By Janet H. Cho

Cryptocurrency enthusiasts will be eyeing MicroStrategy's fourth-quarter earnings results after the markets close on Wednesday.

The world's largest corporate Bitcoin holder is expected to report adjusted earnings of 5 cents a share on sales of $122.4 million for the quarter, according to FactSet. That's down from adjusted earnings of 56 cents a share on sales of $124.5 million in the fourth quarter of 2023.

MicroStrategy on Monday disclosed in a regulatory filing that it had gone a week without purchasing any Bitcoin for the first time since early November. Its latest purchase -- at the end of January -- was for around 10,107 digital tokens, bringing its total holdings to around 471,107 Bitcoins.

Bitcoin was trading at around $97,000 early Wednesday, down from above $100,000 last week, according to CoinDesk.

MicroStrategy holds about $50 billion of Bitcoin, but it has no recurring earnings, based on generally accepted accounting principles. Its software business, with about $500 million in revenue, isn't profitable on a GAAP basis.

Barron's noted in December that the gap between MicroStrategy's market value and the value of its Bitcoin holdings is at the heart of the debate about the company. Chairman and controlling shareholder Michael Saylor calls MicroStrategy a "Bitcoin treasury company," and has helped the company gain a huge retail following.

MicroStrategy last week priced about 7.3 million shares of 8% convertible preferred stock offering at $584 million, with a 10% dividend yield.

MicroStrategy's stock has risen 16% year to date and 563% over the past 12 months. Barron's has said the premium looks too high, and the stock is vulnerable to a pullback, especially if Bitcoin's postelection surge begins to reverse.

Julian Klymochko, CEO of Canadian investment firm Accelerate, thinks analysts and investors are going to extremes to justify the MicroStrategy valuation, calling it "mental jujitsu to justify buying the shares at such an inflated price and in such a convoluted way through a holding company that is basically a closed-end fund." Closed-end funds raise money by issuing shares and using the proceeds to buy financial assets, and usually trade at a discount to their net asset value, not a premium.

On Dec. 13, MicroStrategy, along with Palantir Technologies and Axon Enterprises, was added to the Nasdaq 100 index of the 100 largest nonfinancial companies in the Nasdaq Composite index. MicroStrategy's inclusion was because of a quirk classifying it as a software company because that was its main business before it became the largest corporate holder of Bitcoin, even though software now accounts for less than 5% of its current value.

Write to Janet H. Cho at janet.cho@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 05, 2025 14:43 ET (19:43 GMT)

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