Strategy, the world's largest corporate holder of bitcoin, reported an $8.2 billion second-quarter net loss after the cryptocurrency's price decline erased billions from the value of its digital asset holdings.
The quarterly loss was driven almost entirely by an $8.32 billion unrealized markdown on its bitcoin holdings under fair-value accounting. The company held 843,775 bitcoin as of July 26, up 25% from the start of the year. At current prices, the stash is worth roughly $54.8 billion, compared with an acquisition cost of $63.7 billion.
A Growing Capital Structure
The report comes amid growing investor scrutiny over whether the firm can sustain an increasingly complex capital structure built around multiple classes of preferred stock, common equity and convertible debt. Strategy raised $17.06 billion through at-the-market stock offerings this year, repurchased $1.5 billion of convertible notes at an 8% discount, and expanded its U.S. dollar reserve to $3.75 billion.
Chief Financial Officer Andrew Kang said the reserve is enough to cover more than two years of preferred dividend payments and interest expenses.
Selling Bitcoin for the First Time
In a notable departure from its long-standing accumulate-only strategy, Strategy sold about $218.4 million worth of bitcoin under its new BTC Monetization Program to shore up cash and help fund preferred stock dividends.
Executive Chairman Michael Saylor said the company remains focused on expanding what it calls its "Digital Credit" business despite weaker bitcoin prices, framing the current environment as a phase of muted sentiment.
Strategy also established a $1 billion share repurchase program for its common stock, though it has not bought back any shares yet. It separately repurchased about $25 million of its preferred shares at a discount.
