MicroStrategy may sell Bitcoin to fund dividend, reassure market

MicroStrategy reported a $12.5 billion net loss for the first quarter, driven mainly by unrealized markdowns on its Bitcoin holdings after a 23.8% fall in Bitcoin during the quarter. On the company’s quarterly earnings call Tuesday, executive chairman Michael Saylor raised the possibility of selling some Bitcoin to fund a dividend and “inoculate” the market.

Saylor stated during the call: “We’ll probably sell some Bitcoin to fund a dividend, just to inoculate the market, just to send the message that we did it.”

He added: “the company’s fine, the Bitcoin’s fine, the industry’s fine, the world didn’t come to an end,” describing such sales as limited and strategic steps to reassure investors.

MicroStrategy has continued aggressive Bitcoin purchases in 2024. The company acquired about 145,834 Bitcoin so far this year, bringing total holdings to 818,334 BTC, which the firm values at roughly $66.7 billion. Much of the recent buying has been financed through dividend-paying perpetual preferred shares known as Stretch (STRC), which pay an 11% monthly dividend.

Saylor earlier dismissed concerns that MicroStrategy would be forced to sell in a downturn, saying the company could survive a steep drawdown to about $8,000 per Bitcoin and still meet its debt obligations without selling reserves. On the call he reiterated MicroStrategy’s long-running commitment to hold Bitcoin while acknowledging options to monetize part of the holdings for corporate purposes such as dividends.

Saylor said he expects digital banking firms to offer Bitcoin-backed “digital yield accounts” that could pay rates up to 8%. He noted a rapid increase in initiatives to expand credit and yield products tied to Bitcoin and to MicroStrategy’s preferred securities, and predicted further announcements in the coming weeks.

MicroStrategy’s stock fell about 4.3% in after-hours trading following the earnings report. The company said a stronger second-quarter result is possible, noting Bitcoin has risen roughly 20% since April 1 to about $81,250, which has eased some unrealized loss pressure on its balance sheet.

MicroStrategy began treating Bitcoin as a primary treasury asset in August 2020 and has used cash, equity and debt-linked instruments to accumulate holdings. Under the company’s accounting, changes in Bitcoin’s market value are recorded as unrealized gains or losses, which can cause large swings in net income even when no Bitcoin is sold.