MicroStrategy buys additional $6 million worth of Bitcoin despite change in leadership

MicroStrategy, a company that provides business intelligence, mobile software, and cloud-based services, and formerly run by one of the world’s biggest Bitcoin supporters, Michael Saylor, has announced the purchase of $6 million worth of Bitcoin.

According to Form 8-K filed with the United States Securities and Exchange Commission (SEC), it revealed that the company bought 301 Bitcoins between August 2, 2022, and September 19, 2022. The company paid for the Bitcoins using, “excess cash” for its purchase, according to the filing, at an average price of approximately $19,851 per bitcoin, “inclusive of fees and expenses.”

The news comes after Michael Saylor announced that he was stepping down from his role as the CEO of MicroStrategy, to begin acting as the executive chairman of the firm. As of the time he stepped down as the CEO of the company, the firm held 129,699 BTC. Looking at the date of his announcement, and the date the time frame the purchases took place, it shows that the purchase happened after Saylor stepped down as the CEO of MicroStrategy, and Phong Le took over the role.

What you should know

  • The new purchase of Bitcoin shows that Phong Le shares the same vision as Michael Saylor, who has adopted the Bitcoin strategy, which is to hold the company’s reserve in the native token of the Bitcoin network, BTC.
  • The new purchase of Bitcoin means that MicroStrategy, together with its subsidiaries, now holds 130,000 BTC, which were acquired at an aggregate purchase price of approximately $3.98 billion and an average purchase price of approximately $30,639 per bitcoin, inclusive of fees and expenses, according to the filing.
  • Michael Saylor earlier mentioned that his new position would all him focus on the firms, “bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.”
  • MicroStrategy has consistently refused to alter its outlook on the digital asset, despite the price of bitcoin plunging below $30,000 in May, which meant MicroStrategy was in the red on its average purchase price. Using Bitcoin’s price today, which stands at $19,300, MicroStrategy is down 37% on its Bitcoin holdings. However, Saylor has always opined that Bitcoin’s near-term volatility is largely irrelevant.
  • During this most recent purchase period, on Sept. 9, the firm revealed plans to sell up to $500 million in class A common stock and could buy more bitcoin. The filing stated, “We intend to use the net proceeds from this offering for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.”
  • Looking at the firm’s second quarter of 2022 report, the firm generated a revenue of $122.1 million, which compared to the second quarter of 2021, declined by 2.63%, as it generated $125.4 million in that quarter.

On the financial state of its bitcoin holdings, MicroStrategy stated, “As of June 30, 2022, the carrying value of MicroStrategy’s digital assets (comprised of approximately 129,699 bitcoins) was $1.988 billion, which reflects cumulative impairment losses of $1.989 billion since acquisition and an average carrying amount per bitcoin of approximately $15,326.” This indicates that MicroStrategy is on track to incur over $2 billion in impairment losses in the third quarter of 2022 since it began its Bitcoin Journey.

Due to this, investment bank, Jefferies, downgraded MicroStrategy’s stock to underperform from hold last month, setting a price target of $180. The firm also forecasted total revenue growth of 4%, higher than the analyst consensus of 3%, but below the resulting report. As of the time of this writing, MicroStrategy’s share price is trading $201.77, up 2.63% as at market open.

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