On Tuesday (1 November 2022), Phong Le, President and CEO at business intelligence software company MicroStrategy Inc. (nasdaq: MSTR), talked about his firm’s Bitcoin strategy during the Q3 2022 earnings call.
It is worth remembering that on 11 August 2020, MicroStrategy announced via a press release that it had “purchased 21,454 bitcoins at an aggregate purchase price of $250 million” to use as a “primary treasury reserve asset.”
MicroStrategy Co-Founder Michael Saylor said at the time:
“Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively.“
Since then MicroStrategy has continued to accumulate Bitcoin and its former CEO has become one of Bitcoin’s most vocal advocates. MicroStrategy’s latest $BTC purchase, which Saylor tweeted about on 20 September 2022, means that the firm is now HODLing around 130,000 bitcoins, which were “acquired for ~$3.98 billion at an average price of ~$30,639 per bitcoin.”
Anyway, according to the transcript of the Q3 2022 Earnings Call by The Motley Fool, Phong Le, who is President and CEO at MicroStrategy, had this say about Bitcoin:
“To reiterate our strategy, we seek to acquire and hold Bitcoin for the long-term. And we do not currently plan to engage in sales of Bitcoin. We have a long-term time horizon and the core business is not impacted by the near-term Bitcoin price fluctuations. As a final comment, I would say macro and market volatility are expected to be the new normal.
As for MicroStrategy Senior Executive VP and CFO Andrew Kang, he said:
“Total non-GAAP expenses, which exclude share-based compensation costs were $102 million in the third quarter, compared to $165 million in the third quarter of 2021. Our total non-GAAP costs this quarter were significantly lower year over year, as well as compared to Q2 of this year.
“This was primarily due to stable Bitcoin prices this quarter, which led to a nominal $700,000 Bitcoin impairment charge in contrast to the $65 million charge in Q3 of 2021. The Bitcoin volatility as measured by the one-month realized volatility fell below that, of the major equity indices such as the S&P 500 and NASDAQ this past quarter.
“We view this recent market shift as a possible signal that Bitcoin’s investor base and institutional adoption is continuing to mature, making it more suitable and accepted by traditional market participants. During the quarter, Bitcoin prices remained above our carrying value, low watermark of approximately $17,600 – and as a result, we saw a minimal digital asset impairment charge in Q3…
“As you know, GAAP accounting treats our Bitcoin holdings as an indefinite-lived intangible asset, which means that any decrease in the fair value below our carrying value any time after date of acquisition requires us to recognize an impairment. Conversely, when prices increase, the current accounting rules did not allow us to increase the carrying value…
“On October 12, the Financial Accounting Standards Board unanimously voted to recommend the adoption of fair value accounting for all public and private companies in measuring certain digital assets, including Bitcoin. Under current fair value accounting standards, both decreases and increases in the fair market value of an asset would be recognized in GAAP earnings...
“We understand this is an initial step in the standard-setting process and many of the details and disclosures have yet to be determined, but we are extremely encouraged and supportive of the FASB’s decision for the change and the improved investor transparency it should provide. We believe this is an extremely positive step for the future of digital asset accounting, and we remain committed as we have in the past to supporting these efforts…
“On slide 16, as of September 30, 2022, we held a total of 130,000 Bitcoins, of which 14,890 Bitcoins were held directly by MicroStrategy at the parent. All of which secure our 2028 notes.
“The remaining 115,110 Bitcoins are held at MicroStrategy — I’m sorry, MacroStrategy, our subsidiary. In Q3, there was no change to the number of Bitcoins pledged at MacroStrategy. Of the Bitcoins held at the sub, approximately 30,000 Bitcoins are pledged as collateral to our Bitcoin back loan and just over 85,000 Bitcoins or 65% of our total holdings, equivalent to approximately $1.7 billion at the current market price of $20,400 remain unpledged and unencumbered.
“As you can see, we have more than sufficient collateral to meet the ongoing requirements of our Bitcoin back loan today and through any current foreseeable price volatility. As Paul mentioned earlier, our Bitcoin strategy remains simple. We have bought and held Bitcoin and will continue to do so.“
As for former CEO Michael Saylor, he added:
“And I’m delighted to report to all the shareholders that since MicroStrategy adopted the Bitcoin strategy on August 11, 2020, our stock has outperformed all of the major asset classes that we benchmark ourselves against. It has outperformed all big tech stocks, and we have outperformed all enterprise software stocks that we benchmark ourselves against.
“You can see from this chart, we are up as of 4:00 P.M. yesterday, October 31 we were up 116%, since we embarked on this strategy. And I think the most important benchmark we compare ourselves against is Bitcoin itself. And Bitcoin in that same time period is up 72%, so we have managed by our strategy to capture all of the Bitcoin gains with a boost.
“Now, if we compare the Bitcoin performance in that 2.25 years to other assets, the S&P is up 15%. So a diversified portfolio of really high-quality stocks are 15%. the NASDAQ is effectively zero percent. So there is no gain in the NASDAQ.
“Gold, and many of you have followed us in our journey will recall that — when we started on this path, our No. 1 was, should we buy Bitcoin or should we buy gold. Gold is down 19%. In that same time period, the Bitcoin is up 116%...
“We benchmark ourselves against big tech stocks, and of course, three of the most extraordinary stocks and companies in the modern era are Apple, Google and Microsoft. And of course, Apple is up 36%, about one-fourth of our performance results and our stock. Google was up 27%. Microsoft is only up 11%. So MicroStrategy stock is 10x…“
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