Strategy, the world's largest corporate bitcoin holder, posted an $8.2 billion net loss for the second quarter, driven almost entirely by an unrealized markdown on its bitcoin stack. The company is now leaning on a $3.75 billion cash reserve and a new bitcoin-selling program to keep funding its preferred-stock dividends.
Strategy (MSTR) reported an $8.2 billion second-quarter net loss on Thursday, after bitcoin's price decline erased billions of dollars from the value of its digital asset holdings. The loss came almost entirely from an $8.32 billion unrealized markdown on its bitcoin holdings under fair-value accounting.
Holdings still grew despite the paper loss
The company held 843,775 bitcoin as of July 26, up 25% from the start of the year. At current prices, that stash is worth roughly $54.8 billion, compared with an acquisition cost of $63.7 billion.
Investors pressed the firm on its capital structure
The report followed a period of growing investor scrutiny over whether Strategy can sustain an increasingly complex capital structure built around multiple classes of preferred stock, common equity and convertible debt. In response, the company raised $17.06 billion through at-the-market stock offerings this year and repurchased $1.5 billion of convertible notes at an 8% discount. It also expanded its U.S. dollar reserve to $3.75 billion, a buffer Chief Financial Officer Andrew Kang said is enough to "cover our existing preferred dividend payments and interest obligations for more than 2.1 years."
Strategy starts selling bitcoin to fund dividends
The firm also sold about $218.4 million worth of bitcoin under a new BTC Monetization Program to shore up cash and help fund preferred stock dividends, a departure from its long-standing strategy of accumulating bitcoin without selling it. Executive Chairman Michael Saylor said the company remains focused on expanding its "Digital Credit" business despite weaker bitcoin prices.
Strategy separately established a $1 billion share repurchase program for its common stock, though it has not yet bought back any shares. It also repurchased about $25 million of its STRC preferred shares at a discount to their stated value and said it intends to keep buying those securities while they trade below par.
Source: CoinDesk
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