Bitcoin Accumulator Strategy Inc. has reported a return to profitability in the third quarter, largely driven by an unrealized gain stemming from the increase in the value of the company’s substantial cryptocurrency holdings, valued at approximately $69 billion.
The Virginia-based firm announced a net income of $2.8 billion, translating to earnings of $8.42 per share, a significant turnaround from a loss of $340 million, or $1.72 per share, reported in the same period last year. The uptick in profitability comes after the company, previously known as MicroStrategy, adopted accounting standards in January that mandated the inclusion of fair value assessments for its Bitcoin holdings in financial statements. These accounting changes had previously led to considerable fluctuations in profits and losses over the preceding two quarters.
In their statement, the company indicated it is “actively laying the groundwork for credit securities in international jurisdictions.” Following the announcement, shares of Strategy experienced volatility during after-hours trading.
Despite Bitcoin reaching record highs during the third quarter and numerous public firms emulating the treasury strategy championed by co-founder and chairman Michael Saylor five years ago, skepticism regarding this approach has begun to surface among investors. Strategy’s shares have plummeted approximately 45% since their peak last November, diminishing much of the premium the stock had maintained over its Bitcoin assets in recent years.
The company transitioned from a modest enterprise software operation to a Bitcoin-focused entity in 2020 when Saylor made headlines by reallocating company funds into the cryptocurrency. This pivot resulted in the stock trading not on traditional earnings potential but on a multiple of the underlying Bitcoin holdings, known as market-adjusted net asset value (mNAV). Despite previously soaring above two times that multiple, the mNAV currently hovers around 1.3.
Investor concerns have primarily centered around the company’s financing strategies. The preferred stock, which is touted as the main vehicle for future Bitcoin acquisitions, has seen lackluster demand. Recent fundraising attempts have not met the lofty expectations set forth by Saylor, leading to a reduction in the frequency of Bitcoin purchases in recent weeks.
In the wake of its second-quarter results released in July, Strategy committed to refraining from issuing new common shares below 2.5 times its net asset value, except when covering debt interest or preferred dividends. Furthermore, Saylor indicated intentions to continue opportunistically engaging with markets when premiums are favorable, converting equity sales into newfound Bitcoin acquisitions. However, reassurance to shareholders was complicated by a subsequent sale of additional common shares.
On a different note, the revenue from the company’s legacy enterprise software sector saw an 11% increase, reaching $128.7 million, surpassing analysts’ expectations, which averaged $116.8 million according to Bloomberg’s survey.
