Michael Saylor’s Strategy (previously MicroStrategy) is increasing its Bitcoin investment plans to $84 billion, despite reporting record losses this past quarter. The losses are due to new accounting regulations affecting asset values. Strategy has ramped up Bitcoin acquisitions significantly and aims to mitigate losses through a mix of equity and debt financing. Saylor continues to be a powerful advocate for Bitcoin, amid market skepticism and new challenges.
Michael Saylor’s company, now known as Strategy (formerly MicroStrategy, Nasdaq: MSTR), is going full steam ahead with its investments in Bitcoin, even as it deals with a record loss. Recently, the firm announced plans to double its initial capital-raising target for Bitcoin to an astonishing $84 billion. This surge comes in the wake of a significant loss reported for the March quarter, driven largely by a new accounting rule that causes Bitcoin holdings to be valued at current market rates.
Last week, Strategy disclosed intentions to issue an additional $21 billion in common shares. This follows an earlier equity initiative, worth $42 billion, that had already garnered approval in October. Moreover, they’ve expanded their debt purchase program, with $14.6 billion now remaining of the total $42 billion originally anticipated, which is effectively double what was first put out there.
The firm reported a substantial shortfall of $4.2 billion in the last quarter. This gap highlights how strategic decisions and market conditions are impacting the earnings and profits linked to Bitcoin’s notorious price fluctuations. The high-profile software company, which has pivoted into a leveraged Bitcoin proxy, took advantage of the new accounting rules in the March quarter this year. As it stands, Strategy holds around 555,450 BTC, valued at roughly $53 billion following a recent acquisition.
Prior to the accounting change, Strategy classified its Bitcoin as an intangible asset. This meant that as Bitcoin’s value fell, the company faced an obligation to adjust the assessed worth of its assets downward. Profits from Bitcoin can only be acknowledged once the tokens are sold. Saylor has not only influenced Bitcoin’s acceptance in mainstream finance but has also made Strategy a key player in the crypto landscape.
Remarkably, Saylor has reshaped his older business intelligence company into the world’s largest Bitcoin proxy. His efforts have boosted the firm’s stock nearly 3,000% since he began accumulating Bitcoin in 2020. However, the question everyone has on their minds is whether this strategy is sustainable long-term. Saylor’s gamble has proven beneficial so far, but with new competitors coming into play that have solid financial backing, challenges are on the horizon.
Recently, firms such as Cantor Fitzgerald and Tether Holdings joined forces with SoftBank Group to create Twenty One Capital, posing fresh competition for investment in Bitcoin. Yet, Saylor’s commitment to bitcoin acquisitions remains unwavering; his decision to double the capital plan for Bitcoin last week underscores this. Over the past six months, Strategy has ramped up its investments significantly, buying thousands of dollars in Bitcoin almost every week.
Using a blend of common equity and debt issuances to finance these acquisitions, the company announced just this week it had purchased 1,895 BTC, costing about $180 million. This follows prior purchases of 15,355 BTC for $1.42 billion and 6,556 BTC for $555.8 million.
Interest from hedge funds in convertible debt is on the rise too. Many funds are pairing bond purchases with short-selling strategies, becoming increasingly influential in markets for convertible debt. However, this often results in volatile earnings and losses, similar to what Strategy experienced last quarter.
According to Bloomberg, Saylor’s extensive investment contributed to a substantial loss of around $1 billion for the company, stemming from its investments in Bitcoin in the first quarter. With Bitcoin’s token price slipping by 12% during that period, Strategy reported nearly $5 billion in losses. Despite these hurdles, boutique research firm Monness, Crespi, Hardt & Co. recently gave Strategy a sell recommendation, citing an oversaturated market for assets tied to Bitcoin purchases.
However, this is not Saylor’s first encounter with such skepticism from the market, and it likely won’t be the last. He continues to firmly believe in Bitcoin’s potential.
