MicroStrategy Reports Larger-Than-Expected Loss, Increase in Bitcoin Holdings — Barrons.com

By Janet H. ChoCryptocurrency enthusiasts were digesting MicroStrategy's fourth-quarter earnings results after the market close on Wednesday.Chief Financial Officer Andrew Kang said the company saw its largest-ever increase in quarterly Bitcoin holdings in the fourth quarter, "culminating in the acquisition of 218,887 bitcoins acquired for $20.5 billion," since the third quarter. The company raised an additional $584 million through convertible preferred share sales to investors."We have completed $20 billion of our $42 billion capital plan, significantly ahead of our initial timelines," President and CEO Phong Le said in a statement, referring to the company's plan announced last year to raise money over three years to buy more Bitcoin."Looking ahead to the rest of 2025, we are well-positioned to further enhance shareholder value by leveraging the strong support from institutional and retail investors for our strategic plan," Le said.The world's largest corporate Bitcoin holder is closely followed by investors mainly for its cryptocurrency holdings, and not for its business. It reported a larger-than-expected net loss of $3.03 a share, or $670.8 million. Analysts had expected adjusted earnings of 5 cents a share, according to FactSet.It said total revenue for the quarter fell 3% to $120.7 million, whereas analysts had expected a 1.7% decline to $122.4 million.The results compare with adjusted earnings of 56 cents a share on sales of $124.5 million in the fourth quarter of 2023.Shares rose 1% to $338.94 late Wednesday, after dropping 3.3% in regular trading.The company said subscription services revenues grew 48% from a year earlier, to $31.9 million; product licenses and subscription services revenues grew 18% to $47.2 million; product support revenues rose 11% to $58.4 million; and other services revenues increased 21% to $15.1 million.But gross profit of $86.5 million declined from $96.3 million in the year-ago quarter.MicroStrategy announced earlier on Wednesday that it is now doing business as "Strategy," calling itself the world's "first and largest Bitcoin Treasury Company" and the largest independent, publicly traded business intelligence company. It also announced that its new logo is a stylized "B," signifying its Bitcoin strategy.MicroStrategy on Monday disclosed in a regulatory filing that it had gone a week without purchasing any Bitcoin for the first time since early November. Its latest purchase — at the end of January — was for around 10,107 digital tokens, bringing its total holdings to around 471,107 Bitcoins as of Sunday, Feb. 2.Bitcoin was trading at around $97,000 early Wednesday, down from above $104,000 last week, according to CoinDesk.MicroStrategy holds about $50 billion of Bitcoin, but it has no recurring earnings, based on generally accepted accounting principles. Its software business, with about $500 million in revenue, isn't profitable on a GAAP basis.Barron's noted in December that the gap between MicroStrategy's market value and the value of its Bitcoin holdings is at the heart of the debate about the company. Chairman and controlling shareholder Michael Saylor has helped it gain a huge retail following.MicroStrategy last week priced about 7.3 million shares of 8% convertible preferred stock offering at $584 million, with a 10% dividend yield.MicroStrategy's stock has risen 16% year to date and 563% over the past 12 months. Barron's has said the premium looks too high, and the stock is vulnerable to a pullback, especially if Bitcoin's postelection surge begins to reverse.Julian Klymochko, CEO of Canadian investment firm Accelerate, thinks analysts and investors are going to extremes to justify the MicroStrategy valuation, calling it "mental jujitsu to justify buying the shares at such an inflated price and in such a convoluted way through a holding company that is basically a closed-end fund." Closed-end funds raise money by issuing shares and using the proceeds to buy financial assets, and usually trade at a discount to their net asset value, not a premium.On Dec. 13, MicroStrategy, along with Palantir Technologies and Axon Enterprises, was added to the Nasdaq 100 index of the 100 largest nonfinancial companies in the Nasdaq Composite index. MicroStrategy's inclusion was because of a quirk classifying it as a software company because that was its main business before it became the largest corporate holder of Bitcoin, even though software now accounts for less than 5% of its current value.Write to Janet H. Cho at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.