Saylor's $8.2B Q2 paper cut: Strategy's bitcoin bet gets a fair-value haircut

Strategy (MSTR), the world's largest corporate holder of bitcoin, reported Thursday an $8.2 billion second-quarter net loss after the cryptocurrency's price decline erased billions of dollars from the value of its digital asset holdings. The quarterly loss was driven almost entirely by an $8.32 billion unrealized markdown on its bitcoin holdings under fair-value accounting.

The company held 843,775 bitcoin as of July 26, up 25% from the start of the year. At current prices, the stash is worth roughly $54.8 billion, compared with an acquisition cost of $63.7 billion. Bitcoin ($BTC) was trading around $64,673.16 on Thursday after falling about 14% during the second quarter, from around $68,000 at the start of April to about $58,600 by the end of June, according to CoinGecko data. Strategy (MSTR) shares finished the regular trading session up 4.7% before slipping modestly in after-hours trading following the earnings report, per Yahoo Finance data.

The report came after a period of growing investor scrutiny on the firm over whether it can sustain an increasingly complex capital structure built around multiple classes of preferred stock, common equity and convertible debt. Strategy raised $17.06 billion through at-the-market stock offerings this year and repurchased $1.5 billion of convertible notes at an 8% discount. The company also disclosed it had repurchased $25 million of its STRC preferred shares at a discount to par and said it intends to continue buying the securities while they trade below $100.

The firm expanded its U.S. dollar reserve to $3.75 billion, enough to cover more than two years of preferred dividend payments and interest obligations. "Our USD Reserve currently stands at $3.75 billion, which is enough to cover our existing preferred dividend payments and interest obligations for more than 2.1 years," Chief Financial Officer Andrew Kang said in a statement.

Strategy also sold approximately $218.4 million worth of bitcoin under its newly established BTC Monetization Program to help fund a portion of its preferred stock dividend obligations, with about $216 million of those sales occurring in early July after the second quarter ended. The company is pursuing a "Digital Credit" business and a $1 billion share repurchase authorization, and said it has built a cash reserve covering more than two years of dividend payments as investors questioned its growing stack of preferred securities.