MicroStrategy Incorporated, a leading business intelligence company, recently announced its Q1 2023 financial results. Notably, the report provides insights into the company’s digital asset holdings, specifically its significant investment in Bitcoin. In this article, we will delve into MicroStrategy’s Bitcoin strategy and its impact on the company’s overall financial performance.
MicroStrategy’s Bitcoin Holdings
As of March 31, 2023, MicroStrategy held approximately 140,000 bitcoins, with a carrying value of $2.000 billion. This value reflects cumulative impairment losses of $2.172 billion since acquisition and an average carrying amount per bitcoin of approximately $14,289. The original cost basis and market value of MicroStrategy’s Bitcoin holdings were $4.172 billion and $3.986 billion, respectively. This indicates an average cost per bitcoin of approximately $29,803 and a market price per bitcoin of $28,468.44.
Key Developments in MicroStrategy’s Bitcoin Strategy
- Repayment of 2025 Secured Term Loan: On March 24, 2023, MicroStrategy’s subsidiary, MacroStrategy LLC, repaid its bitcoin-backed loan in full by paying Silvergate Bank approximately $161.0 million. The repayment resulted in a gain of $44.7 million on debt extinguishment for MicroStrategy. Upon repayment, Silvergate released its security interest in all of MacroStrategy’s assets, including approximately 34,619 bitcoins held in a collateral account.
- Acquisition of Additional Bitcoin: During the first quarter of 2023, MicroStrategy continued to strategically manage its balance sheet by acquiring an additional 7,500 bitcoins, bringing its total holdings to 140,000.
- Equity Issuance under the 2022 Sales Agreement: During the three months ended March 31, 2023, MicroStrategy issued and sold 1,348,855 shares of its class A common stock under the 2022 Sales Agreement for aggregate net proceeds of approximately $339.0 million. As of March 31, 2023, the company had issued and sold an aggregate of 1,567,430 shares of class A common stock for net proceeds of approximately $385.2 million. Approximately $112.3 million of the company’s class A common stock remained available for issuance and sale under the 2022 Sales Agreement.
Impact of Bitcoin Strategy on MicroStrategy’s Financial Performance
MicroStrategy’s bold move into the digital asset space has brought both opportunities and risks. In Q1 2023, the company reported a net income of $461.2 million, a significant improvement compared to a net loss of $130.8 million in Q1 2022. Digital asset impairment losses of $18.9 million and $170.1 million were reflected in the net income for Q1 2023 and 2022, respectively.
The company’s Bitcoin strategy has helped to diversify its revenue streams and bolster its balance sheet. By repaying the bitcoin-backed loan and strategically managing its Bitcoin holdings, MicroStrategy has demonstrated a strong conviction in the future of digital assets.