MicroStrategy's Mega Bet on Bitcoin with $42B Plan Despite Earnings Miss

MicroStrategy Inc. (Nasdaq: MSTR), recognized as the largest corporate holder of Bitcoin and the world’s first ‘BTC Treasury Company’, revealed its third-quarter 2024 financial performance. The company’s Bitcoin-focused financial strategy showed continued growth, coupled with its newly launched “21/21 plan.”

MicroStrategy Makes Major Bet on Bitcoin

The 21-21 plan is a three-year capital-raising strategy involving $21 billion in equity and $21 billion in fixed income securities, as stated in a press release today. MicroStrategy aims to leverage this plan to expand its Bitcoin holdings as a treasury reserve asset. Phong Le, President and CEO, emphasized the company’s commitment to shareholder value, highlighting that the 21/21 Plan will enable higher BTC Yield.

In Q3 2024, MicroStrategy raised $2.1 billion through equity and debt, expanding its Bitcoin reserves by 11% and achieving a year-to-date BTC Yield of 17.8%. Additionally, the company reported a reduction in annualized interest expenses by $24 million. CFO Andrew Kang commented on MicroStrategy’s leveraged strategy, stating it provides a solid foundation for their growth objectives.

MicroStrategy’s Bitcoin holdings, as of September 30, 2024, totaled approximately 252,220 BTC with a carrying value of $6.851 billion. This Bitcoin stash had an original cost basis of $9.904 billion but were valued at $16.007 billion in the current market. This translates to an average acquisition cost of about $39,266 per BTC against a market price of $63,463.

MicroStrategy announces $42 billion capital plan including $21 billion ATM equity offering and a target of raising $21 billion in fixed-income securities. Join us at 5pm ET as we discuss our quarterly results and #Bitcoin Treasury Company plans. $MSTR https://t.co/eXYELbN1Dm

— Michael Saylor⚡️ (@saylor) October 30, 2024

In an At-the-Market (ATM) equity offering program, MicroStrategy issued 8,048,449 shares of its class A common stock, generating net proceeds of $1.1 billion. Approximately $891.3 million in shares remained available for issuance under this program. Furthering its capital-raising efforts, MicroStrategy launched a new ATM program on October 30, 2024, targeting an additional $21 billion in equity sales.

To optimize its debt structure, the company issued $1.010 billion in 0.625% Convertible Senior Notes due 2028 in September, with a conversion price of $183.19 per share. Proceeds from this issuance were partly used to redeem all $500 million of its 6.125% Senior Secured Notes, which carried a higher interest rate. The redemption included a premium cost of 103.063% of the principal, along with accrued interest up to September 26, 2024.

A Look at Company’s Earnings Report

For Q3 2024, MicroStrategy reported $116.1 million in total revenue, marking a 10.3% decrease year-over-year. Subscription services revenue grew by 32.5% to $27.8 million. Conversely, product licenses and subscription services revenue fell by 13.6% to $38.9 million, product support revenue decreased by 8.7% to $61.0 million.

Moreover, other services revenue declined by 8% to $16.2 million. Gross profit was $81.7 million with a gross margin of 70.4%, down from $102.8 million and a gross margin of 79.4% in Q3 2023.

Operating expenses surged by 301.6% year-over-year to $514.3 million, largely due to impairment losses on digital assets, which amounted to $412.1 million. The company posted a loss from operations of $432.6 million, up from $25.2 million a year prior.

Furthermore, net loss reached $340.2 million, or $1.72 per diluted share, compared to a net loss of $143.4 million, or $1.01 per diluted share, in Q3 2023. Cash and cash equivalents totaled $46.3 million at the end of Q3, down by $0.5 million from December 31, 2023.

Analysts had anticipated a 6.2% revenue drop to $121.5 million and an adjusted loss of $0.02 per share, contrasting with MicroStrategy’s reported performance. Thus, the MSTR stock plunged 6.62% to $230.95% in the after hours trading session on Wednesday.

Also Read: MicroStrategy to Buy $25B Bitcoin? Speculation Grows Amid Trump’s No Crypto Tax Idea