MicroStrategy: 226,500 BTC

MicroStrategy earnings report

Business intelligence company MicroStrategy purchased another 12,222 bitcoins for $805 million in the second quarter of this year, bringing its total bitcoin holdings to 226,500 BTC, worth $14.7 billion at current prices.

In its second-quarter earnings call, MicroStrategy reported quarterly revenue of $111.4 million, down 7% year over year, and a loss per share of $5.74.

That was well below analysts' expectations, who expected a quarterly loss of $0.78 per share on revenue of $119.3 million, according to Bloomberg survey data.

Notably, the company reported a second-quarter net loss of $123 million, a slight improvement from a net loss of $137 million in the same period last year.

The company said it holds a total of 226,500 bitcoins, costing $8.5 billion at an average price of $36,821 per bitcoin.

The company also unveiled a new key performance indicator called “Bitcoin Yield,” which represents the percentage change over time in the ratio between the company’s Bitcoin holdings and its diluted outstanding shares.

Diluted shares outstanding include all of the Company's common shares and any additional shares resulting from convertible notes or the exercise of stock options.

MicroStrategy said its BTC returns so far this year are currently 12.2%, noting that it is targeting returns between 4% and 8% over the next three years.

“The Company uses BTC Yield as a KPI to help evaluate the performance of its strategy to acquire Bitcoin in a manner that the Company believes will be accretive to shareholders,” the company said in a statement.

The company also confirmed that its 10:1 stock split, originally announced on July 11, will take effect on August 7.

Will there be more Bitcoin purchases in the future?

MicroStrategy said it would file a registration form to offer $2 billion of stock on the market to raise more funds, but did not disclose how the funds would be used.

It can also be said that in addition to operating cash flow, MicroStrategy also uses various methods to raise funds to purchase Bitcoin, such as issuing more than $2 billion in convertible bonds this year. The proceeds from the software business are used to pay related interest expenses and taxes.

Historically, MicroStrategy has raised funds with the goal of buying more Bitcoin.

MicroStrategy shares are trading at $1,500, down 6% on the day. They rebounded 1.1% in after-hours trading after the company reported second-quarter earnings, according to TradingView data.

MicroStrategy shares fell 6% on the day but rebounded 1% in after-hours trading.

Vitanza analysts estimate that the company will have interest expenses of about $45 million this year, plus about $20 million in cash taxes; earnings before items such as taxes will be about $82 million. Due to cash constraints, Vitanza expects the company to delay issuing additional notes to buy more Bitcoin until next year. Although the company's Bitcoin holdings have nearly doubled in value, the tokens have not increased revenue or profits because they do not generate any income.

So far, most investors have shrugged. The company’s shares have surged 156% this year, outperforming the roughly 50% gain in bitcoin’s price over the same period.

The company may also take impairment charges on its bitcoin holdings, which could be enough to put it in the red for 12 of the 16 quarters since it started buying bitcoin, according to analysts surveyed by Bloomberg.

Instead, Chief Financial Officer Andrew Kang said: “Since the beginning of the second quarter, we have increased our Bitcoin holdings by an additional 12,222 Bitcoins through proceeds from capital markets activities and excess cash.”

She added: “In addition, we announced a 10-for-1 stock split earlier this month. We continue to manage our equity closely and are in the process of filing a registration statement for a new $2 billion market cap equity offering. By leveraging Smart Leverage, we have again achieved a 12.2% ‘BTC Yield’ year to date, which we believe represents significant Bitcoin appreciation for shareholders.”