MicroStrategy, the business intelligence firm, has announced a significant increase in its cryptocurrency holdings in its Q2 2024 earnings report. The company now possesses 226,500 bitcoins, cementing its position as one of the largest corporate holders of the digital asset.
In Q2 alone, MicroStrategy acquired an additional 12,222 bitcoins, investing $805.2 million at an average price of $65,882 per bitcoin. This brings the company’s total Bitcoin investment to around $8.3 billion, with an average purchase price of $36,821 per bitcoin.
MicroStrategy’s Chief Financial Officer, Andrew Kang, highlighted the use of “intelligent leverage” in the company’s Bitcoin acquisition strategy, which has resulted in significant Bitcoin accumulation for shareholders.
While MicroStrategy’s Bitcoin holdings have grown, its core software business has experienced mixed results. Overall revenue declined by 7.4% compared to Q2 2023, totaling $111.4 million. Subscription services revenues, however, increased by 21% year-over-year to $24.1 million. On the other hand, product licenses and subscription services revenues fell by 5.7% to $33.4 million, and product support revenues declined by 6.6% to $61.7 million.
To support further growth and Bitcoin acquisitions, MicroStrategy has announced plans for a new $2 billion at-the-market equity offering program. This comes after the company successfully raised $1.6 billion through three ATM equity offerings in 2023. However, market analysts caution that raising the full $2 billion may be challenging due to increased competition from Bitcoin ETFs and potential investor fatigue with MicroStrategy’s Bitcoin-focused strategy.
MicroStrategy’s reliance on convertible notes and equity offerings to fund its Bitcoin purchases is a topic of debate. The company’s software business generates barely enough cash to cover operating expenses, currently running a free cash flow deficit of at least $60-70 million in annual interest expenses. With $4 billion in debt and Bitcoin holdings valued at $15 billion (against a cost basis of $8.4 billion), the company’s financial situation raises concerns.
In an effort to increase the liquidity of its stock and make it more accessible to a wider range of investors, MicroStrategy has announced a 10-for-1 forward stock split, set to take effect on August 7.
Despite the concerns surrounding its financial strategy, MicroStrategy reported a “BTC Yield” of 12.2% year-to-date, indicating that its Bitcoin holdings have contributed positively to shareholder equity.