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Microstrategy holds 92,079 Bitcoins. Dreamstime.com
The recent weakness in Bitcoin may have scared some companies to acquire more of them, but one company looks more bullish than ever.
Enterprise software company Microstrategy (ticker: MSTR) said on Monday it would sell $ 400 million worth of bonds to institutional investors and use the proceeds to buy more Bitcoin. This is the first time that a company has issued speculative grade bonds to finance a purchase of Bitcoin, according to Bloomberg.
Microstrategy already owns 92,079 Bitcoins, worth over $ 3 billion at current prices. Bitcoin was trading at $ 35,800 on Monday.
The Microstrategys purchases come even as the company also said in a separate securities deposit that it will have to write down the value of its assets by at least $ 284.5 million in the next quarter due to the decline in the Bitcoin price. Bitcoin-related operating losses have already had a significant impact on Microstrategys results.
In its most recent quarter, the company reported an impairment charge of $ 194.1 million, resulting in an overall operating loss of $ 183.2 million. Microstrategy rates its assets down to the lowest level Bitcoin reached in the quarter. In the last washout, the price dropped to $ 30,200.
Others seem to have been dissuaded from getting into crypto, at least for now. Tesla (TSLA), which bought Bitcoin in the first quarter, then sold some of its holdings and reversed its decision to accept it as payment for its vehicles.
That said, Microstrategy still appears to have made a paper gain on its Bitcoin holdings, given that the company said in its last earnings call that it has accumulated its current Bitcoin holdings at an average price of $ 24,214. . He will create a subsidiary called Macrostrategy to hold Bitcoin.
Outside of a few crypto-focused companies like Riot Blockchain (RIOT), Microstrategy appears to be the most Bitcoin-connected company in the United States. It was a sleepy Virginia-based software company until last year, when CEO Michael Saylor fell in love with Bitcoin. He bought some for himself and then began to advocate for corporate purchases. At the time, he explained to Barrons in an interview that he believed Bitcoin would become more and more popular as inflation accelerates.
As Microstrategy began buying Bitcoin and the price of crypto increased, the company’s market capitalization grew from $ 1 billion to over $ 10 billion earlier this year. It has since fallen to around $ 4.6 billion.
Microstrategy has already issued nearly $ 1 billion in convertible bonds to buy Bitcoin. Analysts say the strategy adds new risk to the stock, but some have accepted it, in part because it gives the company a unique selling point for investors. BTIG analyst Mark Palmer called it rational action to protect the company’s inherent value in the long run. That said, he notes that Microstrategy could be affected if it became easier for investors to buy Bitcoin directly, through an ETF listed in the United States for example.
There may be another room here too. The company claims that its Bitcoin-related notoriety appears to be helping it attract new software clients.
The increased visibility and thought leadership of our Bitcoin acquisition strategy is driving more leads for inbound software, CFO Phong Le said in the company’s latest earnings call.
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