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- MicroStrategy bought an additional 12,222 $BTC ($784M) in Q2, bringing its holdings to around 226,500 $BTC (~$14.7B).
- The company has introduced Bitcoin Yield (a new KPI) to keep track of its $BTC holdings.
- However, it has a net loss of $123M in $BTC. To stay above water, it might have to get a loan, issue more shares, or even sell $BTC.
MicroStrategy, one of the world’s largest corporate Bitcoin holders, acquired an additional 12,222 $BTC (~$784M) in Q2, bringing its portfolio to 226,500 $BTC (~$14.7B).
Despite this bullish move, the business intelligence company announced a $123M $BTC net loss in Q2.
Let’s explore what went wrong, and what the company’s doing to mitigate these losses and avoid asset liquidation.
MicroStrategy’s $123M $BTC Decline & 7% Revenue Dip
On top of MicroStrategy’s Bitcoin losses of $120M in Q2, the company announced shortfalls of $5.74 per share on quarterly revenue.
The firm’s year-over-year (YoY) total revenue has declined by 7% to $11.4M.
According to Lance Vitanza, a senior TD Cowen analyst, the company has ~$45M in interest expenses, $20M in cash taxes, and $82M in earnings before taxes this year.
To fund its Bitcoin holdings, Microstrategy issued over $2B in convertible notes this year, allocating the proceeds from its software business to cover taxes and interest payments.
Additionally, a regulatory filing with the US Securities and Exchange Commission (SEC) announced the company’s plans to raise $2B by selling its class A shares.
Despite setbacks, MicroStrategy’s expanding Bitcoin portfolio raises doubts about its ability to cover escalating expenses associated with the money previously borrowed to buy $BTC.
Another red flag is the fact that $BTC’s price has dropped by 4% this week.
Vitanza believes MicroStrategy won’t purchase any $BTC until next year. While the firm has a new metric to maintain stability, it might not completely solve the problem.
MicroStrategy’s Plan to Mitigate Losses – Bitcoin Yield
MicroStrategy has launched a new KPI called Bitcoin Yield that measures the performance of its Bitcoin strategy.
Bitcoin Yield measures the percentage difference between the company’s $BTC holdings and its outstanding shares.
The company uses the KPI’s yearly growth figure (currently 12.2%) as a reference point to accomplish a $BTC APY of 4%–8% in over three years.
However, MicroStrategy announced the KPI’s calculations do not consider the source of capital used to purchase $BTC.
Our Verdict – MicroStrategy Might Have to Sell Its $BTC
MicroStrategy’s focus on enhancing its $BTC portfolio and developing Bitcoin Yield reflects its commitment to overcoming financial challenges.
However, the company’s overall strategy might ultimately suffer, as their KPIs don’t account for the capital used to buy $BTC, which obscures the actual investment costs. This could also minimize stakeholders’ confidence.
To fix things, MicroStrategy might have to get a loan, issue more shares, or sell Bitcoin to pay off its debt, which they reportedly need to settle by 2027.
References
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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