Throughout the MicroStrategy (MSTR) Q3 earnings name, Government Chairman Michael Saylor mentioned Bitcoin is profitable, in flip boosting the corporate’s fortunes.
“Bitcoin is profitable, however MicroStrategy is profitable much more than the Bitcoin proper now due to our levered lengthy Bitcoin technique we pursued.”
MicroStrategy is the most important public firm holder of Bitcoin, at 130,000 tokens, with a market worth of $2.655 billion based mostly on at the moment’s value.
Since first saying its BTC technique in 2020, the agency has come below hearth with critics saying its BTC-heavy method places shareholders in danger and varieties a distraction from the corporate’s core software program enterprise.
Regardless of that, the discharge of the Q3 earnings report noticed MicroStrategy inventory rise 3%. Nonetheless, MSTR stays down 51% year-to-date. Equally, Bitcoin is down 56% year-to-date.
Bitcoin outperforms different asset lessons
Throughout the name, maybe to dispel criticisms of the corporate’s funding technique, Saylor targeted on the time interval since first including Bitcoin as a treasury asset.
He mentioned since Aug. 11, 2020, MSTR has “outperformed all the main asset lessons that we benchmark ourselves towards.” Later including that these benchmarks embrace all large tech and enterprise software program shares.
“You possibly can see from this chart, we’re up as of 4:00 P.M. yesterday, October 31 we had been up 116%, since we launched into this technique.”
Likewise, he identified that Bitcoin is up 72% since August 2020. Whereas the S&P and Nasdaq grew 15% and 0%, respectively, over the identical interval,
So far as gold is anxious, Saylor mentioned gold is down 19%, which, looking back, justified MicroStrategy’s resolution to go BTC-heavy over the dear steel to protect wealth throughout the precarious macro circumstances.
“Gold is the exhausting cash answer for the nineteenth century, and Bitcoin is the exhausting financial asset for the twenty first century.”
Impairment fees
Based mostly on accounting requirements that require “indefinite-lived intangible asset,” corresponding to Bitcoin, to be recorded at impaired worth with out subsequent unrealized good points to be mirrored, MicroStrategy’s digital belongings don’t replicate market worth.
The distinction is made up of impairment fees. Given Bitcoin’s relative stability throughout Q3, this quarter’s BTC impairment cost got here in at $700,000, the bottom since adopting BTC as a treasury asset.
CFO Andrew Kang mentioned the acquisition of a further 301 BTC this quarter reaffirms the corporate’s dedication to its treasury technique.
As well as, Kang additionally referenced ongoing discussions with the Monetary Accounting Requirements Board over altering the remedy of Bitcoin to a “truthful valuation” commonplace, which acknowledges subsequent good points following impairment losses.
Kang mentioned the adoption of a good worth accounting remedy commonplace would encourage additional institutional adoption.
“If lastly adopted and applied, we imagine truthful worth accounting will enhance upon the present, unfavorable intangible accounting remedy relevant to bitcoin holdings and can promote further institutional adoption of bitcoin as an asset class.”
