Bitcoin accumulator Strategy Inc. registered a roughly $14.5 billion unrealized loss in the first quarter as the value of the Michael Saylor-led company’s cryptocurrency holdings fell.
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Bitcoin tumbled more than 20% in the three months, the largest first-quarter drop for the notoriously volatile digital asset since 2018. Strategy held more than $50 billion of cryptocurrency at quarter-end.
The company adopted accounting standards last year that require changes in the fair value of its Bitcoin holdings to flow through earnings, driving multibillion-dollar swings in results.
Strategy, formerly known as MicroStrategy, also said it bought 4,871 Bitcoin from April 1 through April 5 for about $330 million, according to a Securities and Exchange Commission filing Monday.
The latest acquisition was funded through sales of Class A common stock and at-the-market sales of the firm’s Stretch preferred shares. The average purchase price was about $67,700. The Tysons Corner, Virginia-based firm also reported a $2.42 billion deferred tax benefit in the quarter.
The slide in Bitcoin since its record high last year pushed the value of Strategy’s holdings below their average purchase price of more than $75,000 by the end of the quarter. Bitcoin traded near $70,000 on Monday before paring gains.
At its peak, Strategy shares traded far above the value of its holdings, allowing the company to issue new stock, buy more Bitcoin and repeat the cycle. But with that premium largely gone and capital markets tightening, the model has become harder to sustain. Now, co-founder and executive chairman Saylor is leaning more heavily on Stretch preferred shares to keep funding purchases.
Selling common stock to buy Bitcoin dilutes existing shareholders. Issuing preferred shares avoids that dilution, but adds a fixed obligation. Saylor has been shifting between the two depending on market conditions and investor demand.
Last month, the firm announced plans to sell $21 billion in Class A common stock and $21 billion in perpetual preferred shares through open-market offerings. The preferreds, introduced in 2025, give Saylor another way to keep buying without further diluting common shareholders. The securities carry an 11.5% annual yield that resets monthly to help maintain a $100 par value.
For the model to hold, Bitcoin must appreciate faster than Strategy’s obligations compound. The company has a cash reserve of about $2.25 billion, enough to cover interest and distributions for more than two years.
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