Nearly all of the profit came from marking up its 848,517 bitcoin. The company sold 5,552 bitcoin in the quarter to fund preferred dividends and buybacks, its chief financial officer is leaving, and bitcoin now trades only about 3% above its average cost.
Strategy's third-quarter income statement shows the biggest profit in its history. Its own preferred measure of success points the other way.
The largest corporate holder of bitcoin reported operating income of $20.91 billion for the quarter, against $3.89 billion a year earlier, almost entirely from a $20.91 billion fair-value gain on its digital assets. Net income was $19.53 billion, or $44.75 a diluted share. After $419.6 million of preferred dividends, net income to common shareholders was $19.12 billion. Software revenue fell 3% to $125.4 million, short of the roughly $128 million expected.
The gain is an accounting mark. It reflects the rise in bitcoin's price during the quarter, not cash from operations.
The yield problem
Strategy held 848,517 bitcoin as of Oct. 25, bought for $64.02 billion, an average of about $75,446 each. Its "BTC Yield," the change in bitcoin held per diluted share, is negative 3.7% for the year. In plain terms, Strategy has issued shares faster than it has added bitcoin.
The company raised $21.23 billion of capital this year and bought $14.33 billion of bitcoin. In the third quarter alone it raised $5.41 billion through at-the-market stock sales, which Saylor called, in the company's release, the "largest ever in Strategy's history."
In the quarter, Strategy bought 7,218 bitcoin for $588.1 million and sold 5,552 for about $348.6 million. The proceeds funded $239.9 million of preferred dividends and $108.6 million of repurchases of its STRC preferred shares.
A leadership change
Chief Financial Officer Andrew Kang will step down on Nov. 5 and remain an adviser through Dec. 31. Chief Operating Officer Reza Virasteh becomes CFO on Jan. 1. The company did not give a reason.
Close to cost
Bitcoin was near $77,860 early Friday, about 3.2% above Strategy's average cost, by our arithmetic. The company valued its holdings at $68.90 billion using a price of $81,200 on Oct. 23. At Friday's price, the holdings are worth about $66.1 billion, roughly $2.8 billion less than that valuation, by our arithmetic.
Strategy shares closed at $141.62 on Thursday, down 2.44%, and were about 4.9% lower near $134.72 in premarket trading.
"We're at the beginning of the next bitcoin bull market," Saylor said.
Treasury strength or a shrinking slice?
The strength view: Strategy holds more than 848,000 bitcoin and a $5.07 billion U.S. dollar reserve, and just had its largest quarter of at-the-market stock sales.
The erosion view: bitcoin per share is falling, the company is now selling some bitcoin to pay preferred dividends, the price is close to its average cost, and the finance chief is leaving.
What to watch
Bitcoin against the roughly $75,400 average cost, the start of daily dividend accrual on STRC on Nov. 1, Kang's departure on Nov. 5, and whether fourth-quarter purchases outpace share issuance.