Investors, Customers Reward MicroStrategy for Using Bitcoin as Treasury Reserve Asset

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In Brief
  • MicroStrategy had a blockbuster third-quarter.

  • Bitcoin was a highlight even though the company reported an impairment loss of $44 million.

  • MicroStrategy is not done with bitcoin yet.

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Michael Saylor, chief executive of business analytics and mobility software company MicroStrategy, placed a big bet on bitcoin a couple of months ago, and his strategy has paid off big time. The stock is up more than 7% in after-hours trading as investors like what they see.



MicroStrategy’s third-quarter results are hot off the press, and according to Saylor, it was one of the best showings in a decade. Earnings per share came in at $2.06, well above Wall Street estimates of $0.04 per share. The company experienced “meaningful growth” across its product licenses and deferred subscription services revenue as well as an improved non-GAAP operating margin, Saylor noted.

And while it reported an impairment loss of $44.2 million from its bitcoin investment in Q3, the bitcoin price has since rebounded above MicroStrategy’s purchase price, putting the company back in the black. In addition to bolstering revenue and profits, bitcoin is a key part of the company’s strategy to deliver long-term value to investors. Saylor said in a statement,

“Our recent decision to make bitcoin our primary treasury reserve asset is the latest example of MicroStrategy’s embrace of virtual technologies. The purchase of $425 million of bitcoin during the quarter offers the possibility of greater return potential for investors than holding such balances in cash and has increased the overall visibility of MicroStrategy in the market. We believe our proactive management of our balance sheet, together with our improved revenue and profitability performance, can serve as catalysts to generate substantial long-term value for our shareholders.”

MicroStrategy Up $100 Million on Bitcoin Bet

While bitcoin’s inherent volatility has been playing out since his company invested, Saylor is not complaining. MicroStrategy has already earned $100 million from its bitcoin investment since August when the company first made headlines for scooping up BTC, as pointed out by tech investor Kevin Rooke.

 

Now the Virginia-based company owns more than 38,000 bitcoins after paying an average price of $11,111 each. The average carrying value for the company’s bitcoin was $9,954 in the quarter but with bitcoin trending well above $13,000, that value is on the rise.

Investors Send MicroStrategy Stock Soaring

Since MicroStrategy’s third-quarter earnings report came out, the stock has been rallying. Shares of MSTR are up more than 7% in after-hours trading. Since naming bitcoin its treasury reserve asset, MicroStrategy’s stock has ballooned by some 25%. Saylor expects that other “investors and enterprises” will come to realize bitcoin’s potential as a digital monetary network, saying that the “consequences will be profound.”

Source: Yahoo Finance

MicroStrategy is not done with the leading cryptocurrency yet and will reportedly be directing any excess cash after working capital into bitcoin, even with the price barreling toward $14K.

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Gerelyn caught wind of bitcoin in mid-2017, and after becoming smitten by the peer-to-peer nature of crypto has never looked back. She has been covering the space ever since. Previously, she wrote about traditional financial services, Wall Street and institutional investing for much of her career. Gerelyn resides in Verona, N.J., just a hop, skip and a jump from New York City.

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