MicroStrategy, a company that provides business intelligence, mobile software, and cloud-based services, run by one of the world’s biggest Bitcoin supporter, Michael Saylor, just announced that it purchased $414.4 million worth of Bitcoin.
According to the Form 8-K filed with the United States Securities and Exchange Commission (SEC), it revealed that the company had been buying bitcoin between the 1st of October 2021 and the 29th of November 2021.
The filing also revealed that the total bitcoin purchased was 7,002 BTC at an average price of approximately $59,187 per bitcoin, inclusive of fees and expenses. The purchase was made with cash.
What you should know
The filing revealed that the addition of 7,002 BTC puts MicroStrategy’s total bitcoin portfolio at approximately 121,044 BTC that were acquired at an aggregate purchase price of $3.57 billion and an average purchase price of approximately $29,534 per bitcoin, inclusive of fees and expenses.
The disclosure further gave description as to how MicroStrategy raised the money it used to acquire more BTC. It reads, “As previously disclosed, on June 14, 2021, the Company entered into an Open Market Sale AgreementSM (the “Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company may issue and sell shares of its class A common stock, par value $0.001 per share (“Shares”) having an aggregate offering price of up to $1.0 billion from time to time through Jefferies. On November 29, 2021, the Company also announced that during the fourth quarter of the Company’s fiscal year to date (the period between October 1, 2021 and November 29, 2021), the Company had issued and sold an aggregate of 571,001 Shares under the Sale Agreement, at an average gross price per Share of approximately $732.16, for aggregate net proceeds to the Company (less sales commissions and expenses) of approximately $414.4 million.”
Michael Saylor also took to Twitter to announce his company’s acquisition. He stated, “MicroStrategy has purchased an additional 7,002 bitcoins for ~$414.4 million in cash at an average price of ~$59,187 per #bitcoin. As of 11/29/21 we #hodl ~121,044 bitcoins acquired for ~$3.57 billion at an average price of ~$29,534 per bitcoin.”
In August 2020, MicroStrategy declared it would adopt bitcoin as its treasury reserve asset, citing the digital currency being a “dependable store of value” and an attractive investment with greater long-term return potentials than holding cash.
In addition, the firm drew attention to the unprecedented stimulus being printed by governments to combat COVID-19 as a catalyst for potential inflation and subsequent depreciation of fiat currencies. Since then, MicroStrategy has almost consistently purchased bitcoin every single quarter.
Although many have criticized MicroStrategy’s bitcoin purchases, especially because of the volatile nature of the asset. However, that’s not necessarily the case for MicroStrategy.
According to its earnings conference transcript published last month, Phong Le, president and chief financial officer of MicroStrategy, said that the company’s Bitcoin holdings are classified as “indefinite-lived intangible assets under applicable accounting rules.”
This means that at any time subsequent to its acquisition, if the fair value or market value of the bitcoin dips below its book value, the company will need to recognize impairment charges. These impairment charges can then be used to legally offset its corporate income tax liability.