Saylor may sell MicroStrategy bitcoin to fund dividends

On the company’s May 5 Q1 earnings call, MicroStrategy CEO Michael Saylor said the firm may sell some of its bitcoin holdings to fund dividend payments and that the company would notify the market before doing so.

Saylor framed potential sales as part of MicroStrategy’s capital strategy, not as panic selling. He told investors, “We will probably sell some bitcoin to pay a dividend just to inoculate the market and send the message that we did it.” He compared the approach to a development business and later summarized: “You buy bitcoin with credit, you let it appreciate, and then you sell bitcoin to pay the dividend.”

At the end of Q1 the company reported holding 818,334 bitcoin at an average cost of $75,537 per coin. MicroStrategy added 89,599 bitcoin during the quarter, but the value of its digital-asset portfolio fell by $7.2 billion after bitcoin declined about 23% over the period. The company recorded a $2.2 billion valuation allowance because deferred tax assets tied to unrealized bitcoin losses were not expected to be realized.

Company filings show a $12.54 billion net loss for the prior quarter and about $1.5 billion in annual dividend and interest obligations, including preferred stock dividends. MicroStrategy’s cash and dollar reserves were reported to cover roughly 18 months of those payments at current levels. Saylor said selling bitcoin to meet dividend obligations, to buy U.S. dollars or to purchase debt could be considered if it benefits shareholders.

Markets reacted to the comments. MicroStrategy shares fell more than 4% in after-hours trading following the call, and bitcoin’s price slipped below $81,000 after trading above that level earlier in the day.

MicroStrategy has sold bitcoin before. On Dec. 22, 2022, the company sold 704 bitcoin for about $11.8 million, its first public sale of coins. In 2022 executives had warned about potential margin calls on bitcoin-backed loans if prices fell sharply; at that time the company reported it had not received margin calls and said it had sufficient capital to withstand price swings.

Chief Financial Officer Phong Le has previously described a policy of selling bitcoin when it is “advantageous to the company,” including using sales to buy dollars or reduce debt if doing so would increase bitcoin per share. MicroStrategy also reported that issuance of its STRC securities contributed a $2.1 billion increase in Q1 financing activity.