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Biggest Bitcoin Corporate Buyer Confirms Cryptocurrency Bet

MicroStrategy, the software company of bitcoin evangelist Michael Saylor, wants to raise money to acquire new bitcoins.
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Michael Saylor, who recently stepped down as CEO of software company MicroStrategy  (MSTR) , remains a strong believer in bitcoin's resurgence. 

His latest tweets show that faith of this evangelist in the most popular cryptocurrency remains firm despite the market crash. Bitcoin (BTC) has lost almost 68% of its value since hitting an all-time high of $69,044.77 on November 10. Currently, BTC is trading around $22.375.99, according to data firm CoinGecko.

"Only #Bitcoin," Saylor posted to his 2.6 million followers on Twitter on Sept.12.

The day before, he had posted an almost similar message, reaffirming his loyalty to the token.

"#Bitcoin Any Given Sunday," the billionaire said.

Sell Stocks to Buy Bitcoin

If Saylor is no longer at the helm at MicroStrategy, the bitcoin strategy of the company he co-founded in 1989 hasn't changed. The firm plans to issue and sell up to $500 million in stock, according to a recent regulatory filing.

The company has retained the services of Cowen & Co and BTIG LLC to conduct this sale, which will take place in several stages. MicroStrategy, however, did not give the dates on which the company intends to proceed with the transactions. What is striking is that MicroStrategy intends to use part of the money raised to continue investing in bitcoin.

"We intend to use the net proceeds from this offering for general corporate purposes, including the acquisition of bitcoin," the company said. "As a result, our management will have broad discretion in the application of the net proceeds from this offering and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used in a manner of which you approve."

The company goes even further by repeating that its bet on bitcoin remains intact as many institutional investors have opted for caution on risky assets like cryptocurrencies at a time when the specter of recession looms. 

"We currently intend to retain all of our future earnings, if any, to purchase additional bitcoin and for the development of our business," MicroStrategy said in the filing with the U.S Securities and Exchange Commission (SEC).

Tesla  (TSLA) , the electric vehicle maker, which was the second largest bitcoin holder among major corporations liquidated nearly its entire portfolio in the second quarter of 2022.

"We have converted approximately 75% of our bitcoin purchases into fiat currency," the maker of the Model Y and Model 3 announced last July. 

Impairment Charge

Tesla's bitcoin portfolio has fallen from 43,200 bitcoins at the end of the first quarter of 2022 to 10,800 bitcoins currently, according to Bitcoin Treasuries. Tesla invested $1.5 billion in virtual currency on Feb. 8, 2021.

Tesla's withdrawal leaves MicroStrategy as the only big name on Wall Street to hold tens of thousands of bitcoins on its balance sheet. As of September 8, the software company's portfolio contained 129,699 bitcoins purchased at a total price of $3.977 billion, according to regulatory filings.

In view of the fall in the price of BTC, we can therefore logically say that the losses currently amount to some $1.2 billion at last check. MicroStrategy bought its bitcoins at an average price of $30,664 per unit.

The company said it took BTC-related asset impairment charges of $2 billion in the second quarter, which weighed on results. Indeed, MicroStrategy recorded a net loss of $1.06 billion in the second quarter.

MicroStrategy shares which are impacted by the evolution of bitcoin prices are down 52% since January.

"Our bitcoin acquisition strategy exposes us to various risks associated with bitcoin," the firm says. "Fluctuations in the market price of bitcoin, which may be influenced by highly uncertain regulatory, commercial, and technical factors, and the associated impairment charges that we may incur as a result of a decrease in the market price of bitcoin below the value at which our bitcoin are carried on our balance sheet, each of which may significantly influence the market price of our class A common stock.