MicroStrategy doubles down on buying Bitcoin, business intelligence doesn't make money, but stock price outperforms Bitcoin

Publicly traded company MicroStrategy, whose main business is holding Bitcoin, has announced its third-quarter financial results. MicroStrategy has once again increased its Bitcoin holdings, with a total of 158,400 Bitcoins as of October 31, 2023, lowering its average acquisition cost to $29,586. Benefiting from the recent surge in Bitcoin prices, MicroStrategy's Bitcoin holdings have turned profitable, and its stock performance has outperformed Bitcoin in the recent period.

MicroStrategy Buys Bitcoin on Dips Again

Since the end of the second quarter, MicroStrategy has acquired 6,067 bitcoins at a price of $167 million, with an average cost of $27,531 per bitcoin. As of October 31, 2023, MicroStrategy holds a total of 158,400 bitcoins at a total cost of $4.69 billion, once again lowering the average cost to $29,586 per bitcoin from the end of July's $29,672 per bitcoin.

Bitcoin Digital Asset Impairment Continues to Significantly Impact Financials

The impairment of digital assets still has a significant impact on MicroStrategy's operating expenses. For the three months ending September 30, 2023, the impairment loss on digital assets amounted to $33.6 million, accounting for 26.2% of operating expenses.

Although the operating profit can barely turn positive after deducting the impairment on digital assets, does this also indicate that MicroStrategy's core business intelligence is not profitable? MicroStrategy reported third-quarter revenue of $129.5 million, with a year-over-year increase of only 3%.

MicroStrategy Has Not Yet Adopted FASB's New Accounting Rules

The Financial Accounting Standards Board (FASB) passed a new accounting rule in early September, allowing companies like MicroStrategy that hold cryptocurrencies to evaluate the value of bitcoin on their financial statements using Fair Value. However, based on MicroStrategy's recent financial reports, it seems they have not yet implemented this new rule.

However, MicroStrategy did compare the significant differences caused by using the existing carrying value and the market price evaluation of bitcoin in their presentation. If evaluated at market price, the value of bitcoins held by MicroStrategy at the end of October would be as high as $5.48 billion, far exceeding the carrying value of $2.46 billion.

Bitcoin's Rise Benefits Shareholders! MicroStrategy's Stock Price Rises Due to FASB's New Regulations

MicroStrategy's Recent Stock Price Outperforms Bitcoin

Benefiting from Bitcoin's recent surge, MicroStrategy's bitcoin holdings have turned profitable, and its stock price performance has outperformed Bitcoin. MicroStrategy's stock price has risen 193% from its low of $140 at the beginning of the year, while Bitcoin has only risen by 115% during the same period.