MicroStrategy’s bitcoin bet pays off with $900 million paper gain

abdelaziz Fathi

MicroStrategy Inc. (NASDAQ: MSTR) has widened its third-quarter loss compared to the same period last year, missing Wall Street estimates. The company’s bottom line showed a loss of -$143.4 million, or -$10.09 per share, which is a stark contrast to the -$27.1 million, or -$2.39 per share, reported in last year’s third quarter.

Microstrategy CEO

Nevertheless, the company saw some positive developments. MicroStrategy’s revenue for the quarter was $129.5 million, which is higher than the $126.4 million average analyst estimate. It also represents a 3% year-over-year increase. The revenue growth was attributed to strong performance in cloud services and product license revenues, according to President and CEO Phong Le.

Meanwhile, the company reported a $125.8 million impairment loss on its Bitcoin holdings. This was due to the market price of Bitcoin being lower than its carrying value as of September 30, 2023. MicroStrategy remains the largest public Bitcoin holder, followed by firms like Tesla and Marathon Digital Holdings.

The company’s total operating expenses also saw an uptick, totaling $128.0 million compared with $120.0 million in Q2 and $93.9M a year before. Despite the reported loss, MicroStrategy’s stock experienced a 2.1% gain in after-hours trading.

“We further increased our total bitcoin holdings to 158,400 bitcoins, adding 6,067 bitcoins since the end of the second quarter. Our commitment to acquire and hold bitcoin remains strong, especially with the promising backdrop of potential increased institutional adoption. And while we continue to grow our strong balance sheet, our Q3 operating results and growth in total revenues reflect the resiliency of our software business and establish a solid foundation to capitalize on AI in BI,” said Andrew Kang, Chief Financial Officer, MicroStrategy.

MicroStrategy has been known for its aggressive Bitcoin acquisition strategy, and this quarter was no exception. The company purchased an additional 6,067 Bitcoin for $167 million since the end of Q2 2023, bringing its total Bitcoin holdings to 158,400, acquired at an average price of $29,586 per coin. In October alone, the company acquired an additional 155 Bitcoin for $5.3 million.

As of the last update, MicroStrategy’s average acquisition price for its Bitcoin stash, amounting to $4.68 billion, was at $29,582. This extensive hoard of the primary cryptocurrency witnessed a bleak phase in 2022 when Bitcoin plummeted 80% from its peak in November 2021. However, the rumors around the approval of a Bitcoin ETF and the impending halving event acted as the needed tailwinds, nearly doubling the digital currency’s price this year. Specifically, MicroStrategy has reported a “paper gain” of $900 million on its 158,400 Bitcoin holdings.

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