Aug 2, 2023

Microstrategy's latest earnings report reveals the software company posted an impairment charge of $24.1 million on its bitcoin holdings in the second quarter.

Video transcript

Micro strategy is out with its latest earnings report. The company posted an impairment charge of $24.1 billion on its Bitcoin holdings in the second quarter. Well, that hasn't stopped shares from rising. They're up 15% in the past month and joining us now to discuss is approaching capital President David Tael. Welcome David. Hey Lawrence, good morning. Good to see you again. Uh I got to ask you about uh micro strategy here. We probably have different opinions on it. Of course. Um You know, this is a company that's gone and it seems to have abandoned what it does and is focused on uh hoarding Bitcoin at this point, uh $4.5 billion worth of Bitcoin on its balance sheet right now. Uh I don't even think it's market cap. Uh It, it adds up to what it used to value the company itself plus the the added uh Bitcoin. So at what point, do do investors say, you know what, there's an ETF coming out, potentially, there are other ways to invest in crypto. Other than hoping Mike, the uh Michael sailor can leverage uh in into the capital markets and buy a ton of Bitcoin. That's a great question. Um Said it said differently. Does micros strategy as it currently exists and as it seems to be going have a finite shelf life in, in light of the developments in the sector as of now, we don't have the spot, Bitcoin ETF in the United States. Uh We've got a lot of clamoring. Um microstrategy still fills um a need, let's say in the marketplace in some way. Um It's certainly, you know, easier to buy and sell than G BT C. And uh it's obviously operated somewhat differently. And on top of that, you know, the, the most significant point out of yesterday's earnings call for microstrategy is the fact that they may go out there and raise an additional three quarters of a billion dollars to buy more Bitcoin. So as long as we've got this disjointed system of how, in fact, people can invest in Bitcoin, there seems to be room in the universe for one micro strategy. But here, here we have a situation that they might go out in the capital markets and, and try to borrow that money. But things are a lot different than when they first started doing that. And that is, interest rates have gone up significantly. I mean, when I look at, when I look at interest rates, uh, you look at the fed funds rate, it's a, it's a, it's a cliff up, right. And, uh, it's a different world when you have to have that, that hurdle rate there than when they started this, when you had 0% interest rate? Do you think that this basically makes it not only a lot harder but a lot more risky than, than what they did before? I'm sorry, I didn't mean to have my mouth open there. I didn't, I wasn't aware. Are you sure that this is a debt offering of three quarters of a billion dollars as opposed to a stock off 750 million? Even, even if it is, even if it is a uh even if it is an offering nonetheless, you still have that hurdle rate, you still have to overcome a certain amount of, you still have to have a, a certain amount of return to overcome what you're putting your money in and that's taking extra risk. It's not the same as it was before you can make that, that you could, you could have and can still make that argument for the entire market, which hasn't traded down despite 500 basis points of rate raises. Um So, I don't know, yes, academically that that point is incredibly valid. Uh But in, in practice, that has not worked out that way. And frankly, you know, Michael Saylor is a great sales person on top of everything else that he does. And so therefore, if he can go ahead and raise enough rabble to go ahead and get people to put in another three quarters of a billion to allow him to buy more Bitcoin. He will and all the power to him. I mean, I'm old enough to remember the nonsense from 23 years ago. I'm old enough to remember that. And I, you know, hard to trust him after that. I understood. I understand. Um, as many as six entities now have applied for futures based, uh, efe ETF s, um, curious what you, you think about that? It's also kind of interesting because, you know, we just had this report from coin base saying that basically the setc told them that everything was a security except Bitcoin, which, you know, kind of would include e but um I, I'm just curious what your take is on that news. Um II, I don't take much by way of that news except for the fact that everybody in the ETF business uh needs to find the next act because they went through so many years of growth. And, you know, we seem to be somewhat ETF saturated at this point. Um Clearly, even if six are approved, six won't survive. Um There, there's probably space in the world for one or two of them, certainly, so that traders can go ahead and use it um to correlate with other trades in their book. Um But, you know, II I think it's just about the, the product offering and being able to offer as an ETF provider. A full suite of products. And so therefore it is what it is, any flavor you can come up with. I have a good friend actually, that works in ef land as a lawyer and they're constantly regurgitating the same ideas over and over and in order to go ahead and seem busy, make filings and go ahead and satisfy their bosses that they are, in fact doing things. One, it's one thing to create, it's one thing to paper and then it's another thing to in fact, go out there and sell and gather the aum. And I think that that's really the hardest part because the rest of it is just commoditized. All right. Well, thanks so much uh for that, David, we're completely out of time that was approaching capital. President David Tahe.

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