Microstrategy May Not Increase Profitability In The Future

For many factors, Microstrategy’s operating results, revenues, and expenses have fluctuated in the past and may continue to do so considerably from quarter to quarter in the future. The market value of their class A common stock may be negatively impacted by these changes.

Microstrategy and their subsidiaries possessed about 130,000 bitcoins as of September 30, 2022, with 14,890 of those held by MicroStrategy Incorporated and 115,110 held by MacroStrategy LLC, a wholly-owned subsidiary of MicroStrategy. Approximately 30,051 of the 115,110 bitcoins held by MacroStrategy make up the collateral securing their 2025 Secured Term Loan, while the roughly 14,890 bitcoins held directly by MicroStrategy Incorporated make up the collateral securing their 2028 Secured Notes.

They experienced a net loss for the nine months that ended September 30, 2022, principally as a result of losses associated with the impairment of digital assets. Going forward, Microstrategy might not be able to enhance or regain quarterly or yearly profitability. Consequently, the company could experience operating losses in the future, and profitability may fall, nay stop being profitable.

“If our revenues are not sufficient to offset our operating expenses, we are unable to adjust our operating expenses in a timely manner in response to any shortfall in anticipated revenue, or we incur significant impairment losses related to our digital assets, we may incur operating losses in future periods, our profitability may decrease, or we may cease to be profitable. As a result, our business, results of operations, and financial condition may be materially adversely affected.”

Stated in 10-Q filing

They had $233.0 million in deferred tax assets as of September 30, 2022, which is the result of a $411.8 million valuation allowance. The impairment on bitcoin assets is the largest deferred tax asset. They might need to further enhance the valuation allowance against the deferred tax asset if the market price of bitcoin falls.

However, the business maintains $67 million in cash and cash equivalents on hand, giving MSTR a safety net through 2023 in the event that its income from operations stays flat, and there is no immediate threat to the Bitcoin market from MicroStrategy.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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