crypto strategy

MicroStrategy’s software business turns profitable as Bitcoin Stash appreciates

them bitcoin investment vehicle attached to an enterprise software company, is likely to report its first quarterly profit in two years in earnings expected this afternoon as its business improves and the value of its crypto hoard rises.

Steady progress by its business analytics division, which seeks to transition customers to Internet-based recurring subscriptions – known as the software-as-a-service model – from on-premises licensed programs, should give a boost to results, according to Joe Vafi, Managing Director of Canaccord Genuity. Although the business is relatively mature, it is “very sticky with good margins”, he adds.

Even though fourth-quarter revenue is expected to fall about 3% to $130 million, according to consensus data compiled by FactSet, the company is on track to report net income of $10.7 million after losing $90 million a year earlier. The last time he made a profit was in the last quarter of 2020, when he earned $2.7 million.

On the adjusted basis used by Wall Street analysts, MicroStrategy is expected to earn 98.3 cents per share, according to Bloomberg data.

As far as investors are concerned, the software business plays a secondary role in the company’s bitcoin strategy, which is basically buying and holding the senior cryptocurrency. Microstrategy sold some for the first time in December, a tax reduction strategy which was offset by purchases in the fourth quarter. He liquidated 704 bitcoins on Dec. 22 at an average price of $16,776 but bought back 810 for $16,845 each two days later, according to a Filing with the SEC. He also revealed that he purchased 2,395 pieces in November and December for $17,871 each.

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The tax sale — which is not subject to washout rules that would deny a deduction for an immediate redemption of securities — could have resulted in a short-term capital loss of $770,880, CPA Brian T. Stoner calculated. licensed in Los Angeles. Last year. That could be used to offset any capital gains in 2022 or 2023, he said.

After the transactions announced in the fourth quarter, MicroStrategy was left with 132,500 bitcoins, acquired for an average price of $30,397 on December 28 and now worth nearly $3.2 billion. $24,000 today, all fourth-quarter purchases have turned profitable, and the company may be looking to book some of the December losses from acquisitions made in 2021, when it paid an average price of $49,229, Steven said. Chung, a tax attorney from Los Angeles last year.

Given the stable nature of its business, MicroStrategy shares tend to trade in line with bitcoin. The Stock was above $500 per share in late March, then crashed with the crypto selloff, closing the year at $141.57. It has since recovered to $291 as bitcoin fell from below $16,000 to its current price.

Not only does MicroStrategy trade with bitcoin, but its holdings command a premium, according to Canaccord Genuity. Traditionally, according to the company, this reflects the value of the stock as a proxy for bitcoin without worrying about establishing a crypto wallet and the security risks that exist for cryptocurrencies attract individual investors, but it think that institutions also use stocks for strategies. which are more sophisticated than simple buy-and-hold.

Canaccord noted that a buyer called Group One Trading has filed a notice with the SEC that it has acquired a 13.5% stake in MicroStrategy common stock. It’s not necessarily direct equity holdings, it could have been achieved via derivatives, but it seems relatively large open interest in equity options is a sign that institutional investors are using the company as a proxy for bitcoin in trading tactics.


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