MicroStrategy ( MSTR ) announced Tuesday that its founder and CEO Michael Saylor will step down from the top job and take a new position as executive chairman, focusing on the company’s bitcoin strategy.
Phong Le, the company’s chairman, will assume the role of CEO.
MicroStrategy reported quarterly results that missed Wall Street estimates on Tuesday, with revenue of $122.1 million versus expectations for $126 million. Losses in the quarter totaled $918.1 million, with $917.8 million attributable to the company’s bitcoin holdings.
In a statement, MicroStrategy said Saylor will primarily focus on “innovation and long-term corporate strategy, while continuing to provide oversight of the Company’s bitcoin acquisition strategy.”
“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,” Saylor said in a statement.
At the end of Q2, the book value of MicroStrategy’s digital assets (consisting of approximately 129,699 bitcoins) was $1.988 billion, reflecting cumulative impairment losses of $1.989 billion since the acquisition and an average book value per bitcoin of approximately $15,326. statement.
The initial cost base and market value of MicroStrategy’s bitcoins were $3.977 billion and $2.451 billion, respectively, reflecting an average cost per bitcoin of approximately $30,664 and a purchase price per bitcoin of $18,895.02, respectively.
While it doesn’t reflect the current value of the company’s bitcoin investment, the decline offers the latest evidence of how tough the crypto market has been for bitcoin’s largest known corporate holder.
As of Tuesday afternoon, the price of bitcoin has recovered 23% from its June 17 low of $17,708 per coin, although it remains down 51% year-to-date.
Since first buying bitcoin in Q3 2020, MicroStrategy has invested over $4 billion in the cryptocurrency. To do this, it issues corporate debt, convertible bonds, issues shares and has taken out a loan with part of its bitcoin.
Shares of MicroStrategy were little changed in after-hours trading following the announcement. By Tuesday’s close, the stock had gained more than 60% last month, but remains down by about 50% year to date.
Charges related to the company’s bitcoin position also don’t tell the company’s full story according to BTIG analyst Mark Palmer who calls it “accounting noise.”
Based on Generally Accepted Accounting Principles (GAAP), MicroStrategy must account for bitcoin purchases by recording their original cost with a downward sign if the bitcoin’s value declines.
Under these rules, the value of bitcoin from the low to the end of the quarter cannot be reported unless the asset is sold, so the impairment charge reflects the lowest value of bitcoin in the previous quarter, not its market value at the end of the second quarter.
“The reality is that the overwhelming driver of MicroStrategy’s value is the company’s Bitcoin holdings. The driver of that, of course, is the price of Bitcoin at any given time,” Palmer added.
Since bitcoin’s value began plummeting in May, investors have sold shares of MSTR short at an increasing rate. Between May and July 14, the amount of MSTR shares shorted increased by 1.19 million from 2.4 to 3.6 million shares, reaching a notional value of more than $1 billion in short positions according to Yahoo Finance data.
“Our people and our brand have incredible momentum. I look forward to strengthening our commitment to our customers, shareholders, partners and employees, and I look forward to leading the organization in the long-term health and growth of our enterprise software and acquiring bitcoin strategies,” Le said in the announcement.
At current market prices, the firm’s crypto investments have a total market value of $2.9 billion.
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