MicroStrategy Adds To Its Bitcoin Stash In Q2, Crypto Aids Results – Forbes


Michael Saylor, CEO of MicroStrategy, photographed in January 2021 by Jamel Toppin for Forbes. … [+] Jamel Toppin/The Forbes Collection
MicroStrategy MSTR bumped up its bitcoin holdings and made a little profit on them in Q2, adding 12,800 tokens at a cost of $361.4 million for an average price of $28,233.
Bitcoin BTC is now trading at 29,213, according to CoinGecko, and it was even higher on June 30 at 30,478. Crypto accounting rules mask those gains, and the company posted a $24.1 million loss on digital-asset impairments, though that far was milder than the $917.8 million charge a year earlier.
The company paid for most of its new digital gold by selling 1.08 million shares for stock under an arrangement with agents Cowen and Canaccord Genuity for aggregate proceeds of $333.5 million, or about $309 a share. The shares closed out the quarter at $342.42 and have since rocketed to $434.98.
MicroStrategy, which acts as a surrogate for a bitcoin mutual fund, said it owned 152,800 bitcoins as of July 31, now worth about $4.46 billion, or about $277 for each of the company’s shares.
The equity issue raised the average amount of shares outstanding to 16.1 million on a fully diluted basis from 14.6 million at the end of Q1 and 11.3 million a year earlier, putting downward pressure on earnings per share. Yet EPS, on the adjusted basis used by Wall Street analysts was $2.35 a share, according to Bloomberg, well above the 67-cent consensus. The earnings beat was due to continued solid profitability in the core business and materially lower digital asset impairment charges this quarter, Canaccord analyst Joseph Vafi says.
MicroStrategy’s revenue was $120.4 million, down 1% from Q2 2022 and below analyst estimates of $123.2 million. In July, Microstrategy’s chief revenue officer Kevin Adkisson quit after seven years at the company. CEO Phong Le took over the role. Net income was $22.2 million, a turnaround from a $1 billion loss the year before as the company was forced to write down the value of its bitcoin during the crypto market downturn.
The business intelligence side of the company posted $19.9 million in subscription services revenue, up 42% year-over-year, and $35.4 million in total software services revenue, a gain of 4% year-over-year. MicroStrategy’s software business counts clients including Visa V , eBay, Disney and Pfizer PFE among its ranks and posts consistent moderate growth by cross-selling products to existing clients.
Microstrategy’s stock price is 92% correlated with the price of bitcoin over the last two years, according to an analyst report from BTIG. The company stands to benefit from increased demand for bitcoin if one or more of a recent slew of applicants gain approval to sell exchange-traded funds based on the spot price of the cryptocurrency, widening the potential audience of investors. With major money managers like Blackrock and Fidelity lining up to sell bitcoin ETFs, however, MicroStrategy might face competition for investor attention in the long run.
“If they get approved then all of a sudden everyone in their IRA will be able to buy bitcoin, creating a lot of potential buying power versus where the demand is today,” Vafi says. “That would move the price of bitcoin up, moving shares of Microstrategy up. If you have a positive bias on bitcoin, then you would have to have a positive bias on Microstrategy.”


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