Michael Saylor is a bitcoin evangelist in times of euphoria and difficulty.
The billionaire is still staying the course by continuing to believe and bet on the king of cryptocurrencies.
However, the setbacks of bitcoin since the end of 2021 had enough to sow a bit of doubt in the minds of even the most indomitable bitcoin champions.
Bitcoin prices have risen from $69,044.77 on Nov. 10 to $39,828.16 currently. Bitcoin has thus lost a large part of its value.
This has just been seen in the results of the first quarter of MicroStrategy (MSTR) – Get MicroStrategy Incorporated Class A Report, Saylor’s company, which has had bitcoin on its balance sheet since 2020.
MicroStrategy’s revenue decreased 2.92% to $119.3 million in the first quarter compared to the first quarter of 2021.
This is the lowest level of revenue since MicroStrategy implemented its bitcoin strategy in the third quarter of 2020.
In the second quarter of 2020, revenues were $110.6 million but then rose to $127.4 million three months later.
Impairment Charge of $170.1 Million
The company shows a first quarter net loss of $130.8 million compared to $110 million in the same period in 2021, according to a statement.
These results were impacted by an impairment charge of $170.1 million, the firm said.
MicroStrategy had to depreciate the value of its bitcoin holdings to better reflect changing prices.
MicroStrategy explains that it bought 4,827 bitcoins in the first quarter for a total amount of $215 million at an average price of $44,645.
The company now owns 129,218 bitcoins as of March 31, 2022, with a market value of $5.9 billion, “reflecting $1.9 billion of unrealized gains or nearly 50% appreciation when compared to the original cost basis of our bitcoin.”
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MicroStrategy says it has, however, booked a total impairment charge of $1.1 billion related to its bitcoins.
Saylor Stays in For The Long Run
Despite this headwind, Saylor and MicroStrategy have no intention of selling their bitcoin and continue to believe in their strategy.
“To reiterate our strategy, we seek to acquire and hold Bitcoin long term,” Phong Le, president and chief financial officer, said during the earnings’ call. “We view our bitcoin holdings as long-term holdings and we do not currently plan to engage in sales of bitcoin.”
The company also recently obtained a bitcoin-backed loan from Silvergate Bank, a subsidiary of Silvergate Capital Corporation (SI) – Get Silvergate Capital Corp. Class A Report.
That is a provider of financial infrastructure solutions and services for the growing digital currency industry.
“We raised $205 million as an interest-only loan for a term of three years, which is collateralized by bitcoin,” Le explained during the earnings’ call. “The loan matures on March 23, 2025.”
More Bitcoin-Backed Loans?
This loan is not guaranteed by any party, MicroStrategy said.
Roughly 14,100 bitcoins of its 129,218 bitcoin holdings are held at the MicroStrategy entity, all of which are held as collateral securing the company’s 2028 secured notes, it indicated.
“The remaining approximately 115,100 Bitcoins are held at the MacroStrategy subsidiary,” the CFO said.
“Of the MacroStrategy of bitcoins, approximately 19,500 bitcoins are pledges collateral toward the bitcoin back term loan and over 95,600 bitcoins remain unpledged and unencumbered.
MicroStrategy also said that it might consider additional opportunities to utilize its bitcoin holdings in the future.
“For example, subject to market conditions, we may enter into additional bitcoin back financings, we seek to lend our bitcoin to third parties to generate yield,” Le told analysts.
“We will continue to closely monitor market conditions and determine whether to engage in any such transactions and may ultimately decide not to pursue any of these transactions.”
