Every quarter, big money managers disclose their holdings on Form 13F with the Securities and Exchange Commission. The batch of filings covering last quarter is now available. Shockingly, they show that the number of financial institutions holding Hyperliquid Strategies (PURR +4.96%), which stockpiles Hyperliquid's (HYPE +2.65%) token, grew by 122% in just three months to reach a total of 202, with BlackRock and State Street among the largest. Eleven institutions cut their positions in the same period, and another 29 exited entirely.
Should you follow these institutional investors in loading up on Hyperliquid Strategies?
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This news requires some context to be fully understood
A big part of the reason many institutions are now holding Hyperliquid Strategies is that it joined the S&P Global Broad Market Index, as well as the Russell 2000 and Russell 3000 indexes, in late June. So any funds tracking those benchmarks had to buy it.
For instance, BlackRock's stake in the company was disclosed via a Form 13G, a passive holder disclosure form, while Morgan Stanley and Invesco built index-scale positions of their own. Citadel Advisors, a market maker, holds more bullish and more bearish options on the stock than any other filer, suggesting it was accumulating market-making inventory rather than loading up on conviction. The same could be true of Jane Street, another market maker among the new holders, though not necessarily of Renaissance Technologies, a systematic hedge fund.
NASDAQ: PURR
Key Data Points
In effect, this means it doesn't make much sense to get excited about Hyperliquid Strategies solely because more institutions now hold it.
Of course, these caveats don't apply to every single new holder. Many of the new stakes, like the one held by Stanley Druckenmiller's Duquesne Family Office, were acquired without any attendant obligations to market-make or back other funds.
There's a trade here, but that doesn't mean it's for everyone
As a digital asset treasury (DAT) company, Hyperliquid Strategies holds 29.2 million Hyperliquid tokens, which are worth about $1.7 billion.
Given its current price, the stock's $1.4 billion in market value falls short of the value of that token pile, with a net asset value multiple (mNAV) of about 0.84. When a treasury company's mNAV is lower than 1, the implication is that the market is valuing the stock beneath the value of the assets it holds. Thus, there's an opportunity to buy the stock and wait patiently for the market to close the discount.
CRYPTO: HYPE
Key Data Points
But opportunities usually have some attendant risks, and this is no exception.
DATs accumulate tokens by issuing additional shares. Hyperliquid Strategies could dilute its shareholders through new issuance to raise capital until its mNAV reaches 1 again, leaving anyone who buys it now with losses rather than the tidy profit expected. This is a realistic concern because the company still has $353 million left under its $1 billion equity facility, and also because it's in management's interest to show regular purchasing of its target underlying asset.
Thus, it's probably not the smartest move for individual investors to buy Hyperliquid Strategies. Buying its underlying asset, Hyperliquid, is probably the better choice.
