Michael Saylor steps down as CEO of MicroStrategy, company takes $917 million from bitcoin
MicroStrategy (MSTR) announced on Tuesday that its founder and CEO, Michael Saylor, will step down and take on a new role as executive chairman, focused on the company’s bitcoin strategy.
Phong Le, chairman of the company, will assume the role of CEO.
MicroStrategy on Tuesday reported quarterly results below Wall Street estimates, with revenue of $122.1 million versus $126 million. Losses for the quarter totaled $918.1 million, with $917.8 million attributable to the company’s bitcoin holdings.
In a statement, MicroStrategy said Saylor will primarily focus on “innovation and long-term business strategy, while continuing to oversee the company’s bitcoin acquisition strategy.”
“As Executive Chairman, I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage the company’s overall operations,” said Saylor said in a statement.
At the end of the second quarter, the book value of MicroStrategy’s digital assets (consisting of approximately 129,699 bitcoins) was $1.988 billion, reflecting cumulative impairment losses of $1.989 billion since the acquisition and a average book value per bitcoin of approximately $15,326, the company said in a statement. statement.
MicroStrategy’s original cost base and bitcoin market value were $3.977 billion and $2.451 billion, respectively, reflecting an average cost per bitcoin of approximately $30,664 and a market price per bitcoin of $18,895.02, respectively.
While not reflective of the current value of the company’s bitcoin investment, the writedown offers the latest evidence of crypto market brutality for the largest known bitcoin holding company.
On Tuesday afternoon, the price of bitcoin recovered 23% from its low of $17,708 per coin on June 17, although it remains 51% below the year to date.
Since the first bitcoin purchase in Q3 2020, MicroStrategy has invested over $4 billion in cryptocurrency. To do this, he issued corporate debt, convertible bonds, issued stocks, and took out a loan with some of his bitcoins.
MicroStrategy shares were little changed in after-hours trading following that announcement. Through Tuesday’s close, the stock has gained more than 60% over the past month, but still down about 50% year to date.
Fees related to the company’s bitcoin position also don’t tell the full story of the company, according to BTIG analyst Mark Palmer, who calls it “accounting noise”.
Based on generally accepted accounting principles (GAAP), MicroStrategy must account for its bitcoin purchases by recording their initial cost with a discount if the bitcoin’s value declines.
Under these rules, bitcoin’s value from the quarter’s low to its end can only be reported if the asset is sold. Thus, the impairment charge reflects bitcoin’s lowest value in the previous quarter, not its market value at the end of the second quarter.
“The reality is that the overwhelming driver, the value of MicroStrategy, is the company’s bitcoin holdings. The driver of that, of course, is the price of bitcoin at any given time,” Palmer added.
Since the value of bitcoin began to fall in May, investors have sold shares of MSTR short at an increasing rate. Between May and July 14, the amount of MSTR shares sold short increased by 1.19 million, from 2.4 to 3.6 million shares, reaching a notional value of over $1 billion in short positions according to Yahoo Finance. Data.
“Our people and our brand carry incredible momentum. I want to strengthen our commitment to our customers, shareholders, partners and employees, and I look forward to leading the organization for the long-term health and growth of our enterprise software. and bitcoin acquisition strategies,” Le said in the statement.
At current market prices, the company’s crypto investments hold a total market value of $2.9 billion.
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