MicroStrategy reports $1B loss on bitcoin holdings, looking for ways to generate yield

abdelaziz Fathi

MicroStrategy, spearheaded by one of bitcoin’s most vocal proponents, has posted a cumulative impairment loss of $1.071 billion on its cryptocurrency holdings.

MicroStrategy

As of the end of 2022’s first quarter, MicroStrategy holds about 129,218 bitcoins, which were acquired at an average price of nearly $30,700 per unit.

Nasdaq-listed business intelligence firm witnessed paper losses of $170.1 million and $194.1 million for the first quarter of 2022 and 2021, respectively, from holding digital assets on its books. However, this loss is something that has not yet been realized as it just reflects a depreciation in fair market value in excess of the book value.

Under the US generally accepted accounting principles, or GAAP, the original cost of MicroStrategy’s digital assets was $3.96 billion. But at the current price, the company’s bitcoins are worth in excess of $5.9 billion. This means that MicroStrategy would make nearly $2 billion in profit if all BTC holdings are sold today.

Other business highlights show that total revenues for the Q1 2022 were $119.3 million, a 2.9% decrease compared to the first quarter of 2021. Overall, the Virginia-based corporation reported a net loss of $130.8 million, or $11.58 per share, as compared to $110.0 million, or $11.40 a share, for the first quarter of 2021.

MacroStrategy mulls yield generation on its “unencumbered” bitcoins

Per its earnings report, the world’s biggest corporate holder of bitcoin may “conservatively explore future yield generation opportunities on unencumbered MacroStrategy bitcoins.”

The company is looking for new ways to generate yield on its massive crypto trove after its subsidiary raised $205 million via an interest-only term loan due 2025. Offered by the crypto-friendly bank Silvergate Capital, the Michael Saylor-led enterprise software company intends to use the net proceeds from the loan to acquire additional bitcoins.

Specifically, the fiat money was granted against a bitcoin holding worth around $820 million, which represents 12% of MicroStrategy’s total crypto holding. With 19,466 BTC held by the subsidiary pledged as collateral, the firm now looks to put its 95,643 “unencumbered” bitcoins to use in exchange for juicy yields.

The analytics software maker, run by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency. It has been using cash flows from its main business to acquire the digital coin, then turned to issuing convertible bonds and filing an equity shelf registration to raise additional funds.

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