Tysons software company MicroStrategy Inc. recorded a financial hit of more than $424 million in the second quarter due to the fluctuation in the price of Bitcoin, the digital currency the company has invested in heavily in the past year.
The impairment charge resulted in MicroStrategy (NASDAQ: MSTR) recording a net loss of $299.3 million for the quarter, a substantial reduction from the second quarter of 2020, when MicroStrategy recorded net income of $3.4 million. The company brought in $125.4 million in revenue during the second quarter, a 13% increase from $110.6 million in Q2 2020.
In all, for the first six months of the year, MicroStrategy recorded $618.9 million in impairment charges related to its Bitcoin, the company said in its second quarter earnings report. For that period, the company recorded a net loss of $409.4 million, compared to net income of $4 million for the same quarters of 2020.
We've reached out to MicroStrategy and will update this post when we hear back.
MicroStrategy predicted the impairment charges earlier this year, saying in June it expected to record an impairment of at least $284 million based on Bitcoin fluctuation. The company, which specializes in business intelligence software, has made acquiring and holding Bitcoin a second prong of its business strategy for the past 12 months. It purchased 13,759 bitcoins in the quarter at an average price of $38,467 per token, MicroStrategy executives said on a second quarter earnings call. As of July 28, MicroStrategy held approximately 105,085 bitcoins purchased for a total of $2.74 billion, or approximately $26,080 per bitcoin, according to the quarterly report.
During the second quarter, MicroStrategy also created a subsidiary — called, wait for it, MacroStrategy — to hold a substantial portion of its Bitcoin holdings, the company said in its quarterly report. MacroStrategy LLC holds the more than 92,000 bitcoins the company acquired before June 14. That’s because the company issued $500 million in additional debt in June, and did not want that debt secured against the Bitcoin it owned at the time, MicroStrategy President and interim Chief Financial Officer Phong Le told analysts on the company’s earnings call.
Despite the impairment charge, the company isn’t ruling out buying more Bitcoin. The company on June 14 filed a shelf registration to potentially sell up to $1 billion of Class A common shares, according to Securities and Exchange Commission filings. The company has not executed the shelf, Le said, but if it does, it would consider using the proceeds to continue investing in Bitcoin, according to the registration documents.
CEO Michael Saylor told analysts on the earnings call that he views continuing to acquire Bitcoin as "a wise strategic move" because he believes Bitcoin is digital property, which makes it superior to other digital currencies.
The big number
$389 million — The cost of a new gaming resort called The Rose pitched for Dumfries by Colonial Downs, according to Inside NoVa. The plan calls for a 50,000-square-foot gaming floor with 250-seat sports bar, eight additional bars and restaurants, 7,000 square feet of event space, 200 hotel rooms and a 1,500-seat theater. The Dumfries Town Council will consider a resolution on Wednesday that would open up the approval process for the zoning and use permits Colonial Downs is seeking for the project.
Odds and ends
- D.C.’s new indoor masking policy has a quiet start — and it stirs old fears over the Covid-19. (Washington Post)
- Montgomery County Executive Marc Elrich and his challengers for his seat see things different on the Interstate 270 toll-lane project. (Bethesda Magazine)
- The restaurateur behind Rockville’s China Garden and Han Palace in Tysons will open two new locations of Han Palace in the District — one in Woodley Park and one in Barracks Row. (Washingtonian)
- With an uptick in enrollment, Howard University is bracing for a housing shortage. (Washington Post)
- Free fares on D.C. Circulator buses will continue through September. (WTOP)
- A 113,000-square-foot location of Life Time gym is coming to Clarendon. (ARLnow)
