MicroStrategy (NASDAQ: MSTR) reported yet another quarterly loss, but for once, the blame can’t be pinned entirely on founder Michael Saylor’s bad bet on BTC.
Figures released Tuesday show MicroStrategy’s revenue totaled $125.4 million in the three months ending September 30, a 2.1% decline from the same period last year. Gross profit was down 5.4% to just under $100 million, and the company’s net loss was reduced from $36.1 million in Q3 2021 to a mere $27 million this time around.
Let’s face it, nobody—not even Saylor—cares about the company’s business analytics software business anymore, so let’s cut right to the roughly 130,000 BTC tokens on MicroStrategy’s balance sheet. The company booked a digital impairment loss of only $727,000 this Q3, compared to the over $65 million loss in Q3 2021 and the nearly $918 million fiasco of Q2 2022.
The comparatively modest impairment this time around came courtesy of the doldrums that the lifeless BTC token has found itself mired in following this spring’s epic ‘crypto’ crash (and the subsequent freezing of the usually white-hot Tether printer). But the value of Saylor’s BTC remains down nearly $1.1 billion for the year-to-date, and it’s anybody’s guess what the next few months will bring.
Saylor bought an additional 301 BTC during Q3, spending about $6 million in the process. Saylor paid an average of $30,639 for each of the 130,000 BTC stashed in his crypto bunker, while the token’s current value is hovering just over $20,000. After originally buying low on the sly, Saylor bought tens of thousands of additional tokens in the $40,000-60,000 range last year, so blinded by his own laser eyes that he truly believed the token was moon-bound.
MicroStrategy could catch a minor break should the Financial Accounting Standards Board (FASB) amend its rules to allow ‘fair value accounting’ of digital assets like BTC rather than their current status as ‘indefinite-lived intangible assets.’ Last month, the FASB proposed allowing companies holding digital assets on their balance sheets to measure them at fair market value. The process is a long way from becoming reality, however, requiring further deliberations and a public comment period.
MicroStrategy shares closed Tuesday’s trading down nearly 4% to $257.20, barely half their worth when the year began but a darn sight better than their $166 low-point this summer. The shares rose a little over 2% in after-hours trading.
Can I get an amen?
MicroStrategy’s quarterly analyst calls have become a little outside the norm, to the point where they’re now promoted as ‘webinars.’ Basically, it’s the usual combination of dry state-of-the-nation CEO/CFO addresses followed by Q&A, but sandwiched between these two are lengthy Saylor sermons that seek to reassure investors—and possibly Saylor himself—of the wisdom of his BTC strategy.
Saylor began by analyzing MicroStrategy’s stock performance since August 11, 2020, when his BTC strategy was first announced. With the air of a prat who insists he’s not the type to say ‘I told you so’ before saying ‘I told you so,’ Saylor not-so-humble-bragged that his firm has outperformed not only other tech firms but also hard assets like gold and even BTC itself. Saylor left out the part that, at this time last year, MicroStrategy was worth nearly three times its present value, but yada yada yada, aren’t I smart?
Saylor then went on to give an overview of the global economy, the decline of which is (surprise!) bullish for BTC. (If you haven’t guessed, everything in Saylor’s world is bullish for BTC.) Saylor wrapped things up with another of his wacky “wall of crypto energy” quips that make him sound like he thinks BTC is the Tesseract from the Avengers movies.
Lightning: faster payments, gets out tough stains, tastes great on a cracker
A more notable update came from CEO Phong Le, who assumed the role after Saylor stepped down in August (just before Saylor was sued for tax fraud by the District of Columbia’s Attorney General). The new chief exec confirmed that MicroStrategy is serious about jumping into bed with the Lightning Network, the ‘Layer 2’ solution to the BTC blockchain’s pathetic seven-transactions-per-second capacity.
Saylor’s original BTC strategy revolved around his view of the token as the ultimate digital gold brick. However, not everyone took to his philosophy of ‘buy-bury-in-backyard-and-forget’ (buy and mold?). So, around May 2021, Saylor began promoting Lightning as the solution to BTC’s utter lack of utility.
Fast forward to this September, when MicroStrategy began searching for a ‘Lightning Software Engineer’ to help the company develop its own apps to “help our enterprise customers secure networks, monetize websites and deploy wallets en masse using [BTC].”
On Tuesday, Saylor celebrated the recent decision by Jack Dorsey’s Block to expand Lightning access at his Block firm’s Cash App on Tuesday—although Saylor mistakenly referred to the app’s use of a QR code as a ‘universal bar code’—for helping to “create a massive amount of enthusiasm in the Lightning development community.”
Saylor also hailed a South African supermarket chain’s recent test run of Lightning payments in a limited number of stores. Saylor cited the poor performance of most African and South American currencies against the U.S. dollar as helping to convince merchants to try getting paid in something other than the local currency.
(These same merchants may also find that it’s no picnic rushing to get their Lighting tokens off this ‘Layer 2’ and back onto the main BTC chain as fast as they can in order to convert them to fiat before BTC takes another double-digit daily dive. Saylor might be able to carry a billion-dollar BTC shortfall on his books forever, but the average green grocer probably can’t.)
Despite Saylor’s evangelism, this week saw another potentially catastrophic Lightning hiccup. Burak, the developer who corrupted Lightning nodes last month by pushing out a large multi-sig transaction, disrupted more nodes Monday by exploiting a bug that had been reported a couple weeks ago but apparently went unpatched. Maybe Saylor’s oft-repeated ‘Bitcoin fixes this’ slogan should be amended to ‘Bitcoin fixes this … eventually … after things go wrong … usually.’
COPAthetic
As MicroStrategy forges ahead with its plans to develop new Lightning apps for enterprises, Saylor likely has one specific enterprise in mind. For over a year now, Saylor has been promoting the BTC/Lightning tandem as a way for Twitter to fix, well, all of the social network’s problems. This breathless elevator pitching got more frenzied after Elon Musk decided to buy Twitter this spring.
Block’s Dorsey, the co-founder/former CEO of Twitter, rolled over his 18 million-plus Twitter shares following Elon’s takeover, giving Dorsey a 2.4% stake in Twitter’s future. Dorsey and Musk were already friends, but having saved Elon a $1 billion payout, Dorsey will likely have even more influence on Elon’s plans for his new toy. And with Musk currently fixated on how to get users to pay for various features, a push for a Lightning-based payments system seems an obvious ‘ask’ for Dorsey to make.
Saylor’s ever-tighter embrace of Lightning and his eagerness to see it incorporated into Twitter is more than just a shared aspiration with Dorsey. Both men’s companies are also part of the Crypto Open Patent Alliance (COPA), a group that also includes Meta (NASDAQ: META) (whom Saylor has similarly lobbied to add Lightning), exchanges like Coinbase (NASDAQ: COIN) and Kraken, and numerous others.
Also on COPA’s roster is Blockstream, the group of developers that operates the most prominent version of Lightning. (The group’s members include many developers who bear responsibility for eliminating much of the original Bitcoin’s functionality, a neutering that created the need for ‘solutions’ such as Lightning.)
COPA’s aim is to throw up legal challenges to patents held by Dr. Craig Wright, the real-world figure behind Satoshi Nakamoto, the pseudonymous author of the Bitcoin white paper (which was released 14 years ago this week). COPA’s members see Wright’s patent library, along with his support for Bitcoin SV (which maintains faith with the original Bitcoin protocol), as impediments to their plans to dominate the digital asset space.
COPA is believed to have originated as an in-house Blockstream project before the realities behind the costs of legal challenges dawned on the developers. A schmooze-or-lose strategy seems to have been drawn up to sweet-talk some deep-pocketed crypto-leaning figures to get on board. With Saylor and Dorsey both out there pressing the flesh, it seems almost inevitable that Twitter’s name will eventually be added to COPA’s roster of crypto obstructionists.
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