(Bloomberg) — MicroStrategy Inc., the enterprise-software maker that holds the largest publicly-traded Bitcoin portfolio, reported a third-quarter loss due to a decline in the value of the cryptocurrency.
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The Tysons Corner, Virginia-based company’s net loss widened to $143.4 million, or $10.09 per share, compared to $27 million, or $2.39 per share, in the same period last year. Revenue from the software business increased by approximately 3% to $129.5 million, exceeding the average analyst forecast of $125.8 million, according to a Bloomberg survey.
MicroStrategy has been purchasing Bitcoin in large volumes since 2020 as a hedge against inflation. However, the company has had to write down significant losses following downturns in the volatile digital currency. After a decline of 11% in the three months ending September 30, Bitcoin has since risen by approximately 30%.
Co-founder Michael Saylor has transformed the once struggling software company into a Bitcoin proxy for equity investors by accumulating over $5.5 billion worth of the cryptocurrency. Saylor stepped down from his role as chief executive officer last year to focus on the Bitcoin aspect of the company’s strategy.
The impairment loss of $33.6 million for the quarter brings the cumulative total to over $2.2 billion. This means that the company has written off nearly half of its Bitcoin purchases, as calculated by Bloomberg. As of October 31, MicroStrategy held more than 158,000 Bitcoin at an average cost of $29,586 per coin.
In a post-earnings conference call, Chief Financial Officer Andrew Kang stated that the company intends to purchase more Bitcoin.
Investors and analysts are now debating whether MicroStrategy’s shares will continue to command a premium due to its Bitcoin holdings, especially with the potential approval of Bitcoin ETFs by the US Securities and Exchange Commission.
Since mid-2020, MicroStrategy shares have more than tripled in value, along with the surge in Bitcoin prices, while the S&P 500 Index rose by approximately 40% during the same period.
ETF Competition
During the conference call, Saylor highlighted the advantages of investing in MicroStrategy stock rather than a US spot Bitcoin ETF, citing potential fees associated with the latter. He believes that spot ETFs can significantly expand the market and provide an onramp for Wall Street capital into the Bitcoin ecosystem.
Since the end of the quarter, MicroStrategy’s Bitcoin holdings have increased by around $1.2 billion, which is equivalent to the company’s market capitalization at the start of its crypto purchases in 2020.
Saylor also mentioned his plans to sell some of his MicroStrategy shares between January and April of next year in connection with expiring options.
— With assistance from Tom Contiliano.
(Updates with comments from executives from the sixth paragraph.)
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