MICHAEL Saylor’s Strategy, the new name announced earlier today for MicroStrategy, had a fourth consecutive quarterly loss as the company registered a US$1 billion impairment charge against its Bitcoin holdings.
The Tysons Corner, Virginia-based enterprise software company turned leveraged Bitcoin proxy had a net loss of US$670.8 million, or US$3.03 a share. Revenue from the software operation fell 3 per cent to US$120.7 million, the company said on Wednesday (Feb 5).
The billion-dollar impairment charge dragged down operating losses and was the largest the company has taken since it started buying Bitcoin in 2020. All told, Strategy wrote down almost 15 per cent of the US$28 billion of Bitcoin that had been purchased by year end under old accounting guidelines.
The firm’s cash holdings also fell in the fourth quarter, dropping to US$38.1 million – the lowest year-end amount since 2002.
Strategy began its plan in the quarter to raise US$42 billion in capital from equity offerings and fixed-income securities to 2027 as chairman and co-founder Saylor looks to continue to fund Bitcoin purchases. The capital goals are ahead of schedule, with only around US$4.4 billion of equity issuance left as at Jan 26.
“There’s a lot of opportunity for us to refinance our existing convertible debt and to expand our convertible debt structure in order to create intelligent leverage,” Saylor said.
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The company now owns 471,107 Bitcoin tokens, or more than 2 per cent of all the Bitcoin that will ever exist. The firm’s crypto holdings are worth around US$46 billion and are expected to generate significant profitability in the first quarter.
The company will implement the new accounting for crypto assets, whereby changes to the fair value of its Bitcoin holdings will be reflected on the income statement.
This increase to net income from Bitcoin gains could trigger a 15 per cent corporate alternative minimum tax being applied to Strategy. Since the company does not plan to sell its Bitcoin, it would have to find another way to cover the tax bill, according to Dave Zion, founder of Zion Research Group.
“Unless they get some relief from the US Treasury, they could be looking at a pretty nasty tax bill,” Zion said.
Strategy and Coinbase Global wrote to the Internal Revenue Service in January to request relief from the corporate alternative minimum tax.
Strategy shares are up around 16 per cent year to date while Bitcoin is up 3.9 per cent. The company’s shares were little changed in late trading. BLOOMBERG
