Insights

Why Shares of MicroStrategy, Bitfarms, and TeraWulf Are Rising Today

What happened

Shares of several cryptocurrencies and crypto-related stocks performed well today along with the broader market. Over the past 24 hours, the price of Bitcoin (CRYPTO: BTC) traded 2.2% higher as mid-afternoon Wednesday.

Shares of the Bitcoin buyer and business intelligence company MicroStrategy (NASDAQ: MSTR) traded nearly 13% higher as of 3:16 p.m. ET today. In the same time frame, shares of the Bitcoin miner Bitfarms (NASDAQ: BITF) traded almost 7% higher, and shares of TeraWulf (NASDAQ: WULF) traded roughly 2% higher after being up around 20% at one point earlier today.

So what

Despite MicroStrategy missing earnings estimates and announcing that its CEO would be stepping into another role, its shares are performing well today.

For the second quarter of the year, MicroStrategy reported a net loss of $94.01 per share on total revenue of $122.1 million. The company’s revenue missed estimates of roughly $126 million for the quarter.

Image source: Getty Images.

Impairments related to MicroStrategy’s Bitcoin holdings, which are now valued significantly lower than they were due to the drop in the price of Bitcoin, more than doubled from nearly $425 million in the second quarter of 2021 to almost $918 million at the end of the second quarter of 2022.

At the end of the quarter, MicroStrategy held 129,699 Bitcoin tokens, which is up 481 tokens from the first quarter of the year. Those tokens were acquired for a total cost of $4 billion, or $30,664 each, net of fees and expenses.

In other news, the company announced that MicroStrategy’s well-known CEO, Michael Saylor, will leave that role and become executive chairman of the company. Saylor will continue on as chairman of the company’s board of directors. MicroStrategy’s president, Phong Le, will become the new CEO.

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business,” Saylor said in a statement.

He added, “As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.”

Now what

It’s a generally positive day for crypto and crypto-related stocks, which seems to be what’s driving Bitfarms and TeraWulf up. TeraWulf has less than a $200 million market cap right now, so it can move in a more volatile fashion than larger stocks.

While MicroStrategy does have a whole other side of its business with analytics, it largely trades in a correlated fashion with Bitcoin and is still down close to 44% this year.

Considering the company continues to purchase and hold Bitcoin, I find it difficult to see this correlation dissipating anytime soon and therefore don’t see a huge advantage of holding this company over Bitcoin itself.

Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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