MicroStrategy, a renowned company in business intelligence and software, has demonstrated its unwavering commitment to Bitcoin by acquiring an additional 122 BTC for $7.8 million in April. This announcement was made by Founder & Chairman Michael Saylor. Phong Le, the company’s President and CEO, emphasized that MicroStrategy, as the world’s first Bitcoin Development Company, is dedicated to enhancing the Bitcoin network through its involvement in the financial markets, advocacy, and technological innovation.
With this recent purchase, MicroStrategy now holds a total of 214,400 bitcoins, acquired at an average price of $35,180 each. MicroStrategy’s aggressive accumulation of Bitcoin can be traced back to August 2020 when the company made an initial investment of $250 million in Bitcoin. Since then, it has continually expanded its Bitcoin holdings, accumulating over 214,400 bitcoins valued at almost $15 billion. Andrew Kang, MicroStrategy’s Chief Financial Officer, highlighted that the company raised over $1.5 billion in the first quarter through successful convertible debt offerings and purchased an additional 25,250 bitcoins.
MicroStrategy’s Bitcoin reserves have consistently increased for 14 consecutive quarters. Kang emphasized that the company’s operational strategy, combined with its focus on Bitcoin and technological innovation, presents a unique opportunity for shareholder value creation, especially considering the significant rise in Bitcoin prices. This increase can be attributed to the approval of spot bitcoin exchange-traded products, which has boosted institutional demand and provided regulatory clarity.
Despite reporting a substantial operating loss of $53.1 million for the first quarter, primarily due to a digital asset impairment charge of $191.6 million, MicroStrategy chose not to adopt a new accounting standard that would have reflected its digital assets at fair value. This decision could have shown a significant profit. Under the prevailing accounting norms, the company’s Bitcoin was valued at $23,680 per unit by the end of the quarter, totaling $5.1 billion. This value was significantly lower than the market closing price of $71,028 per Bitcoin at the end of March.
During the earnings call, Andrew Kang indicated that MicroStrategy is considering switching to the new fair value accounting standard for digital assets. Although the Financial Accounting Standards Board (FASB) allows early adoption of the rule, officially required by January 1, 2025, the timing of the transition is carefully being considered.
Michael Saylor, the controlling shareholder of MicroStrategy, has recently raised approximately $400 million from pre-planned daily sales of about 5,000 shares. These sales were tied to the exercising of options granted to him in 2014 that were nearing expiration. Remarkably, the company’s stock price has doubled this year, reaching around $1,290, outperforming even the gains of the original cryptocurrency over the same timeframe. In 2014, the company’s shares were trading at approximately $160.
Despite concerns about selling shares at a market peak, Saylor’s financial moves appear to be strategic. He mentioned in a conference call that he has only drawn a nominal $1 salary from the company for more than a decade, forgoing any cash bonuses. The funds from the stock sales are intended to cover personal obligations and increase his Bitcoin holdings.
The significant rise in MicroStrategy’s stock has not gone unnoticed in the financial community. While some express skepticism, Lance Vitanza, a managing director at TD Cowen, noted that investors are aware Saylor still retains a substantial portion of company stock.
There may be a potential development affecting MicroStrategy’s financial strategy related to its stock. The company faces $650 million in convertible bonds set to mature in 2025. The option to settle these bonds either in cash or by converting them into company stock could lead to the creation of up to 1.63 million new shares. This potential conversion raises concerns about the dilution of value for existing shares and the potential impact on current shareholders.
