(Bloomberg) — MicroStrategy Inc., the leading enterprise-software company and the largest publicly-traded holder of Bitcoin, reported a third-quarter loss due to a writedown caused by the decline in the value of the cryptocurrency.
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The net loss for the Tysons Corner, Virginia-based company 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. However, there was positive news on the revenue front, as revenue from the software business increased by approximately 3%, reaching $129.5 million. This surpassed the average forecast of $125.8 million by analysts surveyed by Bloomberg.
MicroStrategy has strategically purchased large quantities of Bitcoin since 2020 as a hedge against inflation. However, the company has been hit with significant writedowns in past years when the value of the cryptocurrency experienced downturns. In the last three months ended on September 30, Bitcoin saw a decline of 11%, but has since recovered, increasing by approximately 30%.
Co-founder Michael Saylor has transformed the once-struggling software company into a prominent player in the Bitcoin market. With over $5.5 billion worth of the cryptocurrency, MicroStrategy has become a Bitcoin proxy for equity investors. Saylor, who stepped down as CEO last year, expressed his commitment to focus on the Bitcoin aspect of the company’s dual strategy.
According to Bloomberg calculations, the $33.6 million impairment loss incurred in the quarter brings the cumulative total to over $2.2 billion. This means that MicroStrategy has written off nearly half of its Bitcoin purchases. As of October 31, the company held over 158,000 Bitcoin, with a total cost of $4.69 billion, or an average of $29,586 per Bitcoin, as stated in their official statement.
In a post-earnings conference call, Chief Financial Officer Andrew Kang revealed the company’s intention to make further Bitcoin purchases.
Investors and analysts are now pondering whether MicroStrategy’s shares will continue to demand a premium due to its Bitcoin-related activities, especially in light of the US Securities and Exchange Commission’s apparent inclination to approve Bitcoin-focused ETFs after a significant court ruling earlier this year.
MicroStrategy shares have tripled since mid-2020, coinciding with the surge in Bitcoin’s value. In the same period, the benchmark Standard & Poor’s 500 Index rose by approximately 40%.
ETF Competition
Saylor, in the conference call, highlighted the advantages of investing in MicroStrategy stock instead of a US spot Bitcoin ETF.
“There will be fees to invest in a spot ETF,” Saylor said. “The ability to get Bitcoin exposure and not get charged a fee is another plus for us.”
Saylor believes that spot ETFs would greatly expand the market and serve as an entry point for capital from Wall Street into the Bitcoin ecosystem.
Since the end of the quarter, MicroStrategy’s Bitcoin holdings have increased in value by roughly $1.2 billion, approximately equal to the company’s market capitalization when it first entered the crypto market in 2020.
Saylor also announced his plans to sell some of his MicroStrategy shares between January and April of next year due to expiring options.
–With assistance from Tom Contiliano.
(Updates with comments from executives from the sixth paragraph.)
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