks in the UK, the equivalent can't access bitcoin. They're not allowed to. There's no ETF still. So you can get access to bitcoin through a bitcoin treasury company and a homegrown one seems to be particularly appealing and accessible. And I think that's part of the tailwind that has delivered Smarter web from a 4 million pound market cap company three months ago to now a billion pound market cap company. And that still puts us like a 10x away from where Meta Planet is today.
- [11:30]
So guys, for people listening that hear M Nav, you guys are like at what, an m nav of 10 at this point? What's the M Nav on the company?
- [11:38]
Andrew
It's a bit lower actually. So today it's probably around about six. It probably floats between five, seven, maybe eight. You know, it has, it has gone higher at times, of course, but the end nav, our job is running the company is to use the mnav. The higher it gets, the more beneficial additional capital can be to the business and therefore its shareholders. So a high mnav, in some ways you think the company's getting too expensive, but that's because the demand exists for the company and that's an opportunity to then raise additional capital and then to take the business forward through the strength of the balance sheet. So if anything, as we're recording this today, I would say that we're almost too cheap, actually, providing you are someone that understands what MNAV means. Because in traditional investing, we buy companies for either a yield or for a potential. In companies that adopted Bitcoin on their balance sheet, you buy them for their potential, which is demonstrated by their speed of accumulation. You know, where again, if not the fastest, one of the fastest growing companies in the world to have Bitcoin on their balance sheet, you know, we've got from zero to a thousand Bitcoin almost quicker than anyone else. We did it in half the speed that I set out at the start. That's a third of the speed of what Meta Planet did it in last year. So it's a strange concept if you're not familiar with Bitcoin treasury companies, but if you spend a couple of hours understanding it, it's so similar to why we buy Nvidia or any of these other fantastic companies that trade at a multiple of their potential earnings. It's just that we have different metrics in our space, so it takes a bit of time for people to understand them.
- [13:26]
Jesse
Yeah, Preston, I've been starting to describe it this way and I think about you every time I say this. But you know, right now Apple trades at a 35 PE ratio, right? So you're effectively paying for 35 years of profits today. Right. And that's, that's what people do in equities markets and everything's been bid up to crazy PE ratios. Bitcoin treasury company is delivering value to shareholders through a different way. It's not delivering income statement profits, it's delivering a better and better balance sheet by accumulating Bitcoin. And that's where MNAV comes in. And the multiple of your net asset value, which really means the multiple of your Bitcoin plus your cash. And the Bitcoin treasury companies grow into their M Nav as they continue to accumulate Bitcoin in an accretive way, which means deliver, delivering additional Bitcoin per share by using capital market tools to raise capital and deploy into Bitcoin. And it takes some time for you to grow into that M Nav. So if we're trading at a 6M Nav to in it and we're fully deployed into Bitcoin. On the surface it looks like you're paying for Bitcoin that six times more expensive but really you're buying into a machine that is has a track record of growing its bitcoin per share over time. And we'll continue to do that by deploying the same playbook going forward. And it will take some amount of time for that Bitcoin per share to grow 6x. But if the company stays on track it will do that and go beyond. Right. And if you look at the sort of days to cover metric, which means how long it takes you to grow into your M Nav, it varies for different Bitcoin treasury companies at different stages of maturity. For Strategy it's about 700 days, so two years. For Meta Planet it's it's about half a year and this is historically looking. But Smarter web it's about 35 days right now that will continue to grow as we mature. But you know just right there that what we're talking about is effectively a PE ratio in a different sense. It's a different type of PE ratio but the same idea of how long does it take you to earn back your value. If you invest in a company today with strategy they're effectively at a two not PE ratio but price to Bitcoin accumulation ratio. And for Meta planet it's a 0.5. For Smarter Web right now it's a 0.1. So if you look at where you can invest your capital in equities markets, you can go with value investing approach whereas a good PE ratio and there's nothing good out there. Preston, you talk about this all the time. Everything's been bid up to crazy valuations. You can go buy Apple for 35 pens or you can buy a Bitcoin treasury company that's delivering growing into its value in maybe less than a year.
- [16:10]
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- [17:41]
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- [20:09]
Andrew
Expert all right, back to the show.
- [20:12]
Jesse
For a person who's hearing all of this, they're looking at and saying there's no way that this like makes any sense.
- [20:18]
Andrew
Right.
- [20:19]
Jesse
But if I was going to kind of assist in how you guys are describing this, I think a key important point of why your M Nav is so high is because the amount of bitcoin that you're currently holding and I think the numbers like what, 7, 800 bitcoin, is that right?
- [20:34]
The number you are looking at is a week ago. We are now at 1275 as of today.
- [20:39]
Okay.
- [20:40]
Which means that in the last seven days we've accumulated 65% more Bitcoin.
- [20:45]
This is what's important because that number is so relatively small relative to the market cap of the company and their ability to buy it for 1/6 the price of a retail person that's going out there and buying it. Because the m nav is 6, they're able to accumulate bitcoin at a pace that is so much faster than MicroStrategy that has 500,000 plus Bitcoin. Because they have so many bitcoin, it's actually somewhat of a limitation in their ability to get more compared to one of these small, let's call it race car like Meta Planet or you guys, smarter web. So the real question and what I find really fascinating about all of this is as this continues to unfold, there's this huge incentive for more and more of these treasury companies because the smaller their starting point and their ability to kind of manage the risk appetite of interest expense and dividend expense, I'm calling it an expense, but dividend payments is going to really kind of be a huge part of their Success. And I think that it's going to attract with time and I don't know if we're in an interim bubble here, you know, in the short term and then maybe some of this starts coming back three or four years later or what, I don't know. But I do have a sneaking suspicion that all of this is not going away and that this is only going to get crazier in the decade to come. And it seems like the smaller you are, the more of an advantage you have for stock common stock performance. Would you guys agree with that?
- [22:21]
Andrew
I would and I wouldn't. So you're absolutely right in what you say. But what we have to remember here is let's say there's 150 public companies that have got bitcoin on the balance sheet. It's probably a similar number to that, you know, compared with the thousands and thousands of public companies that haven't. And then companies that put bitcoin on their balance sheet, they're going to be either aggressive companies like US and like MicroStrategy where they're trying to really build their balance sheet, or their companies that aren't doing the same strategy as us, but they're holding some of their assets in bitcoin as opposed to property, cash, etc. Etc. So we're still very early. There's only when I say a few 150 or whatever. So that's the first thing to say. The second thing to say is that it depends on the investor profile. So if you take us as an example as a company that's approximately 1 billion pound market cap at the moment. We are only just getting to the size when certain investors would invest in us and that comes down to the size and the liquidity of the stock. When you are a very, very small company and you're just getting started with a similar strategy to us, you'll find that you'll have a different investor profile that will be a lot more growth orientated. So as the bitcoin treasury company gets bigger, you know, all everything else being equal, the profile of the investor gets, let's say, less risky. So when you're a small bitcoin treasury company, you're appealing to different investors than when you're a big bitcoin treasury company. And obviously strategy being the very best example of that in the sense that they've got certain products that are designed for those different types of investors and different pools of capital. So the job of a company that's adopting a bitcoin treasury strategy like ourselves is as you grow, you cater for different types of investors. And when you get very, very big, and this is a couple of years time for us, as opposed to the next year or two, the volatility may decrease ever so slightly, which is actually, dare I say, a good thing for the types of investors that want to invest in you, or you even use other products that you've launched, like preference shares, for example, to smooth out some of that volatility so that it's more comfortable for those types of people. Because there's not that many people, and when I say people, I mean entities, governments, etc. That have got serious exposure to Bitcoin, which is what we all believe. People that think Bitcoin is the solution to everything will happen as a matter of course over a relatively short period of time. So it's about unlocking the capital, whether it's the debt markets, the governments, whatever you want, and allowing them to access Bitcoin in a way that's comfortable to them. So the lifecycle, I agree with what you've said, but the lifecycle needs to be remembered because it's all about the bigger you get, the larger the pools of capital that come in because they come from different types of places, like bigger and bigger investment groups, you know, and so on and so forth. So it's quite an interesting area, you know, as opposed to when we started, for example, we had a group of my friends and family that put in the seed capital as an example. And then as we've grown, institutional investors have come in and then come in at a bigger size and then another one's coming and things. So I think that's a point that's worth making.
- [25:41]
Jesse
I can only imagine what your family and friends think about their stock after watching it go.
- [25:46]
Andrew
They're pretty happy.
- [25:47]
Jesse
They're pretty happy. I bet you they are pretty happy.
- [25:49]
Doing okay.
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What is the, what is the derivatives market around the ticker? And I'm going to say the ticker here and correct me if I'm wrong, it's swc. AQ is what I'm seeing here on Yahoo Finance.
- [26:03]
Andrew
So investors can, can access our stock at the moment in three different ways. So if you've got access to the UK markets, it's swc, which is listed on one of the two stock markets that we have in the uk. We're also available on the OTC market in the US So if you're an American investor, you can access it through tswcf. And then if you're a European investor, there's a Cross listing of our stock in Frankfurt, so you can access it as 3M8. So it actually already, even in this first two and a half months, trades in three different markets, if we call them markets, which is really interesting, it will be more accessible.
- [26:46]
Jesse
That's really interesting in and of itself. Talk to me about the liquidity, talk to me about the derivatives that are being wrapped around the underlying here. What does that look like?
- [26:56]
Andrew
Yeah. So at the moment, because we're in the early stages, what we've done is we've raised our capital through traditional equity common stock. It's a low risk approach for the business, it aligns everyone perfectly and it's appropriate for our size. So we haven't done any sort of crazy funding solutions because we haven't needed to. And one of the things that's very important to us is transparency. So at the moment all of the fundraisings that we have done have been private placements with a variety of high net worth retail investors and institutional investors. And then we've also been able to, which is very unusual in the uk, very common in the States, we've been able to develop something that's a bit like an ATM style facility so the company can sell its stock into the market through a third party on every update. So that's what we've done into the future. The end goal is to do exactly what strategy are doing, which is to have these different types of products, preference shares and to structure them with different value to what the common stock has got. So for example, it might be a preference shares that send, that pays out a 10% dividend. It would be called a dividend, not a coupon because it's an equity. But effectively it's structured like a, like a bond. And then those people can hold that and it will pay that out for life, 10% a year for life. Most people would like that. We would then introduce other things. So we might have one that pays out, you know, a different coupon, a different dividend, but then has a convertible option. So if the stock, 2 1/2 x's for example, from when the debt was issued, which isn't really debt, it's an equity, then we allow them to convert that into common stock. So you can do these different funding solutions. And the great thing about what we can do is we can look at the great companies out there in the world and the best two examples of those are strategy in the us, a meta planet in Japan and, and we can use what they've learned. And indeed, because we're all friendly with each other. We can share with each other our experiences to make Bitcoin better by us all succeeding. Yeah, there's lots of different solutions that you can do because whilst as we said earlier, this is a new area for a lot of people, there's a small concentration of which Jesse and I are part of that have been investing in this space for a number of years now and understand the different things that have worked and also importantly, the things that haven't worked. You can often learn more by things that haven't worked for other people than you can from things that have worked for other people.
- [29:32]
Jesse
Let's take a quick break and hear from today's sponsors.
- [29:35]
Sponsor
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- [33:09]
Jesse
One of the most fascinating aspects to all of this that I'm finding is in Japan the current policies are not accommodative for people to own Bitcoin through an ETF or anything like that. In the UK it's the same scenario and what it appears is that these treasury companies are an enormous backdoor that could end up turning into blackrock like vehicles. Because everything that we've just described in the dynamic that's playing out and the balance sheet of your company, I mean, if I have to be honest with you, I think the balance sheet on your company is going to continue to blow minds just like Meta Planet did last year. That's my expectation, to be quite honest with you in this coming year.
- [33:55]
Andrew
When we listed the business, I was in New York for a family holiday that I had planned before we knew the IPO date. So I was in New York looking around. Fantastic city. I went to the Rockefeller Center. Now when you're queuing up to go to the top of the Rock There's a fantastic model of all of the buildings and it blows your mind, you know. And that was built, I don't know, let's say 100 years ago, something like that. Now, to me, this reminds me of those sorts of times 100 years ago when there was something so significant happening in the world that was not just the chance of a lifetime, but the chance of 100 years, you know, And I think this is what's happening now. I'm sure Jesse has got some views on this as well. I don't want to get carried away and too ahead of our station here because we take a daily, weekly, monthly approach. We work hard every single day to grow the company, to improve every single week. But in a lot of ways, these companies are going to be almost like, and I don't like this analogy, but it's the best one that I've got. The banks of the future. And I mean that in a capital slash balance sheet perspective, because ultimately what you've got with us is you've got a business that's been publicly listed for two and a half months, that has got zero debt, that's got a very low cost base, that's got £150 million of effectively cash and Bitcoin. And it doesn't take much to see how that's going to turn into billions and billions that are stored in the very best asset in the world that over the last 15 or so years has gone up approximately 30% a year. So it's something that you've got to keep your feet on the ground about. But it's tremendously exciting.
- [35:37]
Jesse
It's unreal. Yes, Jesse, go ahead.
- [35:40]
I agree. And I think Andrew does a great job there of highlighting that it's a building process. It's funny how it kind of mirrors bitcoin's development as an asset of. In the early days, there weren't sophisticated derivatives on it, and the markets have slowly built out around it and it's become a larger and larger asset in tandem with that development. And that's what's happening with these entities too. I mean, Meta Planet was a hotel business 15 months ago, and now it still is.
- [36:08]
It still is.
- [36:10]
It still is. It still is. With one hotel and a giant balance sheet. And increasingly they have more sophisticated derivatives built out around them. And you can kind of gather from the sort of hints they're dropping of they're moving towards preferred equities pretty quickly. And I think that will be a big step in advancing their playbook to tap into the bond market. More directly, which is, you know, I, Saylor likes to use that chart of mine of showing the global asset landscape. And I think the reason he likes to use it is because the bond market sticks out there. There's over $300 trillion in the world stuck in the bond market getting mid single digit returns. Yep. This is the chart here. You know, we're now up to $1,000 trillion of, of global asset value.
- [36:54]
A quadrillion markets. A quadrillion, which I've always, I've, I've caught myself saying the same thing you just said, Jesse. And then somebody corrected me like Preston is just a quadrillion. I was like, I guess it is.
- [37:06]
I do say a thousand trillion just because people don't know what a quadrillion is. So you know, you've heard of a trillion. But anyway, that's where we're at now. And of course most of that is because the fiat money keeps losing its purchasing power. So it's not that assets are bec that the dollar is becoming less valuable and that's true across all fiat currencies. But when you look at this chart, you see the bond market, there's this giant pool of capital that is getting in the US you get 4.5% on a 10 year T bill and any decent bond is risk adjusted somewhere at mid single digits. And then here's Saylor turning around and saying I'll give you 10% if you give me your bond capital and I'll turn around and buy Bitcoin. As Andrew pointed out, I know bitcoin's going to grow at 30% a year and I'll have no problem servicing that dividend expense of 10%. And so that's what strategy is now pivoting towards. And that will be the fuel source for them to continue to grow and continue to deliver bitcoin yield going forward. And I think they're going to become the most valuable company in the history of the world by a very large margin as a result of what's happening. Meta Planet is now, I think shifting into that stage of its life cycle as a bitcoin treasury company. We're earlier in our development. It's still kind of the ground floor in many ways, but there's a path forward that Meta Planet has now kind of refined for us to follow of how you become the leader in your capital market. And I think it's going to be a winner. Take most in each capital market in the world and eventually you can add on these preferred equities to make that value Proposition to bond market capital in your country and tap into that as a fuel source for continuing to deliver on bitcoin yield.
- [38:51]
I love that. Framing a winner take most. Yeah, I think you're right on that. Real fast, I want to talk about the mechanics of how you did this, Andrew. So in the US, everybody's familiar with SPACs, if you've heard the term, and you don't really kind of know what it is, it's effectively, there's no company there. What you have is a bunch of investors that put a bunch of money, call it $100 million into a public vehicle and then they go and find a company that they can invest some of that 100 million into to take it public. So it's basically like a turnkey way of taking a company public. The shells sitting there ready to be used, and then when the private company is identified and purchased, then it becomes public. So in the uk, my understanding is that you did this reverse takeover of a listed shell. And is that correct?
- [39:41]
Andrew
Yeah, similar. So what you would probably do a lot of the time is you would do exactly what you've said. So it's a bit like a spac.
- [39:48]
Jesse
Yeah.
- [39:49]
Andrew
You do a reverse takeover of a listed shell. We actually did a reverse takeover of an almost listed shell. Oh. So everything about what we've done has been a bit different and maybe that's why it's worked. So it's relatively unusual to do a reverse takeover of an almost listed shell. I don't think I've ever heard of one before, actually.
- [40:11]
Jesse
So.
- [40:12]
Andrew
So what we did is when, when I decided that I wanted to list my business, I reached out to somebody who's our chairman and I said, look, you understand everything that I don't understand about capital market. So. And this person was able to fill in those gaps. Me and like a lot of the other things that's happened in the business, it's people meeting each other almost in a fake like capacity at the right place and the right time. And he said to me, said, andrew, I love everything about what you're saying, but just change this one little bit. And I actually have got an almost listed shell that you can effectively have, which basically wasn't proceeding. I said to him, thank you much, that's great. So, yeah, it was very similar to what you described, obviously slightly different. And the reason for that is, is that if you're a business in the uk, probably the same in America, it's quite expensive to list a private business. It would have taken me, which is, again, is smaller than in US terms. But it would probably cost me, let's say $500,000, 450,000 to list my business. And because the business was so small, we could actually get it going in a less risky profile. And the compromise I made there is, you know, maybe I gave more of my business away in equity, but I still think that I got a very good deal out of it. It was just a compromise to allow me to get that done quickly, efficiently, with the experience of others. And so that's how we did it really.
- [41:41]
Jesse
You know, Jesse, we've been talking about for years about how fixed income has been bid for four decades and how all of this pressure has been built into these capital markets. And when you look at a company that's private versus one that's public and that they're able to kind of punch a hole into this pressure tank of capitalization that's occurred for decades, you can see how it's just, it's literally just spewing out onto the balance sheet of these companies. It's mind bending to me to see this playing out in real time.
- [42:14]
I think that's, I think you nailed it. The sort of mental image I have for bitcoin treasury companies is as something of like a release valve for over bid up equities valuations. And then yes, it sounds crazy that you're buying Bitcoin at a 6M nav, right. It does times, it does premium, but. But it's delivering in this sort of PE ratio way in under a year. Or you can keep buying Apple and wait 35 years to get your money back.
- [42:44]
Yeah.
- [42:45]
And I think in that way we're seeing just the early stages of a flood of capital exiting from the overpriced traditional market assets into bitcoin treasury companies because of what they're delivering on. I mean, Smarter Web has 1275 Bitcoin right now, so just over a thousand bitcoin. And that'll be very hard for almost any company to achieve 10 years from now. Right. And that's happened here in three months. And we're adding at a very rapid rate and we'll continue to do so going forward. So where is value here? I think it's quite clear that investors are realizing that this model, while different from a traditional income statement PE ratio valuation of an equity, this is delivering massive value very quickly. As we've seen with Meta Planet, as we've seen with strategy over the last five years. And I think this is just the beginning of what will really become an industry. It's already blossoming into an industry of Bitcoin treasury companies repricing capital in the world and helping that capital flow from overvalued traditional markets into undervalued bitcoin. And specifically here, companies that are designed to deliver on bitcoin yield increase bitcoin per share for their shareholders.
- [44:04]
I'm thinking through this and I love how you're comparing it to P E and it's almost like Days to Cover is the inverse of the PE for like that's really the metric to kind of look at is this days to coverage from a value standpoint, is that right in the way I'm framing it?
- [44:22]
Andrew
Really interesting and I've never quite thought of it in these terms but chatting to you and Jesse now, one thing that is a bit out there and a bit extreme but if you think about Days to cover in the sense that that gives you your, your true valuation and then you think about the typical PE in terms of years, it's quite mind blowing in the sense that we're talking about one month, one and a half months even in the biggest companies, two years or whatever. Whereas if you buy Apple stock or Nvidia stock or any of these other fantastic companies of which I own some of them, you're talking 10, 20, 30, 40 years in a lot of ways. Whilst I don't want to get carried away again and I'm going to have to think this one through very carefully later, but Bitcoin treasury companies are absolutely a screaming buy if you think that you can get that value of what you're buying back in such a short time period. So either the stocks are ridiculously expensive or the bitcoin treasury companies are incredibly cheap or maybe it's somewhere in the middle.
- [45:28]
Jesse
It's certainly both, I think. Yeah. And Andrew's quite right that there are things that remain grounded about, you know, winner take most and there's going to be a lot of competitors that pop up claiming to do something, aspiring to get that marketing boost of oh, we're now a Bitcoin treasury company that are either not set up to do it or don't have the follow through commitment. I mean we've seen Gamestop sort of trot into this sort of positioning as we're going to do bitcoin and then they kind of half assed it and, and the market didn't like that. Right. So there's ways to do it right and there's ways to do it wrong. And I think the reality is the vast majority of companies that set out to do Something like this will not do it well enough. And so investors do need to be careful that they're picking the right one because it will be winner take most and you need to make sure that you're positioned accordingly.
- [46:19]
So one of the things that I think is super important for anybody to wrap their head around listening to this conversation is Bitcoin has annualized volatility of 80%. Okay. On an annualized basis, anywhere from 60 to 80% annualized. And so although we're all very enthusiastic about this, there are massive volatility risks associated with it. When we're using this metric days to cover and if we would treat that like earnings and it's in days versus 30 plus years for some of these other companies that, that we're more accustomed to from evaluation metric like what is. You always have to ask yourself what you get in one advantage, which is stability. In this old system where you don't have to worry about that much volatility, it's all been just like purchased out of the stock. The advantage you get over here is value potentially if you buy into the whole bitcoin thesis, which we all three obviously do. But what you get with that is intense volatility. And people just have to deeply understand that.
- [47:21]
Just to add to that, I think Michael Saylor kind of pioneered this phrase, but I heard it most from the Meta planet community of volatility is vitality. When it comes to this strategy in particular, you want volatility because that volatility skews to the upside. That's the important thing to know about volatility in bitcoin in general and certainly in bitcoin treasury companies. In Trad 5 people are afraid of volatility. It's a scary word because volatility is associated with sharp down days because volatility literally skews. If you look at the histogram of volatility, it skews negative. But in bitcoin it skews very strongly positive. You want that volatility and Bitcoin treasury companies amplify bitcoin's volatility.
- [48:01]
Guys, where I want to get people.
- [48:03]
Andrew
Having responsible portfolio management is important though. If you take myself, I obviously love the sector. Not quite 100%, but almost 100% of my wealth is in Bitcoin treasury companies and bitcoin. Very little in anything else because I think it's the best thing ever and I'm incredibly passionate about it. And I also run a bitcoin treasury company. But take my, my mum or my brother or anyone like that best friend, you know, I don't know, 5%, 10%, something like that of their liquid portfolio. So people need to, like with everything in investing, they need to understand what they're investing in and they need to get those percentages right. Jesse and I, we love bitcoin treasury companies because we love maths. Yeah. So we understand percentages to a degree. Now an investor thinking about investing in this particular space, they need to understand what percentages mean and maybe slightly longer term, they need to understand rebalancing. As an example, even somebody that was very old, that was nearing their retirement, I would probably suggest that they need an allocation to bitcoin alongside the allocation to whatever boring thing that they've invested in that ironically won't have performed very well if it's bonds. So they take the volatility and they use the percentage allocation to smooth it out. That's what I would recommend to, you know.
- [49:27]
Jesse
Well, you're. Yeah, you're about to be in the preferred market, which is going to give that type of person that's getting ready to be in retirement exactly what you just described. I want to talk about this real fast with you guys. This is the last topic I really want to get into and sorry, I don't even think we're going to get to your slides here. Jesse.
- [49:44]
Another time, Preston.
- [49:46]
I want to talk about preferreds. So I'm sharing a back and forth that I had with Josh, man, who is an incredible thinker, absolute incredible thinker. And he brought up this idea that Stride has this option to basically rug pull the coupons because they're non cumulative. And you know, I've been thinking about this and I think some others in this space have been thinking about this. And you hear Michael going around, he says, you know, it's money I can borrow forever, that I never have to pay back. And like, when he says it, I'm thinking to myself, why is he saying it like that? Why is he saying it like that? So what I did is I did a discount cash flow analysis of the dividends of a perpetual dividend. This is a preferred stock that you have to pay the dividend forever and they're cumulative. So if you miss payment, they just add up and then you eventually have to make that before anybody else below you can receive dividends in the future. And what I found so fascinating is when you apply the power law, let's say bitcoin continues to go on this power law and its return is diminishing each year, the percent that it's growing is diminishing each year, but it's still growing very aggressively. But if I use that as my benchmark for what the underlying Bitcoin value is, what I did is I plotted out these dividend payments for the preferred, and what I found is that after about 10 years, and I don't know if this is going to make this bigger. Yeah, there we go. This is better. After about 10 years, this is what the effective dividend is compared to the bitcoin that was raised in the initial issuance of the preferred stock. So the $8. So this is the $8 annual dividend compounded. So at issuance, the dividend would be here. After the first year, that dividend, because bitcoin's continuing today, is compounding at about 40 to 50% annualized. So that $8 dividend turns into like $5.20 the year after that, that dividend's down here at about $3, then it's at about 250, then it's at 2. And you can see it about 10 years. Look at where you're at. You're almost at zero. If Bitcoin continues to perform the way that the power law suggests it's going to perform over the next 10 years. So for a person that issues this preferred stock 10 years later, the dividend payments are de minimis compared to what people think it is in nominal dollar terms today and what that call this perpetual drag, when you got a dividend that you're going to pay on a preferred, it's perpetual drag, especially one that's not callable. So when this is, this is the really fun part. So this top line, this orange is if you add up all these dividend payments, this is the net present value of the issuance itself.
- [52:41]
Andrew
Okay.
- [52:42]
Jesse
Based on this valuation system that I applied using Bitcoin in the power law to this preferred issuance, this is in the MicroStrategy one, this came on the market, I want to say it IPO'd at around 86 to $90 a share. And according to this discount cash flow model, the real value, if you put it in bitcoin terms, is around like 18 bucks or 18. Yeah, $18 versus the 86 that it came on the market for. If you're using bitcoin as your unit of account as opposed to dollars. And this is a perpetual.
- [53:16]
Andrew
Right.
- [53:17]
Jesse
I only did it for 20. A person who's like really into the math on this stuff, they say, well, this goes on forever and you only did 20 years. I, I look back at that person, I Say, yeah, but like, look at the chart and you can see it's maxed out. Like, okay, yeah, it's. It's $18.34 instead of 25 cents.
- [53:33]
Andrew
The reason why that's possible is because of Bitcoin. So obviously, if you believe in bitcoin, like we all do, that's the most important thing. But then it makes perfect sense. But what you're able to do is you're able to offer pretty much unlimited stock because the investment that is generated is going into the best asset in the world as opposed to going into a business to grow, say, a particular type of microchip or a particular type of computer software. So in some ways, the money going into Bitcoin, if you're not comfortable with that, that's the risk. But in return for that, you're not being exposed to the management risk, the idea risk, the limited life cycle of the thing that's being created. It's going into Bitcoin. So that's the reason why that works. And then if it was a traditional business, they might only want to do, say, $100 million worth of the pref stock, for example. But as a potential issuer of preferred stock, you can take billions and billions and billions of dollars into that if there's demand for it, and know that you can do that model so well. Pure genius.
- [54:43]
Jesse
Well, what I would also say, so a person who would see that slide and hear what we just said, they'd say, so you're ripping people off by issuing these preferred stock. And what I would come back to that person and say is, no, you're providing an 8, 10% dividend that they can't get anywhere else with the risk profile that they're getting it of, whether it's actually going to be paid back. This is back, call it 10 to 1 or 5 to 1 or whatever your metrics are, which I don't know, but I would imagine they're in that ballpark. Well, when you guys do this, which I'm assuming is going to be soon.
- [55:16]
It might take some time.
- [55:17]
It might take. Okay, so you got to build a.
- [55:19]
Certain balance sheet first, I think.
- [55:20]
Yeah, but I mean, a thousand, Bitcoin, I mean, in six months could be. And you guys will have more than a thousand at the rate going. But let's just use micro strategy, since we know what those numbers are. It is heavily capitalized, way more than what the issuance is. Okay. And so you're getting this 8 to 10% dividend, your bottom withdrawal, like the, the value that it could drop to is limited in an extreme way because the dividend is there. So the fact that you have this dividend paying it out somewhat caps the bottom side of it. And then on the strike issuance, as an example, because it actually has a convert piece to it, you're getting 80% of Bitcoin's underlying performance in the preferred stock itself, which is crazy. So for a person who needs. So, yeah, a person who needs income, like, I mean, every boomer in the world is starved for some type of income out of their investments. One does, like full stop.
- [56:23]
Andrew
And he's capitalized that to approximately 4%. So he's issued approximately 4% of the balance sheet as pref stock with the different types of prep stock. So it's pretty cautious. It's a fantastic set of products. You know, there's no doubt about it. And to expand on Jesse's point, you know, we probably need to be five times the size. I would suggest to do that. So, you know, without making a prediction, six months, one year, I mean, based.
- [56:47]
Jesse
On the math, you guys are 35 days to cover, Right? So is that the. Is that the quick math, that you'll be there in six months?
- [56:56]
It is historically looking. And the reality of this math is it has to slow down as you scale, so it will be harder to do the next cover than the prior cover. That's just the math of it. But, you know, it won't slow down.
- [57:09]
And a lot of this math, I think this is important too. A lot of this math is dependent on us continuing to be in a bull market in bitcoin.
- [57:17]
Yeah, that's right. And us continuing to be in a seismic shift in how people allocate their capital, which I think is. I think that's what's really different here, is that this is a little bit beyond bitcoin's cycles. What's happening now with bitcoin treasury companies is a systemic shift of value reallocating to where there's a better value proposition than buying Apple.
- [57:45]
I want to get into the stock, like the actual price of the stock, but I know that we can't do that. But anyway, guys, we'll wrap it up there. We're in an hour. I loved this conversation. I think this is crazy illuminating. I think it's sending shockwaves, absolute shockwaves in the process of security analysis, period.
- [58:06]
Yeah. And it's very interesting that this is happening on bitcoin Twitter and in bitcoin circles. People are figuring out on the fly that these things are undervalued and yeah, you're paying a premium versus the bitcoin holdings, but it's because of what it can deliver in the future. And when you run that math, this is unbelievable. I'd also say that there's a place in, I think there's a place in everyone's portfolio for bitcoin spot Bitcoin. There's also a place for risk in Bitcoin. And I think for me, Bitcoin treasury companies are the value proposition that I find most compelling in terms of that framework.
- [58:41]
I've got one final slide. I lied here. We're going to put up one more slide that you made, Jesse. I hope it's in this thing. Okay, hold on one second. I'm going to bring this up. And this goes to the point that you just made, because your opinion is that this is what's playing out right now, correct?
- [58:56]
Yeah. I'll walk you through this. So this originally came from an article I wrote called Asset DNA, which built on Pierre Richard's speculative attack piece. And it was in the very early days of strategy. They had just done their first convertible note in late 2020. And I wrote this to describe what's happening here. Why does it make sense for strategy to borrow dollars and buy Bitcoin? And this was the summary view of it, minus this top line, which is Bitcoin treasury companies, which I added this year. But the reality of assets, in my view in the world right now is that assets perform in different ways. Yeah, with equities, you're going to have some degree of return. But Bitcoin, because of its endogenous properties and its early stage of adoption, has more attractive properties than anything else out there from an investment point of view. So if you can borrow dollars to buy Bitcoin and then wait for those properties of those assets to play out, the dollars will decrease in purchasing power that you owe, and the bitcoin will massively grow in purchasing power, allowing you to settle up that debt or roll that debt or whatever in the future. And it will have worked out for you or the company to have done that. And so this is that summary view of. This is why those mechanics make sense and why strategies started doing what they are doing. And I added to it this year because I realized that now, in my view, there's an asset class that can perform better than Bitcoin, and it's Bitcoin treasury companies, specifically, because their entire goal and their mandate from shareholders is to accumulate more Bitcoin per share. So the only thing better than Bitcoin is more bitcoin, as Saylor likes to say. And Bitcoin treasury companies are designed to achieve that. Yes, it comes with some risk because you have to execute on that and there's custody involved. You can't do self custody like you can with your spot bitcoin. But all in all, that value proposition, I think risk adjusted is the most compelling thing in the world right now.
- [60:58]
I love it, gents, I loved it. I love this conversation. I love. If people want to learn more about your company, Andrew, give them a handoff. And Jesse, anything else that you want to add after Andrew, the best thing.
- [61:09]
Andrew
To do is to go to our website, which is www.smarterwebcompany.co.uk or if you're on Axe, just go to Smarter Web uk or you can find me personally on ax, which is A, S, J Webley, W, E, B, L, E, Y. Any of those places are good. There's loads of information on our website, loads of information on X, Great community on X. And then over to Jesse.
- [61:36]
Jesse
Yeah, I guess the one thing I would add is we talked around it a little bit, but I think that there's a winner that will emerge in each capital market. And this is my view. It's also the view of UTXO Management, which was the seed investor in Meta Planet and also in Smarter Web. And I think that's right. I think that what's happening here is that there will be a winner take most in each capital market. We've seen that in the us, that's strategy, We've seen it in Japan, that's Meta Planet. And right now there's a race for that in other capital markets too. Smarter web has a 10x lead, has emerged as the first out of the gate, doing it right in the UK with a 10x lead in terms of Bitcoin held and in market cap and every other metric you want to come up with. And that makes it a very exciting time for us at Smarter Webinar and for the community that's developing around this, because we've seen what Metal Planet was able to do by following the same path over the last 15 months. And it makes it a very exciting opportunity for us to just continue delivering on that same playbook that they've laid out so nicely. And I think that will also happen in every other capital market in the world and it will happen fast, it will happen in the next year. So now is the time for people to pay attention to what's going on and also I think an opportunity for everyone to make the most of it.
- [62:55]
I love it. All right, guys, thank you for your time. We'll have all the links in the show notes to that and thanks for joining me.
- [63:02]
Thank you, Preston.
- [63:04]
Preston Pysh
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