The 'Dean of Valuation' Says Most Companies Buying Bitcoin Are Making a Classic CEO Mistake—Here's His Brutal Reality Check
Shareholders want choice. Most investors would prefer companies pay dividends, allowing them to make their own Bitcoin investments rather than having management gamble with corporate funds.
It opens the door to abuse. Allowing managers to trade volatile assets creates opportunities for financial scandals and lack of transparency.
The Four Exceptions That Prove the Rule
Despite his skepticism, Damodaran identifies four scenarios where corporate Bitcoin holdings might make sense:
The Bitcoin Santon Exception: Companies led by recognized Bitcoin experts whom shareholders explicitly trust to trade effectively—essentially treating them like Warren Buffett at Berkshire Hathaway (NYSE:BRK, BRK.B)).
Business Necessity: Companies like PayPal (NASDAQ:PYPL) or Coinbase (NASDAQ:COIN) that need Bitcoin for their core operations, with holdings proportionate to business needs.
Currency Escape Artist: Companies in countries with failing currencies, like Argentina’s MercadoLibre (NASDAQ:MELI), where Bitcoin provides more stability than local currency.
Meme Company Strategy: Failed businesses that have become meme stocks – like AMC Entertainment (NYSE:AMC) or GameStop (NYSE:GME) – might embrace Bitcoin as part of their new identity as pure trading vehicles.
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The Institutional Adoption Paradox
Perhaps most intriguingly, Damodaran warns that widespread institutional Bitcoin adoption could be a “mixed blessing” for true believers. As traditional investors pile in, Bitcoin may start behaving more like stocks and bonds, losing its unique uncorrelated movement that made it attractive in the first place.
“As the establishment buys in, Bitcoin might lose what made it special,” he cautions, drawing parallels to how real estate became more correlated with stock markets in the 1980s as institutional investment grew.
The Bottom Line
For most companies, Bitcoin represents a dangerous distraction from their core mission. The rare exceptions require explicit shareholder approval, complete transparency, and clear accounting standards. As Damodaran puts it: this isn’t about Bitcoin’s future price—it’s about whether companies should be gambling with shareholder money on volatile assets they don’t understand.
The corporate Bitcoin revolution may be happening, but investors should question whether their companies are equipped to join it.
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This article The 'Dean of Valuation' Says Most Companies Buying Bitcoin Are Making a Classic CEO Mistake—Here's His Brutal Reality Check originally appeared on Benzinga.com
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