MicroStrategy (MSTR) released its Q2 earnings results on Tuesday, announcing its president Phong Le will replace current chief Michael Saylor as CEO, who will instead become its executive chairman in order to focus on “bitcoin advocacy and evangelism.”
During the earnings call, Saylor conceded that MicroStrategy’s newfound fame from its all-in leveraged bitcoin bet no longer seems to be raking in revenues for its core software analytics business. Q2 earnings were $122.1 million — 2.6% below last year at $123.32 million.
“I believe that splitting the roles of chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business,” Saylor said.
“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 overall corporate operations,” (our emphasis).
MicroStrategy began buying bitcoin in August 2020. Since then, MSTR’s stock price increased by 123% while bitcoin increased by 97%. Core business improved, with revenue in 2021 increasing by 6% after an average revenue loss of -1.5% in the previous three years.
This quarter, earnings per share (EPS) came out at -$94.01; worse than the anticipated -$0.84. The loss comes due to its digital impairment in its bitcoin holdings which is currently down $1.06 billion. MicroStrategy says it now holds 129,699 bitcoin which it acquired for a total cost of $4 billion, or $30,664 per bitcoin, including fees and expenses.
Saylor told investors and analysts that the company intends to buy more bitcoin in the future. So far the company issued $2.4 billion in debt and $1 billion in equity to purchase its BTC bags. Saylor also welcomed the current efforts being made to regulate bitcoin, seeing it as a positive for adoption.
MicroStrategy’s stock fell 1.58% during the afterhours session to $273.88 from $278.26, but has since bounced back. As of yesterday, a record 51% of available MSTR shares are sold short – up by 1.2 million since a previous all-time-high of 4.73 million short shares this time last month. In the past week alone, shorted shares have increased by 680,000.
Indeed, MSTR’s price has fared better than bitcoin since August 2020, but the company’s bitcoin holdings, currently worth $2.95 billion, are pretty much equal to the company’s $3.1 billion market cap. At times, the market cap of the company went below the value of its bitcoin holdings.
MicroStrategy’s stock price is highly correlated to the bitcoin price but the company is heavily leveraged to debt and equity it issued to buy bitcoin. According to Saylor, this bitcoin debt may actually increase.
Its core business, software analytics, has become relatively irrelevant compared to the size of its bitcoin bet – explaining why Saylor is moving away to instead focus on convincing people to buy BTC at a higher price than he did.