12/7/2021 financial analysis of microstrategy

12/7/2021

TURNBULL

Financial Analysis of MicroStrategy

Geoffrey Turnbull [email protected] Bitcoin wallet: bc1qd72q7r0frdhatxjnq35q9zym6ukuruevr5g3uk

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Background The following paper was produced as a final project for BUS555 G100 Managerial Finance (fall 2021 semester). It does not reflect the MicroStrategy bitcoin purchase announcement of December 8 or any subsequent activity. The paper is being shared to develop awareness, stimulate discussion, and create value added to the cryptocurrency space. This is not financial advice. If you find value in the work, please consider contributing to the following tip jars: Bitcoin: bc1qd72q7r0frdhatxjnq35q9zym6ukuruevr5g3uk Ether (all ERC-20): 0x1D7F67ED593B0EBB788f795697C1A91ea711638a

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FINANCIAL ANALYSIS OF MICROSTRATEGY Executive Summary This paper provides financial analysis of MicroStrategy’s (MSTR) operations and bitcoin strategy. It studies a unique intersection between managerial/operational finance, macroeconomics, and cryptocurrency. From an operational perspective, there is solid evidence to believe that MSTR can continue to be cashflow positive. By further reducing operational costs, maximizing the cash conversion cycle, and minimizing interest expenses, MSTR has an opportunity to further increase their retained earnings, which can be used to accumulate additional bitcoin. Current FASB/GAAP reporting standards require MSTR to report each bitcoin’s carrying value down to the lowest reported price. On paper, this significantly increases operating expenses, reducing EBIT and creating negative ROE. A scenario analysis is created where accounting standards are modernized to allow digital assets such as bitcoin to be reported at fair market value, as suggested by MSTR CFO Phong Le. Under this more accurate depiction of economic reality, MSTR’s performance drastically improves in key areas such as gross margin, net margin, return on sales (ROS), return on assets (ROA), and return on equity (ROE). Ultimately, MSTR’s bitcoin strategy provides a unique method to generate asymmetric value to the upside for shareholders. Introduction MicroStrategy (Nasdaq: MSTR) is a global provider of business intelligence (BI), mobile software, and cloud-based services. MSTR’s identified corporate strategies are to grow their business analytics software business and to acquire and hold bitcoin. MSTR was founded in 1989 by Michael J. Saylor (Saylor) and two other partners. Saylor remains the CEO and Chairman of the board. From a software/BI perspective, MSTR’s core product is the MicroStrategy 2021 software platform, which combines modern analytics, open federated architecture for interoperability and integration, and enterprise platform for scalability. Stemming from this core product, MSTR generates additional income by offering support and other complementary services. MSTR’s wide array of clients reside in fields such as retail, consulting, technology, manufacturing, banking, insurance, finance, healthcare, telecommunications, and the public sector. The main industry competition for MSTR comes from IBM, Microsoft, Oracle, Qlik, Salesforce, and SAP. CFO Phong Le (Le), speaking at the Third Quarter 2021 Financial Results Webinar Recording (Third Quarter 2021 Webinar), believes that MSTR is on the “path for consistent growth” and

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that they are confident in their ability to achieve long term growth and profitability targets.1 This confidence is driven by their recent R&D, combined with global competitiveness in business and the subsequent surge to modernize business analytics to gain enterprise-wide efficiencies. In 2020, MSTR introduced its bitcoin acquisition strategy, an ambitious and innovative business model designed to generate additional value for shareholders. MSTR has raised $2.6B in new debt and equity capital that has been deployed in support of their bitcoin acquisition strategy.2 The company maintains $600M in an ATM facility for future bitcoin purchases. As of December 5, 2021, MSTR had acquired 121,044 bitcoins at an aggregate cost of $3.57B and an average cost of $29,534 per bitcoin.3 As of December 1, 2021, the bitcoin holdings had a market value of $7.02B and a carrying value of $3.03B because of impairment charges (Note: estimated carrying value is the $3.03 reported as of June 30, 2021 plus the 9,000 bitcoin purchased in October 2021 and the 7002 bitcoin purchased in November 2021 with no impairment due to strong price performance).4 At the Third Quarter 2021 Webinar, the emboldened Saylor stated: “We believe that bitcoin is attractive because it can serve as a store of value, supported by a robust and public open-source architecture, that is untethered to sovereign monetary policy and can therefore serve as a hedge against inflation. We also believe that bitcoin offers additional opportunity for appreciation in value with increasing adoption due to its limited supply.” MSTR has also stated that they view their bitcoin holdings as “long-term and do not plan to engage in regular trading of bitcoin.”5 In the graph below, MSTR stock performance is compared to those of its broader index (Nasdaq) and its industry benchmark index (Nasdaq Computer).6 Over a five-year period, the stock price has more than doubled and has also outperformed both industry benchmarks.

Clearly, the company has been generating market-leading value for its shareholders.

1 Phong Le, Q3 Financial Results Webinar Recording, MicroStrategy, October 28, 2021, https://www.microstrategy.com/en/investor-relations/events-presentations/q3-2021-financial-results-webinar-recording. 2 Le, Q3 Financial Results Webinar Recording. 3 Chris Morris, MicroStrategy Has Added to Its Bitcoin Holdings, According to Latest SEC Filings, Fortune, November 29, 2021, https://fortune.com/2021/11/29/microstrategy-buys-more-bitcoin/. 4 Phong Le, MicroStrategy FASB-ITC Response Letter, MicroStrategy, September 15, 2021, https://www.microstrategy.com/content/dam/website-assets/collateral/bitcoin-downloads/microstrategy-FASB-ITC-response-letter_09-15-2021.pdf. 5 Le, MicroStrategy FASB-ITC Response Letter. 6 MicroStrategy Incorporated 2020 Annual Report, Tysons Corner, Virginia, MicroStrategy, 2020, p. 37. https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/2020-annual-report.pdf.

https://www.microstrategy.com/en/investor-relations/events-presentations/q3-2021-financial-results-webinar-recording

https://www.microstrategy.com/en/investor-relations/events-presentations/q3-2021-financial-results-webinar-recording

https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/2020-annual-report.pdf

https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/2020-annual-report.pdf

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The numbers (operational) *Appendix A contains the complete Balance Sheet and Income Statement for MSTR. The financial statements include past reports from MSTR, as well as forecasts. The forecasts are derived from patterns identified in past reports, combined with forward-looking statements provided by Saylor and Le. Conservative growth was forecasts were used. Revenue

Total revenue for MSTR has been flat in recent years but began to show strength in 2021. This recent increase in revenue, combined with bullish sentiment from Saylor, led to positive revenue growth forecast. As per Saylor: “The investments we have made in our platform in recent years are driving greater customer adoption of MicroStrategy, particularly in the cloud.”7 Saylor also believes in strong long-term demand for MSTR BI products and services, stating his belief that we are in the early stages of a “supercycle” for enterprise analytics and that MSTR is ready to capitalize on the need for BI modernization.8 An emerging corporate deal with a large financial institution also presents optimism for future sales/revenue growth.9

7 MicroStrategy Announces First Quarter 2021 Financial Results, Tysons Corner, Virginia, MicroStrategy, 2021, https://www.microstrategy.com/en/investor-relations/press/microstrategy-announces-first-quarter-2021-financial-results. 8 Saylor, Q3 Financial Results Webinar Recording. 9 Le, Q3 Financial Results Webinar Recording, 4:30.

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

497,638 486,327 480,735 376,247 489,987 520,241 573,342

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Gross profit margin (Cost of goods sold / sales revenue)

The gross profit margin remains consistently around 80%. This is a relatively high margin, which is typical of a software/cloud services business because there are very low marginal costs to sales. Operating profit margin (Earnings before interest and taxes / revenue)

An operating profit margin ranging from -2.8% to 0.8% between 2018 and 2020 indicates that MSTR is struggling to turn revenue into profit and is not operating as efficiently as shareholders would desire. The largest operating expense is Sales and marketing. It should be noted that this expense has been trending downward in recent years. General and administrative expenses should also remain subdued in coming years. As per the Oct 2021 quarterly report: “We have adapted our operations to meet the challenges of this uncertain and rapidly evolving situation, including establishing remote working arrangements for our employees, limiting non-essential business travel, and cancelling or shifting our customer, employee, and industry events to a virtual-only format for the foreseeable future.” It should be noted that operating profit would have been positive in 2020 if $70,698,000 had not been reported for Digital asset impairment losses for bitcoin. MSTR should continue to work diligently to minimize operating expenses. This miniscule profit margin leaves little margin to pay taxes, interest, and provide return of capital to shareholders. Nonetheless, MSTR was able to commit between $586M and to $782M to stock buybacks between 2018 and 2020, therefore increasing value for shareholders by reducing shares in circulation.

Beginning in 2020 and escalating into future years, Digital asset impairment losses becomes a massive operating expense. On paper, this drastically aggravates MSTR’s operating profit margin problems. According to Generally Accepted Accounting Principles (GAAP), bitcoin and other digital assets fall under the definition of an “indefinite-lived intangible asset.” Because of this, bitcoin is recorded at its historical cost and is routinely tested for impairment. These

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

80.0% 79.4% 81.1% 82.0% 78.0% 78.8% 80.4%

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

0.8% -0.2% -2.8% -172.0% -135.5% -27.8% -15.3%

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Operating expenses

Sales and marketing 205,525 191,235 148,910 116,728 155,637 147,855 140,463

Research and development 102,499 109,423 103,561 86,242 115,000 115,000 115,000

General and administrative 86,134 86,697 80,136 68,397 91,196 92,108 93,029

Digital asset impairment losses 0 0 70,698 684,034 684,034 200,000 200,000

Total operating expenses 394,158 387,355 403,305 955,401 1,045,867 554,963 548,492

(Loss) income from operations (EBIT) 3,981 -1,002 -13,625 -647,060 -663,768 -144,756 -87,468

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impairment charges cannot be reversed. As a result, subsequent increases in market price of the digital asset are not reported on the balance sheet, which results in a significant divergence from their fair market value.10 The divergence is especially pronounced given the volatile nature of bitcoin. It should be noted that EBIT would have been positive in 2020 and 2021 (Q1-Q3) had these Digital asset impairment losses not been reported. Days of receivables [(accounts receivable / total revenues) *365] and days of payables [(accounts payable / cost of revenues) * 365]

On the Balance Sheet, MSTR also shows a very high and increasing days of receivables. With such a large General and administrative expense (~$80M in 2020), the company should be better positioned to follow-up with customers and ensure that payments are made more promptly. Additionally, a company with such a large Sales and marketing budget (~$149M in 2020) should be able to identify better quality customers. In past years, need for funds for operations (NFO = cash necessary + receivables + inventory – payables – other SF)11 has been limited, but this area will need improvement moving forward as MSTR’s operating expenses rise in order to support increased revenue and Digital asset impairment losses. Typically, a long collection period obligates a company to seek short term financing in order to ensure that NFO < Working Capital (WC = Current assets – Current liabilities).12 In this case, however, MSTR also has exceptionally long days payable period (180 days in 2020), which helps limit their need for cash and short-term financing. A long payment period is often a symptom of financial difficulty. Companies with significant cash constraints often try to stretch the payment period in order to gain extra short-term financing at no cost. Given MSTR’s stable financial standing, it appears they are leveraging this strategy in order to finance bitcoin purchases and stock buybacks. Financial ratios

10 Le, MicroStrategy FASB-ITC Response Letter. 11 Eduardo Martínez Abascal, Finance for Manager (New York: McGraw Hill Education, 2012), 12. 12 Eduardo Martínez Abascal, Finance for Manager (New York: McGraw Hill Education, 2012), 12.

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Days of Receivables 126 123 150 150 150 150 150

Days of Payables 124 124 181 180 180 180 180

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

NFO (including min. cash) 194,650 186,572 209,317 135,305 205,135 216,510 166,630

NFO as % of sales 39% 38% 44% 36% 42% 42% 29%

WC 520,130 483,628 -12,998 -56,288 -51,658 -54,180 -118,651

Credit -325,480 -297,056 222,315 191,593 256,792 270,689 285,281

Leverage (L/E) 0.6 0.8 1.7 5.5 -15.9 4.5 4.5

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Prior to the bitcoin acquisition strategy, WC healthily exceeded NFO. The negative credit numbers in 2018 and 2019 indicate that short-term credit was not needed to cover operations. After liquidating Cash and Short-term investments to acquire bitcoin, working capital turns negative and short-term credit is required beginning in 2020. The long-term debt in the next section provides further analysis of this strategy. Equity turned negative in 2021 due to permanent impairment charges against bitcoin holdings. The balance sheet shows that MSTR has chosen to compensate for its constraints in operational liquidity by increasing long-term debt and reducing stock buybacks. Leverage ratios become unsustainable beginning in 2021 (Q1-Q3). These heightened leverage levels typically raise the cost of capital significantly. Nonetheless, MSTR was able to borrow at competitive rates because of the liquidity and trust of their bitcoin collateral. The table below shows the combination of convertible notes and secured notes used to issue the debt.13

Long-term debt MSTR was able to borrow at competitive annual rates between 1.5% and 6.15%.14 Below is the schedule of financial expenses, which is reflected in the “Interest income, net” row of the forecast Income Statement. The highly liquid and fungible bitcoin served as strong collateral for the debt. Such low cost of capital indicates that capital allocators have strong faith in MSTR’s plan moving forward.15

13 MicroStrategy Quarterly Report for the Period Ended September 30, 2021, Tysons Corner, Virginia, MicroStrategy, 2021, https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/form-10-q_10-28-2021.pdf. 14 Nelson Wang, “MicroStrategy CEO Likens Borrowing to Buy Bitcoin to Investing Early in Facebook,” Coindesk, September 14, 2021, Accessed December 5, 2021, https://www.coindesk.com/business/2021/07/30/microstrategy-ceo-likens-borrowing-to-buy-bitcoin-to-investing-early-in-facebook/. 15 MicroStrategy Quarterly Report for the Period Ended September 30, 2021, Tysons Corner, Virginia, MicroStrategy, 2021, https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/form-10-q_10-28-2021.pdf

https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/financial-document-archive/form-10-q_10-28-2021.pdf


https://www.coindesk.com/business/2021/07/30/microstrategy-ceo-likens-borrowing-to-buy-bitcoin-to-investing-early-in-facebook/

https://www.coindesk.com/business/2021/07/30/microstrategy-ceo-likens-borrowing-to-buy-bitcoin-to-investing-early-in-facebook/



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The debt re-payment above has been reflected in the forecast, under Interest income, net. Under current reporting standards, debt payments contribute significantly to MSTR’s net loss in 2022F and 2023F.

DuPont Analysis (Return on sales (ROS) * asset turnover * equity multiplier) This framework allows us to better understand MSTR’s return on equity (ROE) by breaking down the components. The composition allows for more granular detail in identifying the strengths and weaknesses of MSTR’s performance. The formula is: ROE = (net income / revenue) * (revenue / average assets) * (average assets / average equity).

• 2019 DuPont analysis (prior to bitcoin strategy) ROE=0.071 * 0.549 * 1.707 ROE=0.665

• 2020 DuPont analysis (early phase of bitcoin strategy) ROE=-0.016 * 0.4 * 2.24 ROE=-0.014

• 2021 DuPont analysis (forecast of bitcoin strategy) ROE=-1.37 * 0.214 * 13.27 ROE=-3.89

Because of the reported negative net income in 2020 and 2021, MSTR’s ROE is difficult to evaluate. However, some vital information can still be deduced. Firstly, MSTR’s Digital asset impairment losses in 2020 and 2020 exceed their net income loss. Therefore, in absence of these Digital asset impairment losses MSTR would have been a profitable company. At 13.27 (1327%) in 2021, the financial leverage (equity multiplier) portion of the equation is also eye-popping. Because total assets include debt, this indicates that MSTR is highly leveraged. Under normal circumstances, this degree of leverage would usually induce a high risk/junk bond rating and therefore a high cost of capital for MSTR. However, capital markets do not perceive MSTR in this light, as the scenario analysis below will clarify. Scenario Analysis *Appendix B contains the complete Balance Sheet and Income Statement for MSTR Scenario Analysis. *Appendix C contains bitcoin information for Scenario Analysis. MSTR CFO Le penned an open letter to Financial Accounting Standards Board (FASB) Technical Director Ms. Hillary Salo, dated September 15, 2021, in order to address the disconnect

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

11,855 10,909 710 -17,520 -17,520 -35,585 -35,500

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between the carrying value reported on the balance sheet and the market value of bitcoin holdings. As per current FASB/GAAP standards, MSTR must report each bitcoin’s carrying value down to the lowest reported price. In this letter, Le highlighted that the estimated fair market value of MSTR’s bitcoin holdings as of June 30, 2021, was approximately $3.7B, but had to be reported at $2.1B on the balance sheet (a difference of -$1.6B or -43%). Le further stated: “The current accounting treatment required by ASC 350 is therefore incongruous to the bitcoin value perceived by investors and consumers alike, who consider bitcoin more akin to traditional financial instruments that are measured at fair value.”16 As a solution, Le proposed the following: “We believe digital assets should be measured at their fair value at the end of each reporting period to the extent that such fair value is “readily determinable”, with unrealized gains and losses reported in an entity’s income statement as “other income (loss)”.17 As a deep, liquid, and transparent blockchain market that trades non-stop, the fair value of bitcoin is clearly “readily determinable.” A scenario analysis structured around inputting historical fair market value of bitcoin into past statements and projected value of bitcoin for forecasts would provide investors with a more accurate snapshot of the economic reality of MSTR’s financial condition. Additionally, improving MSTR’s collection period would provide an interesting perspective of the company’s financial situation if they were to increase efficiency in this area. The scenario analysis therefore includes the following adjustments to past financial reports, as well as forecasts:

1. Retroactive bitcoin holdings (2020 and 2021 Q1-Q3) will be measured at their historic fair market value and forecasts (2021F to 2023F) fair market value will be estimated by using the bitcoin stock-to-flow price chart model.18

a. Bitcoin holdings will be recorded as “Other income (loss)” in the Income Statement and as “Digital assets” under Current Assets of Balance Sheet.

2. Days of receivables will be reduced to 75 for all reporting periods.

Operational improvement Operating Ratios

16 Le, MicroStrategy FASB-ITC Response Letter. 17 Le, MicroStrategy FASB-ITC Response Letter. 18 “Bitcoin Stock to Flow Model Live Chart”, Buy Bitcoin Worldwide, accessed December 5, 2021, https://stats.buybitcoinworldwide.com/stock-to-flow/

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F


Days of Payables 180 180 180 180 180 180 180

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As Accounts receivable decreases, so does need for cash for operations (NFO). By improving their cash operating cycle (reducing days receivable), MSTR frees up more of its long-term debt to purchase bitcoin at opportune moments. Generally, as sales and revenue increase, NFO increases as well. It is therefore important for MSTR to strive for these operational efficiencies in order to ensure that they are not aggravated as sales increase during the upcoming business intelligence “supercycle” as predicted by Saylor. If MSTR wants to improve operational performance (and therefore increase EBIT and net income) in a non-negligible way, they should also reduce operational expenses. This is another way to increase WC and free up more cash for bitcoin accumulation. The low and healthy leverage ratio demonstrates that MSTR is able to efficiently convert their debt (liabilities) into equity. The low leverage ratio also confirms that MSTR will continue to benefit from low and competitive cost of capital. Part of the affordable long-term debt to buy bitcoin could always be used to cover any spikes in short-term liquidity needs or operational expenses. Bitcoin Strategy Since mid-2020, MSTR has been aggressively accumulating bitcoin. As a result of this, they have depleted cash and short-term investments while significantly increasing long-term debt and convertible senior notes. The financial success of this strategy depends greatly on how the value of bitcoin is represented on the Income Statement and Balance Sheet, as well as the overall performance of bitcoin price. Operating Expenses and net income

Above are MSTR’s operating expenses under the current FASB/GAAP reporting standards, which require MSTR to report each bitcoin’s carrying value down to the lowest reported price.

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F


NFO as % of sales 24% 24% 23% 23% 20% 17% 14%

WC 475,195 483,628 -12,698 -53,552 -56,358 -78,024 -168,304

Credit -325,480 -336,628 147,957 163,031 180,203 194,358 279,771

Leverage (L/E) 0.67 0.80 0.59 0.83 0.86 0.44 0.44

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Operating expenses







Interest income, net 11,855 10,909 710 -17,520 -17,520 -35,585 -35,500

Other (expense) income, net 4,646 28,356 -7,038 1,631 1,631 1,631 1,631

(Loss) income before income taxes 20,482 38,263 -19,953 -662,949 -679,657 -178,710 -121,337

(Benefit from) provision for income taxes -2,019 3,908 -12,429 -22,984 -10,000 -10,000 -10,000

Net (loss) income 22,501 34,355 -7,524 -639,965 -669,657 -168,710 -111,337

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It is evident that these impairment losses become the largest operating expense and significantly reduce MSTR’s reported net income.

In the scenario analysis table above, Digital asset impairment losses are removed, as proposed by MSTR. Net (loss) income improves drastically with this change. This improved performance is also due to the increase in recorded revenue (below). At the Third Quarter 2021 Webinar, Le re-affirmed that continuous investment in research in development remained a significant priority for MSTR. For this reason, Research and development was increased in the scenario analysis. This reaffirms that MSTR remains financially committed to being an industry leader in their software business, in addition to accumulating bitcoin.19

In the scenario analysis above, unrealized gains/losses of bitcoin are reported in the Income Statement as “other income (loss)”, as per MSTR’s proposed solution. Conservative estimates of future bitcoin fair market value were taken from the bitcoin stock-to-flow model ($100,000 by end of 2022 and $115,000 by end of 2023) with MSTR bitcoin holdings increasing by 10,000 in 2022 and 2023. It is assumed that MSTR “buys the dip” by purchasing bitcoin during price corrections. By reporting fair market value of bitcoin as part of revenues, MSTR’s operational performance looks significantly healthier. MSTR’s massive bitcoin holdings measured at fair market value have the potential to represent a large majority of their revenue. Interest income, net

19 Le, Q3 Financial Results Webinar Recording. 10:00.

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Operating expenses




Total operating expenses 394,158 387,355 332,607 271,367 361,833 354,963 348,492

(Loss) income from operations (EBIT) 3,981 -1,002 975,707 1,077,332 543,523 6,425,244 2,246,487



(Loss) income before income taxes 20,482 38,263 969,379 1,061,443 527,634 6,391,290 2,212,618

(Benefit from) provision for income taxes -2,019 3,908 -12,429 -22,984 0 0 0

Net (loss) income 22,501 34,355 981,808 1,084,427 527,634 6,391,290 2,212,618

Revenues 2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Product Licenses 88,057 87,471 86,743 69,261 92,348 120,052 168,073

Subscription services 29,570 29,394 33,082 31,221 38,044 41,849 48,126

Total product licenses and subscriptions 117,627 116,865 119,825 100,482 130,392 161,901 216,199

Product Support 296,216 292,035 284,434 212,063 281,590 278,774 275,986

Other services 83,795 77,427 76,476 63,702 78,006 79,566 81,157

Other income (loss)(bitcoin) 0 0 2,043,601 3,088,289 920,310 7,052,200 3,115,660

Total revenues 497,638 486,327 2,524,336 3,464,536 1,410,297 7,572,441 3,689,002

Total revenues (no bitcoin) 497,638.00 486,327.00 480,735.00 376,247.00 489,987.48 520,240.52 573,342.37

2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Interest income, net 10,909 710 -17,520 -17,520 -35,585 -35,500

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While “Other income (loss)” increases drastically, debt payments for the purchase of the assets remain comparatively low. It is evident that the Economic Value Added (EVA) is high when the annual debt payments are so low (~$18M to ~$36M) compared to the amount of annual income generated from bitcoin holdings (~$1B to ~$7B). This is a strong indication that MSTR is allocating capital efficiently and generating value for shareholders. Net income and profitability ratios

The massive increase in revenues comes with immaterial increases in operational expenses, as well. The expenses of purchase and custody of bitcoin are negligible, which leads to a massive increase in MSTR’s net income and profitability ratios. Above is the forecast net income and profitability ratios. It is forecasted that MSTR’s gross margin, net margin, ROS, and ROE increase astronomically. Assets

The Balance Sheet also looks significantly healthier when the fair market value of bitcoin is reported. Particularly, Digital assets increases significantly as MSTR accumulates bitcoin and reports their holdings at fair market value. By comparison, Digital assets were recorded at $2.4B in 2021F under the current FASB/GAAP requirements but are over $6B when reported at fair market value in the scenario analysis above. Cash and short-term investments have been and will continue to be used to accumulate bitcoin. Bitcoin has the potential to represent a large majority of their assets under this accounting scenario.

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

22,501 34,355 981,808 1,084,427 527,634 6,391,290 2,212,618

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Gross margin (Margin/Sales) 80.0% 79.4% 51.8% 38.9% 64.2% 89.5% 70.3%

Net margin (EBIT/Sales) 0.8% -0.2% 38.7% 31.1% 38.5% 84.9% 60.9%

Net Profit/Sales (ROS) 4.5% 7.1% 38.9% 31.3% 37.4% 84.4% 60.0%

Net Profit/Equity (ROE) 4.6% 6.8% 63.6% 36.3% 15.1% 67.6% 19.1%

ASSETS 2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

Cash 109,924 496,299 134,033 85,501 133,564 133,306 62,485

Restricted cash 862 1,089 1,084 1,149 1,149 1,149 1,149

Short-term investments 466,186 108,919 0 0 0 0 0

Accounts receivable, net 126,424 123,944 123,403 97,958 127,475 140,166 162,235

Prepaid expenses 30,068 23,195 14,400 15,750 20,000 20,000 20,000

Total current assets 733,464 753,446 272,920 200,358 282,189 294,621 245,869

Digital Assets 0 0 2,043,601 5,131,890 6,052,200 13,104,400 16,220,060

Property and equipment, net 51,919 50,154 42,975 38,133 50,844 67,792 90,389

Right-of-use assets 0 85,538 73,597 68,755 91,673 96,257 101,070

Deposits and other assets 8,134 8,024 15,615 14,857 19,809 20,800 21,840

Deferred tax assets, net 17,316 19,409 0 20,000 20,000 20,000 20,000

Total Assets 810,833 916,571 2,448,708 5,473,993 6,516,715 13,603,870 16,699,228

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Liabilities

As the table above demonstrates, liabilities increase but at a much lesser rate than assets increase. It is for this reason that Saylor can confidently continue to raise capital through debt and equity to purchase bitcoin. The cost of capital is significantly lower than the value being generated. The majority of the debt to finance bitcoin accumulation is long-term and fall under the categories of long-term debt, net and Convertible senior notes, net. Retained Earnings

As a result of significantly increasing income and assets, while only marginally increasing liabilities, retained earnings (above) increases astronomically. Equity

The significant increase in equity is a direct result of MSTR’s ability to increase net income and use debt productively in order to significantly increase Digital assets. The change in accounting practices for bitcoin demonstrates that MSTR has greatly increased shareholder value and likely will continue to do so in the coming periods. DuPont scenario analysis (ROS * asset turnover * equity multiplier)

• 2019 DuPont scenario analysis (prior to bitcoin strategy) ROE=0.071 * 0.549 * 1.707 ROE=0.665

• 2020 DuPont scenario analysis (early phase of bitcoin strategy) ROE=0.39 * 1.5 * 1.64

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

LIABILITIES

Accounts payable, accrued expenses, and operating lease liabilities33,684 33,919 45,119 45,454 60,605 80,807 107,743

Accrued compensation and employee benefits 48,045 48,792 49,249 47,759 63,679 66,863 70,206

Deferred revenue and advance payments 176,540 187,107 191,250 160,697 214,263 224,976 236,225

Total current liabilities 258,269 269,818 285,618 253,910 338,547 372,646 414,173

Long-term debt, net 0 0 0 2,119,419 2,153,034 3,008,062 3,533,146

Convertible senior notes, net 0 0 486,366 0 366,201 600,000 1,000,000


Operating lease liabilities 0 103,424 84,328 78,939 105,252 110,000 120,000

Other long-term liabilities 61,262 30,400 33,382 28,934 38,579 39,736 40,928

Deferred tax liabilities 37 26 0 0 0 0 0

Total Liabilities 326,037 408,012 904,356 2,489,504 3,012,682 4,145,203 5,127,926

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

549,134 583,489 1,565,297 2,649,724 3,177,358 9,568,647 11,781,265

2018 2019 2020 2021 (Q1-Q3) 2021F 2022F 2023F

484,796 508,559 1,544,352 2,984,489 3,504,034 9,458,667 11,571,302

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ROE=0.96

• 2021 DuPont scenario analysis (forecast of bitcoin strategy) ROE=0.37 * 0.31 * 1.78 ROE=0.2

• 2022 DuPont scenario analysis (forecast of bitcoin strategy) ROE=0.84 * 0.75 * 1.55 ROE=0.98

When fair market value of bitcoin is reported, the ROS skyrockets from 7.1% in 2019 to 84% in 2022. This is mainly because income increases significantly in this scenario. It should be noted that because of impairment charges under FASB/GAAP reporting standards, ROS and net income were sometimes negative. We can conclude by using the DuPont formula that fair value reporting of bitcoin increases Return on Assets (ROA), which is a sign of business success. Using this method, we can also conclude that MSTR’s leverage ratio is actually much healthier than it appears under current FASB/GAAP reporting standards used in the base case in the previous section. Arguments against bitcoin as corporate treasury The complex and controversial macroeconomic arguments for and against bitcoin and its merits and value proposition are generally outside the scope of this paper. However, the following risk factors have been raised by the market and Saylor has responded to them. Volatility Bitcoin is a volatile asset, as expected with such a dynamic new asset class. This has been adversely reflected in the financial statements that require MSTR to report each bitcoin’s carrying value down to the lowest reported price. While price may fluctuate greatly in the short-term, bitcoin has a strong history of positive price action in the long-term, as presented by the logarithmic chart below (from Trading View). In response to a question regarding volatility in an interview, Saylor responded: “Our view is that it will be volatile because it’s plugged into the entire crypto market and it’s new, but it’s going up forever. I’ve got a long-term view. I think for the decade, bitcoin is going to be strongest, hardest, and most technically forward store of value. We have a long-term focus.” While this project provides a scenario analysis with relatively modest bitcoin price predictions, one can continue to use the practice of reporting carrying value down to the lowest reported price in order to estimate MSTR’s future financial situations where bitcoin is consistently volatile to the downside (long term bearish case for bitcoin).

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Government regulation Arguments have been made that bitcoin poses a threat to the US dollar as a global reserve currency and could de-stabilize other fiat currencies. Governments also tend to want centralized control over money and monetary policy. As a result of these perceptions, some pundits believe that bitcoin and other digital assets will be banned or strictly regulated by governments. Speaking at the Third Quarter 2021 Webinar, Saylor stated the following on the topic of government regulation: “…the last three months have delivered a lot of regulatory clarity for bitcoin. You can see support in Congress and the Senate, and you can see a very progressive administration. Most of the fears around the China crackdown are past us now and with the bitcoin mining industry re-locating to the U.S., I think it’s a very bullish outlook for the next twelve months…”20 Saylor later named specific regulatory bodies, saying that: “Within the CFTC, SEC, and ECB, there’s no intention to block institutions from holding the asset.”21 At the Third Quarter 2021 Webinar, Saylor further emphasized that the upcoming regulatory clarity would be bullish for corporations holding bitcoin and the bitcoin market as a whole: “When the guidance is clear, there will be much more demand to own this asset [bitcoin] and much less demand to sell the asset because banks can hold the asset and collateralize the asset.”22 Conclusion Because of MSTR’s aggressive bitcoin accumulation, shareholders are essentially making a proxy investment in bitcoin. While this study identified some operational inefficiencies such as a lengthy payment period, large operational costs, a lengthy cash conversion cycle and WC<NFO, there is nothing imminently ominous about MSTR’s current or future operations.

20 Michael Saylor, “Bitcoin Will be Volatile, But It Will ‘Go Up Forever’: MicroStrategy CEO,” CNBC, Filmed November 1, 2021, video of interview, 1:00, https://www.youtube.com/watch?v=ev7iProynaU. 21 Saylor, Q3 Financial Results Webinar Recording, 27:30. 22 Saylor, Q3 Financial Results Webinar Recording, 34:00.

https://www.youtube.com/watch?v=ev7iProynaU

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Nonetheless, these operational issues should be monitored to ensure that enough free cashflow is generated to increase bitcoin holdings and that no bitcoin needs to be liquidated to account for liquidity shortcomings. Shareholders of MSTR are essentially focused on the value of the bitcoin holdings, while the BI strategy works as a separate strategy to generate free cash flow for additional investment in bitcoin. As the chart below shows, MSTR stock price is strongly correlated to the price of bitcoin and has de-coupled from the benchmark Nasdaq overall performance.23 Lenders will continue to provide competitive credit options to MSTR because of bitcoin’s strong liquidity and the creditors’ claim to be paid first in the unlikely event of default.

Macro investors may find MSTR to be an attractive investment because of the overall deteriorating value of cash ($US dollar). Saylor has spoken about the long-term opportunity costs of holding cash instead of bitcoin, stating: “…Ray Dalio’s quote: ‘cash is trash.’ Why is cash trash? If the money supply is expanding at 7% per year, then the risk-free hurdle rate is 7%. If you don’t generate more than 7% yield on your cash, then it’s devaluing. From 2010 to 2020, the money supply expanded 7% [annually], so all the cash you’re holding is losing 7% of its value…In the traditional world, you invest your cash at 3% treasury yield…somewhere 15-20 years out, you’re going to lose half of the shareholder value in the treasury…But after March 2020, the money supply is expanding at 24% and interest rate is 0%.”24 In summary, large cash and bond holdings (which many tech companies hold) are a “melting ice cube” 25 and destroy shareholder value in the long-term. In contrast, bitcoin provides an opportunity to greatly

23 John Isige, “MicroStrategy’s Correlation to Bitcoin Price Surpasses 67% while MSTR Skyrockets,” June 1, 2021, Accessed December 5, 2021, https://www.fxstreet.com/cryptocurrencies/news/microstrategys-correlation-to-bitcoin-price-surpasses-67-while-mstr-skyrockets-202101060822. 24 Michael Saylor, “Michael Saylor on Bitcoin and What the Fed is Doing to the Dollars,” Conversations with Tom, June 12, 2021, video of interview, 2:30. https://www.youtube.com/watch?v=iRx8wDFsHdk. 25 Eben Shapiro, “Why MicroStrategy CEO Michael Saylor Bet Company Cash on Bitcoin – and Wants Other Corporations to Join In,” TIME, March 21, 2021, accessed December 5, 2021. https://time.com/5947722/microstrategy-ceo-bitcoin/.

https://www.youtube.com/watch?v=iRx8wDFsHdk

https://time.com/5947722/microstrategy-ceo-bitcoin/

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surpass the risk-free hurdle rate of cash without sacrificing liquidity or increasing operational costs. MSTR also provides a rare piece of portfolio diversification for fund managers or anyone looking for exposure to a historically uncorrelated asset class. It also provides bitcoin exposure for fund managers who are not constitutionally able to purchase and custody bitcoin but seek exposure through a publicly traded enterprise. While the concept of converting corporate treasury into scarce digital assets such as bitcoin may become more common in coming years for other enterprises, there is no doubt that MSTR’s significant current holdings have provided them with a first mover advantage in terms of size of holdings and corporate accounting knowledge. While other publicly traded companies such as Tesla (Nasdaq: Tesla), Square Inc (NYSE: SQ), and Lemonade (NYSE: LMND) also hold bitcoin in their corporate treasury, their holdings are not nearly as significant as MSTR’s. While MSTR has a history of producing positive net income and BI growth prospects appear solid moving forward, it is evident that free cashflow will continue to be used to add to the company’s bitcoin treasury. The fact that MSTR is a legacy software company with a steady history of generating free cash flow that can be used to purchase additional bitcoin makes it a unique value proposition since it is not simply holding bitcoin at spot price like a trust or ETF. MSTR will also continue to raise capital via debt and equity to increase its bitcoin position. Saylor has hinted at the potential to lend out bitcoin to trusted third parties in order to generate interest on the bitcoin.26 While a bit speculative at this point, it highlights another potential value stream for MSTR shareholders. As the scenario analysis above has demonstrated, the current accounting treatment methods of digital assets by the FASB will continue to create confusion and fail to provide investors, analysts, and the general public with the information they need to make an informed assessment of MSTR’s current and future prospects.27 This disconnect between the company’s financial statements and the economic reality of its conditions will likely continue to weigh down the stock until treatment of digital assets is modernized to reflect developments in digital asset markets. The change in accounting practices proposed by Le offers a more accurate depiction of MSTR’s financial situation by allowing digital assets such as bitcoin to be presented at fair market value. The scenario analysis above shows that Income Statement and Balance Sheet of MSTR improve drastically once bitcoin is reported at fair market value. Ultimately, the significant increase in shareholder equity under the proposed accounting method represents the true value that MSTR’s bitcoin acquisition strategy can provide shareholders. MSTR understands that this is a unique and avant-garde strategy that will take the market time to adjust to. As stated by Saylor:

26 Paula Seligson, “MicroStrategy Floats Lending Out Its Bitcoin Trove to Generate Yield”, December 17, 2021, accessed December 21, 2020, https://www.bloomberg.com/news/articles/2021-12-17/microstrategy-may-lend-out-its-bitcoin-trove-to-generate-yield. 27 Le, MicroStrategy FASB-ITC Response Letter.

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“MSTR has pioneered the use of digital assets as a core component of the enterprise’s treasury policies and created $ billions of incremental value for shareholders.” If global bitcoin adoption and demand continue to increase, the price of bitcoin has unlimited upside because of its limited/fixed supply. It should be noted that a bitcoin supply shock (reduction in mining rewards), which typically leads to significant price increases, is programmed to occur in early 2024. Continued positive bitcoin price trajectory in future years will lead to extreme upside for MSTR’s EBIT, retained earnings, and ultimately shareholders’ equity if accounting practices are modernized. Therefore, MSTR’s massive and growing bitcoin holdings present a unique opportunity to create massive value and asymmetric upside potential for shareholders.

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Appendix A – Past performance and base case forecasts

Microstrategy

Forecast Income Statement Microstrategy (in 000 $, except per share data)

2018 2019 2020 2021 (Q1-Q3) 2021 2022 2023

Revenues




Product Support 296,216 292,035 284,434 212,063 281,590 278,774 275,986

Other services 83,795 77,427 76,476 63,702 78,006 79,566 81,157

Total revenues 497,638 486,327 480,735 376,247 489,987 520,241 573,342

Growth -2% -1% 2% 6% 10%

Cost of Revenues




Product Support 20,242 28,317 23,977 14,353 19,137 18,755 18,379

Other services 60,773 54,365 49,952 40,543 54,057 55,679 57,349

Total cost of revenues 99,499 99,974 91,055 67,906 107,888 110,033 112,319

Gross Profit 398,139 386,353 389,680 308,341 382,099 410,207 461,023

Operating expenses









(Loss) income before income taxes 20,482 38,263 -19,953 -662,949 -679,657 -178,710 -121,337

(Benefit from) provision for income taxes -2,019 3,908 -12,429 -22,984 -10,000 -10,000 -10,000

Net (loss) income 22,501 34,355 -7,524 -639,965 -669,657 -168,710 -111,337

Profitability Ratios (in %)


Net margin (EBIT/Sales) 0.8% -0.2% -2.8% -172.0% -135.5% -27.8% -15.3%

Net Profit/Sales (ROS) 4.5% 7.1% -1.6% -170.1% -136.7% -32.4% -19.4%

Net Profit/Equity (ROE) 4.2% 6.8% -1.4% -138.7% 321.4% -21.5% -12.8%

General Assumptions:

1) Demand for services grows, as predicted by Saylor

2) Digitial asset impairment losses stabilize

3) No significant improvement in operational efficiency

4) Financial expenses as reported by MSTR (see X)

5) no other sources of financial income/debt outside of BTC debt

Forecast

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Microstrategy

Forecast normal growth: Base scenarioBalance Sheet Microstrategy (in 000 $)

2018 2019 2020 2021 (Q1-Q3) 2021 2022 2023

ASSETS

Cash 109,924 456,727 59,675 56,975 56,975 56,975 56,975

Restricted cash 862 1,089 1,084 1,149 1,149 1,149 1,149





Digital Assets 0 0 1,054,302 2,405,739 2,405,739 3,500,000 4,000,000




Deferred tax assets, net 17,316 19,409 6,503 261,138 261,138 350,000 400,000

Total Assets 855,768 916,571 1,465,612 2,986,244 3,108,692 4,312,364 4,822,134

LIABILITIES

Accounts payable, accrued expenses, and operating lease liabilities 33,684 33,919 45,119 45,454 53,205 54,263 55,390





Convertible senior notes, net 0 0 486,366 0 0 0 0




Deferred tax liabilities 37 26 8,211 1,811 2,415 2,415 2,415


EQUITY

Class A common stock 16 16 16 17 17 18 19

Class B convertible stock 2 2 2 2 2 2 2

Additional paid-in capital 576,957 593,583 763,051 1,118,761 1,118,761 1,500,000 1,700,000

Treasury stock, at cost -586,161 -658,880 -782,104 -782,104 -782,104 0 0

Accumulated other comprehensive loss -10,217 -9,651 -3,885 -6,781 -6,781 -9,041 -9,041

Retained earnings 549,134 583,489 575,965 131,419 -538,238 -706,948 -818,285

Total stockholders' equity 529,731 508,541 553,027 461,314 -208,362 784,011 872,674

Total liabilities and stockholders' equity 855,768 916,571 1,465,594 2,986,244 3,108,692 4,312,364 4,822,134

Financial ratios


NFO as % of sales 39% 38% 44% 36% 42% 42% 29%

WC 520,130 483,628 -12,998 -56,288 -51,658 -54,180 -118,651

Credit -325,480 -297,056 222,315 191,593 256,792 270,689 285,281

Leverage (L/E) 0.6 0.8 1.7 5.5 -15.9 4.5 4.5

Operating ratios*


Days of Payables 124 124 181 180 180 180 180

Assumptions

Stock buy-backs "Treasury stock, at cost" is suspended to focus capital on BTC.

minimum cash = $56,975

Forecast

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Appendix B – Scenario Analysis: Improved Days Receivable and Bitcoin at Fair Market Value

Microstrategy

Forecast normal growth (operational and accounting improvements)Income Statement Microstrategy

2018 2019 2020 2021 (Q1-Q3) 2021 2022 2023

Revenues




Product Support 296,216 292,035 284,434 212,063 281,590 278,774 275,986

Other services 83,795 77,427 76,476 63,702 78,006 79,566 81,157

Other income (loss)(bitcoin) 0 0 2,043,601 3,088,289 920,310 7,052,200 3,115,660

Total revenues 497,638 486,327 2,524,336 3,464,536 1,410,297 7,572,441 3,689,002

Total revenues (no bitcoin) 497,638.00 486,327.00 480,735.00 376,247.00 489,987.48 520,240.52 573,342.37

Cost of Revenues




Product Support 20,242 28,317 23,977 14,353 19,137 18,755 18,379

Other services 60,773 54,365 49,952 40,543 54,057 55,679 57,349

Bitcoin purchases 1,124,967 2,047,931 414,400 700,000 1,000,000

Total cost of revenues 99,499 99,974 1,216,022 2,115,837 504,941 792,233 1,094,024

Gross Profit 398,139 386,353 1,308,314 1,348,699 905,356 6,780,207 2,594,978

Gross Profit (no bitcoin) 398,139 386,353 -735,287 -1,739,590 -14,954 -271,993 -520,682

Operating expenses




Total operating expenses 394,158 387,355 332,607 271,367 361,833 354,963 348,492

(Loss) income from operations (EBIT) 3,981 -1,002 975,707 1,077,332 543,523 6,425,244 2,246,487



(Loss) income before income taxes 20,482 38,263 969,379 1,061,443 527,634 6,391,290 2,212,618

(Benefit from) provision for income taxes -2,019 3,908 -12,429 -22,984 0 0 0

Net (loss) income 22,501 34,355 981,808 1,084,427 527,634 6,391,290 2,212,618

Profitability Ratios (in %)(fair value bitcoin in operations)





Profitability Ratios (in %)(bitcoin excluded)

Gross margin (Margin/Sales) 80.0% 79.4% -153.0% -462.4% -3.1% -52.3% -90.8%




Forecast

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Microstrategy

Forecast normal growth (operational and accounting improvements)Balance Sheet MicroStrategy (in 000 $)

ASSETS 2018 2019 2020 2021 (Q1-Q3) 2021 2022 2023

Cash 109,924 496,299 134,033 85,501 133,564 133,306 62,485

Restricted cash 862 1,089 1,084 1,149 1,149 1,149 1,149





Digital Assets 0 0 2,043,601 5,131,890 6,052,200 13,104,400 16,220,060




Deferred tax assets, net 17,316 19,409 0 20,000 20,000 20,000 20,000

Total Assets 810,833 916,571 2,448,708 5,473,993 6,516,715 13,603,870 16,699,228

LIABILITIES

Accounts payable, accrued expenses, and operating lease liabilities33,684 33,919 45,119 45,454 60,605 80,807 107,743





Convertible senior notes, net 0 0 486,366 0 366,201 600,000 1,000,000




Deferred tax liabilities 37 26 0 0 0 0 0


EQUITY

Class A common stock 16 16 17 17 17 18 18

Class B convertible stock 2 2 2 2 2 2 19

Additional paid-in capital 576,957 593,583 763,051 1,118,761 1,118,761 900,000 800,000

Treasury stock, at cost -586,161 -658,880 -782,104 -782,104 -782,104 -1,000,000 -1,000,000

Accumulated other comprehensive loss -10,217 -9,651 -1,911 -1,911 -10,000 -10,000 -10,000

Retained earnings 549,134 583,489 1,565,297 2,649,724 3,177,358 9,568,647 11,781,265

Total stockholders' equity 484,796 508,559 1,544,352 2,984,489 3,504,034 9,458,667 11,571,302

Total liabilities and stockholders' equity 810,833 916,571 2,448,708 5,473,993 6,516,715 13,603,870 16,699,228

Financial ratios


NFO as % of sales 24% 24% 23% 23% 20% 17% 14%

WC 475,195 483,628 -12,698 -53,552 -56,358 -78,024 -168,304

Credit -325,480 -336,628 147,957 163,031 180,203 194,358 279,771

Leverage (L/E) 0.67 0.80 0.59 0.83 0.86 0.44 0.44

Operating ratios*


Days of Payables 180 180 180 180 180 180 180

Assumptions

1) Deffered tax assets, net was reduced in order to reflect the increased taxes that MSTR will pay when fair market value of bitcoin increases assets and earnings

2) reductions in accounts receivable were added to cash

3) Long term debt was slightly reduced in 2021(Q1-Q3) to reflect stronger cash position (reduced Accounts receivable)

4) Other income (loss) is bitcoin. Yearly revenue was calculated by (price increase YTY*Q previous holdings) + (price appreciation of current year purchases)

Forecast

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Appendix C – Bitcoin Estimates for Scenario Analysis

Bitcoin Estimates

(In 000 $, except for bitcoin quantity)

2020 2021 (Q1-Q3) 2021F 2022F 2023F

bitcoin purchased during period 70,469 43,573 7,002 10,000 10,000

Total bitcoin 70,469 114,042 121,044 131,044 141,044

Price Paid during period (average) 16$ 47$ 59$ 70$ 100$

Total paid 1,124,967$ 2,047,931$ 414,400$ 700,000$ 1,000,000$

Fair value 29$ 45$ 50$ 100$ 115$

Profit (loss) 918,634$ 3,083,959$ 2,968,241$ 12,404,400$ 15,220,060$

Total btc holdings (fair value) 2,043,601.00$ 5,131,890.00$ 6,052,200.00$ 13,104,400.00$ 16,220,060.00$

Assumptions:

1) Historical bitcoin price from final day of accounting period was used to determine Fair value

2) conservative stock-to-flow estimates were used for forecast bitcoin prices

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12/7/2021 financial analysis of microstrategy

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