Strategy (MSTR), the world's largest publicly traded corporate holder of bitcoin, reported an $8.2 billion second-quarter net loss on Thursday, driven almost entirely by an $8.32 billion unrealized markdown on its bitcoin holdings under fair-value accounting. The loss reflects a sharp decline in the cryptocurrency's price during the quarter, which erased billions of dollars from the value of the company's digital asset portfolio. The markdown also underscores the impact of a relatively new accounting standard — FASB's ASU 2023-08, effective for fiscal years beginning after December 2024 — which requires companies to measure certain digital assets at fair value each reporting period, meaning quarterly price swings now flow directly through the income statement rather than being recorded only as impairment charges.

As of July 26, Strategy held 843,775 bitcoin — up 25% from the start of the year. At current prices, the holdings are worth roughly $54.8 billion, compared with a total acquisition cost of $63.7 billion.

The earnings report follows a period of intensifying investor scrutiny over whether the company can sustain an increasingly complex capital structure built around multiple classes of preferred stock, common equity, and convertible debt.

To address those concerns, Strategy has taken several steps to strengthen its liquidity position. The company raised $17.06 billion through at-the-market stock offerings this year and repurchased $1.5 billion of convertible notes at an 8% discount.

"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 approximately $218.4 million worth of bitcoin under its newly launched BTC Monetization Program to shore up cash and help fund preferred stock dividends. The move marks a notable departure from Strategy's long-standing approach of accumulating bitcoin without selling any.

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.

Additionally, Strategy's board established a $1 billion share repurchase program for its MSTR common stock, though the company has not yet bought back any shares under the authorization. Separately, the company repurchased roughly $25 million of its STRC preferred shares at a discount to their stated value and indicated it intends to continue purchasing those securities while they trade below par.

Source: SEC Filing