Accumulator Bitcoin Strategy Inc. returned to profitability in the third quarter, with results bolstered by an unrealized gain tied to the growing value of the company’s roughly $69 billion cryptocurrency stock.
Net income was $2.8 billion, or $8.42 per share, compared with a loss of $340 million, or $1.72 in the year-ago period, the Tysons Corner, Virginia-based company said in a statement Thursday. The company, formerly known as MicroStrategy, adopted accounting standards in January that required it to include the fair value of its assets. Bitcoin participation in its profits. This change triggered multibillion-dollar swings between profits and losses over the previous two quarters.
The company said in the statement that it was “actively preparing the ground for credit securities in international jurisdictions.” Shares of Strategy fluctuated after hours.
Even as Bitcoin hit an all-time high during the third quarter and dozens of public companies copied the treasury company model that co-founder and Chairman Michael Saylor pioneered five years ago, investors have begun to question the tactic. Shares of Strategy have fallen about 45% since the stock closed at a record high last November, erasing much of the premium the stock had long enjoyed over its Bitcoin holdings in recent years.
The company was a modest enterprise software company until 2020, when Saylor shook Wall Street by moving money into Bitcoin. The stock stopped trading due to its earnings potential and began trading on a multiple of its underlying Bitcoin holdings, known as mNAV. After trading at times at more than twice that multiple, mNAV fell to around 1.3.
At the center of concerns are the financing arrangements of the company. Strategy’s preferred shares, billed as its primary vehicle for future Bitcoin purchases, have attracted lukewarm demand. The recent sales fall well short of Saylor’s ambition for a blockbuster capital raise, leading to a slowdown in the pace of Bitcoin purchases in recent weeks.
Following the release of second-quarter results in July, Strategy committed not to issue new common stock at less than 2.5 times its net asset value, except to cover debt interest or preferred dividends. At the same time, Saylor said he will continue to “opportunistically” exploit the market when the premium is high, thereby turning stock sales into new Bitcoin purchases. Despite its efforts to reassure its shareholders, the company subsequently sold more common shares.
Revenue from the company’s existing enterprise software business rose 11% to $128.7 million, above the average forecast of $116.8 million from analysts surveyed by Bloomberg.
