Strategy books $8.2 billion Q2 loss on bitcoin price decline

Strategy (MSTR), the world’s largest corporate bitcoin $BTC$64,714.55 holder, reported Thursday an $8.2 billion second-quarter net loss after the cryptocurrency’s price decline erased billions of dollars 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.

The report came after a period of growing investor scrutiny on the firm over whether it can sustain an increasingly complex capital structure built around multiple classes of preferred stock, common equity and convertible debt.

The company 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, enough to cover more than two years of preferred dividend payments and interest expenses.

“Our USD Reserve currently stands at $3.75 billion, which is enough to cover our existing preferred dividend payments and interest obligations for more than 2.1 years,” Chief Financial Officer Andrew Kang said in a statement.

The firm also sold about $218.4 million worth of bitcoin under its new $BTC Monetization Program to shore up cash and help fund preferred stock dividends, departing from its long-standing strategy of accumulating bitcoin without selling it.

Executive Chairman Michael Saylor said the company remains focused on expanding what it calls its “Digital Credit” business despite weaker bitcoin prices.

“In the midst of this phase of muted bitcoin sentiment and market skepticism, we continue to evolve our business model and establish Digital Credit as a new asset class,” Saylor said.

Strategy also established a $1 billion share repurchase program for its MSTR common stock, although it has not bought back any shares. It separately repurchased about $25 million of its STRC preferred shares at a discount to their stated value and said it intends to continue buying the securities while they trade below par.