Listed companies are rapidly transforming into bitcoin treasury vehicles, raising capital to buy BTC and hold it on their balance sheets. With bitcoin increasingly seen as a potential global reserve asset, gaining institutional traction and strong price expectations, this trend might seem sound. But there’s a problem: most of these companies have acquisition plans without a business plan.

Almost any investor can buy bitcoin directly, either spot or via ETFs. So why invest through a listed company trading at a significant premium to the net asset value (NAV) of its bitcoin?

The short answer is: you shouldn’t, unless the company has a clear strategy for putting its bBitcoin to work in a way investors can’t easily replicate. Holding BTC must serve an operational purpose. Otherwise, the company should return the capital and let shareholders buy bitcoin on their own terms.

To justify premiums, some analysts now use the concept of bitcoin yield, the percentage increase in BTC per share over time. While it’s an interesting KPI to track, it doesn’t justify a premium to NAV on its own.

Yes, if a company issues equity at a premium above NAV and buys more BTC, it can increase BTC per share. But if an investor’s goal is to gain the maximum bitcoin exposure per dollar invested, investors should just buy BTC directly.

To speed up their acquisitions, many treasury companies raise capital through various types of convertible debt. The result is a leveraged long position in bitcoin, with full downside exposure and limited upside. This structure is exactly why creditors have been eager to underwrite such instruments.

If bitcoin falls, creditors get repaid in USD, while the company may be forced to sell its BTC holdings to cover the debt. If bitcoin rises, creditors convert their debt into shares at a discount and sell them to capture the upside above the conversion price. That’s upside that would otherwise belong to shareholders.

As an investor choosing between buying into a leveraged bBitcoin equity company or simply taking on leverage against your own BTC, you have to ask: Is the reduced upside worth avoiding the work of doing it yourself?

If the company also trades at a substantial premium to its underlying bitcoin and lacks any operational plan beyond buying and holding BTC, the answer is likely no.

The same applies to other simple risk-taking strategies, such as lending out BTC in exchange for interest; they introduce risk, but do little to justify the premium.

This doesn’t mean all bitcoin treasury companies should trade at or below NAV. But a premium requires more than a funding and acquisition strategy, it requires a business strategy.

A strong bitcoin balance sheet can serve as a powerful foundation for an operational business. In finance, balance sheets are the basis for lending, trading, structuring and more, and some of the current nBitcoin treasury companies will likely emerge as financial giants of the future.

Brokerage, liquidity provision, collateralized lending and structured products are all examples of operational models that can scale, generate revenue, and justify premium valuations.

By contrast, simply raising funds to chase “bitcoin yield” is not a business plan. If a pure play treasury company doesn’t develop an operational plan, its premium will collapse, and it may eventually be acquired by a firm that does know how to put bitcoin to work.

Bitcoin is the new hurdle rate. To beat BTC, companies must do more than just buy and hold it. They must figure out how to build a Bitcoin-based business.