Earnings Call Transcript - MSTR Q1 2025

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Hello, everyone, and good evening. I'm Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 First Quarter Earnings Webinar. Before we proceed, I will read the safe harbor statement. Some of the information we provide during today's call regarding our future expectations, plans and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-Q filed with the SEC and our 8-K filed on April 7, 2025. We assume no obligation to update these forward-looking statements, which speak only as of today. Also, during today's call, we will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at strategy.com. I would now like to welcome you all to today's webinar and let you know that we will be taking questions using the Q&A feature at the bottom of the screen. You can submit your questions throughout the webinar, and Michael, Phong, and Andrew will answer the questions at the end of the session. Please be sure to provide your name and company's name when submitting your questions. I'll now walk you through the agenda for today's call. First, Phong Le will cover the business highlights for the first quarter of 2025. Second, Andrew Kang will cover the financial results for the first quarter. Lastly, we will open it up to Q&A. With that, now I'll turn the call over to Phong Le, President and CEO of Strategy.

Phong Le, President and CEO

Thank you, Shirish. Hello, everyone. I'd like to welcome all of you to today's webinar. With just a few days to go, I'm excited to invite you all to Strategy World 2025. Next week, May 5 through 8 in Orlando, Florida. Come meet our software customers, partners and employees, explore innovations in AI and BI and engage with global corporate and thought leaders shaping the future of Bitcoin for corporations. You can visit our website to register if you haven't already, and I look forward to seeing many of you in Orlando. Moving on to the Bitcoin highlights for Q1 2025. Strategy remains the largest corporate holder of Bitcoin in the world, now holding 553,555 bitcoins with a total bitcoin market value of $52 billion as of April 28. In the first 4 months of 2025, we acquired an additional 106,085 bitcoins for a total purchase cost of $9.9 billion at an average price of approximately $93,600. In Q1 2025, Bitcoin's momentum accelerated meaningfully driven by a series of landmark government actions. Most notably, the Trump administration announced the establishment of a strategic Bitcoin reserve. This bold move marked the first time a sovereign government publicly recognized Bitcoin as a national reserve asset. In parallel, the administration's broader pro-Bitcoin regulatory stance further legitimized the asset class and attracted heightened institutional interest, setting the stage for deeper integration of Bitcoin into the U.S. financial system. On the capital markets front, we have also made significant progress. In the first quarter of 2025 and quarter-to-date in Q2 2025, we raised $6.6 billion net proceeds through our at-the-market or ATM equity offering program and raised $2 billion through the issuance of a convertible note offering. We also raised $1.4 billion through our newly listed preferred stock. We expect to continue issuing innovative fixed income securities and seek to enable our common stock to outperform Bitcoin via intelligent leverage. Strategy has added to its balance sheet in every single quarter since August 2020 across 60-plus announcements, and 100% of our Bitcoin holdings remain fully unencumbered, demonstrating our long-term conviction and unmatched consistency in executing our Bitcoin strategy. This makes us the most committed corporate holder of Bitcoin globally, representing 2.6% of all Bitcoin in existence. As the chart shows, our pace of accumulation accelerated meaningfully over the past 2 quarters, reflecting both market opportunity and strong treasury operations execution. As the world's first and largest Bitcoin treasury company, we remain hyper-focused on capital markets innovation and our Bitcoin operations to strategically accumulate more Bitcoin. We've now utilized $37.3 billion of capital to increase our Bitcoin holdings and drive shareholder value. That capital was acquired through 3 primary mechanisms: First, $10.6 billion of debt issuances of which $8.2 billion in aggregate principal is outstanding; second, $1.4 billion in perpetual preferred equity through Strike and Strife reflecting investor demand for both yield and Bitcoin linked instruments; third, $25.9 billion of Class A common stock issuances; and fourth, $836 million of cash flows from software operations. As we reflected in this quarter's capital markets activity, 2025 continues the momentum we built in late 2024, with $10 billion already raised year-to-date through a diversified mix of securities. This included $6.6 billion in equity and $3.4 billion in fixed income instruments, demonstrating the breadth of our investor support and the strength of our market access. These offerings reflect our ability to tap multiple capital sources efficiently and strategically. Q1 demonstrated that the $18.1 billion raised in Q4 wasn't a one-off. We're operating at a new baseline. Rather, it represents the foundation of our evolving and scalable capital strategy. In terms of the largest treasuries in the world, we've gone from virtually negligible to now the 13th largest in the treasury compared to the S&P 500 universe entirely through our Bitcoin holdings, and we're growing fast. Over the next 2 to 4 years, we believe we have the potential to surpass many of the companies ahead of us on this list, continuing to scale our Bitcoin treasury with conviction and discipline. Five years ago, when we embarked on the Bitcoin journey, we were the only corporation with the conviction to do so. Today, there are over 70 publicly listed companies globally holding over 700,000 Bitcoins who are adopting our playbook. There are newer corporate entrants adopting Bitcoin, and some are recirculating coin stackers like us. We welcome all corporates to Bitcoin and are extremely proud to see Bitcoin treasury companies emerging in the U.S., Japan, India, France and other countries. We believe our unique attributes and track record of transparent investor relations, conviction in our Bitcoin strategy, innovative offerings, high volatility, combined with the scale of our Bitcoin holdings will continue to differentiate us. Since we adopted our Bitcoin strategy in 2020, MicroStrategy stock has outperformed every major asset class in every S&P 500 company, appreciating 2,887% to date. To put that in perspective, Bitcoin itself is up 692%. The S&P 500 has risen just 65% over the same period. And while Navidea has been the top-performing S&P 500 stock during this period with an 874% gain, we've outperformed Navidea by more than 3 times. If you look at the last 12 months, we've similarly outperformed all the largest companies as well as all of the key indices. And if you look at the last 3 months, when the broader macro markets witnessed the most volatility since 2020, we still managed to outperform the magnificent 7 and key indices. Our performance metrics speak to the uniqueness and strength of our position in the market. Since launching our Bitcoin strategy, MicroStrategy MSTR has not only outperformed Bitcoin itself, but every stock in the S&P 500. That kind of return doesn't happen by accident; that's the result of strategic focus, intelligent leverage and our disciplined execution. We're also one of the most heavily traded and closely watched equities in the market today, both in spot and in options markets. MSTR consistently ranks among the top across open interest, daily trading volume, and trading volume as a percentage of market cap. This level of engagement reflects more than just price action; it's a sign of growing institutional interest, retail participation and the market's recognition of strategy as a capital market center of gravity for Bitcoin. Now I'll turn to our capital plan. In October of last year, we introduced the 2121 plan, a bold but disciplined framework to raise $21 billion in equity and $21 billion of fixed income capital. We designed it to be agile, scalable and responsive to market dynamics. Since then, we've reported having raised $20.9 billion in equity and $6.4 billion in fixed income capital, meaning we're 65% complete. Notably, 99% of the equity portion has been completed in the near 6 months. We believe the accelerated progress is a testament to the strength of our market access and the credibility we've built with all groups of investors who've demonstrated increasing demand for our securities. So what's next? Remember, our original inspiration from the Hitchhiker's Guide to the Galaxy, the answer to the ultimate question of life, the universe and everything. The number was 42 for our $42 billion capital plan. And given our success, we're now going to double down with the new plan, the 42-42 capital plan. That's $42 billion in equity and $42 billion in fixed income targeted through the end of 2027 and inclusive of our original $21 billion, $21 billion capital plan. This gives us the scale to pursue our strategy with conviction and the flexibility to continue to adapt across market cycles. So to that end, we're pleased to announce that today, we filed for a new $21 billion ATM program. Later in the presentation, Michael will share with you a framework for how we think about our securities and credit risk as it pertains to our Bitcoin strategy. Including illustrative examples of how this framework would apply to the different types of securities we've offered, MSTR convertible bonds, Strike and Strife. We're excited about this opportunity to discuss the framework which we believe is helpful for understanding our capital financing decisions. Under the new 42-42 plan, we are 32% complete. That leaves us with around $57 billion of additional capital to be raised through the end of 2027. As we move forward, we'll focus more on the fixed income side of our plan through instruments like Strike, Strife, convertible notes, and potentially new structures we may explore over time. At the same time, we'll continue to utilize the equity ATM when conditions are favorable and when it represents an accretive and efficient option for our shareholders. The market has shown strong demand for instruments, and we intend to continue tapping new pools of capital in a thoughtful and value-accretive manner while maintaining a disciplined leverage ratio between 20% and 30%, allowing us to responsibly scale while maximizing long-term value. We intend to remain highly efficient with our use of our overall capital. We have $185 million of total fixed annual obligations for interest and dividends, which we can cover using a fraction of our daily trading volume as new stock issuances. To put it in perspective, our ATM activity this year alone has raised $6.6 billion, and our obligations represent just 3% of the daily traded volume of our equity and less than 1% of the total equity we've raised in the last 12 months. As a result, we're comfortable raising additional fixed income capital to buy more Bitcoin without being restricted by available cash and cash flow from our software operations to service all of our interest and dividend obligations. Mike will explain later why the Strategy is highly accretive to our shareholders. We're tracking well ahead of our KPI targets for 2025. Year-to-date, we've achieved a 13.7% BTC yield, putting us well on pace to reach our full year target of 15%. The BTC yield reflects the Bitcoin gain we've generated through our treasury operations. Our BTC gain is approximately 61,500 BTC year-to-date, representing a BTC dollar gain of $5.8 billion at the current Bitcoin price. Given our strong year-to-date performance and the favorable market environment, we're raising our KPI targets for 2025. We've increased our BTC yield target from 15% to 25%, reflecting confidence in our ability to create value for our shareholders. At the same time, we're increasing our BTC dollar gain target from $10 billion to $15 billion. These new targets better reflect the scale of our strategy and the value we believe we can unlock through disciplined Bitcoin acquisitions. We remain disciplined in the use of both the ATM and other capital-raising sources, doing so in a way to achieve our BTC yield and BTC dollar gain targets. I'm now going to turn the call over to Andrew, who will discuss our financials for the quarter in further detail.

Andrew Kang, CFO

Thank you, Phong. I will begin with a quick review of the software results and then go into more detail on our Bitcoin results. In Q1, total software revenues were approximately $111 million, down 3.6% year-over-year. The lower product license revenues, along with support revenues in Q1, continue to be as expected, and our overall revenue trend continues to reflect the ongoing transition of our software business from on-prem to the cloud. Our cloud results in Q1, subscription services revenues increased 62% year-over-year and now make up approximately 33% of total revenues, continuing our quarter-over-quarter double-digit growth. Our subscription billings also grew again by 38% in Q1 to $24.5 million. The decline in product license revenues and support revenues continue to be offset by growth in cloud, and we continue to see growth in demand for our cloud platform and anticipate this trend to continue and strengthen in the coming quarters. Lastly, cost of revenues were $34 million, up 13% compared to Q1 of last year. The increase was driven primarily by higher cloud hosting costs, which we expect to continue in future periods as a direct result of our growth in cloud. Moving on to Bitcoin. We adopted fair value accounting for Bitcoin holdings on January 1 this year, which has fundamentally changed how we value our Bitcoin treasury asset. The left of this slide, we began the year with our Bitcoin holdings valued just under $42 billion. On Jan 1, on adoption of the new rule, we recognized $17.9 billion to our beginning balance of retained earnings which was the difference between the carrying value on our books and the fair value based on the Bitcoin price as of 12/31. One fundamental difference now under fair value accounting is that our holdings are marked on the last day of every quarter, not throughout the quarter as before. Any new Bitcoin purchased during the quarter were initially held at the purchase price of those Bitcoins, and our prior quarter and new quarter purchases are fair valued as of the last day of each quarter. In Q1, the price of Bitcoin declined from approximately $93,400 at the end of the year to roughly $82,400 at the end of Q1, resulting in a $4.9 billion unrealized fair value loss on our pre-Q1 holdings. We also purchased throughout the course of Q1, an additional 80,715 bitcoins at an average price of approximately $94,900, representing $7.7 billion of new purchases. On the last day of Q1, because the market price of Bitcoin was approximately $83,400, these new purchases also reflected a fair value decline of about $1 billion. As a result, our overall Q1 unrealized fair market value loss was $5.9 billion, which flowed directly through our income statement. The next slide is an illustration of how fair value could impact the current quarter. This waterfall chart begins with our March 31 Bitcoin holdings on the left, valued at $43.5 billion. Since 3/31, we have seen a substantial recovery in Bitcoin price, which has increased since the end of Q1. Using a Bitcoin price of $95,000 as an example, the change in Bitcoin price would reflect an illustrative $6.6 billion unrealized fair value gain on our bitcoin held at the end of the previous quarter. In Q2, so far, we have purchased an additional 25,370 bitcoins at an average price of $89,303, which represents a $2.3 billion investment. At the example price, the new Q2 purchases would reflect an increase of roughly $100 million in fair market value. In this illustration, our unrealized fair market value gain would be approximately $6.7 billion, and the market value of our total Bitcoin held today would reflect a fair value of approximately $52.6 billion. As Phong mentioned, Q1 was a milestone quarter for us with the eyes of 2 new innovative preferred equity offerings. Strike, our 8% convertible preferred is trading with an effective yield of roughly 9%. Since launch, Strike has delivered an 8.4% price return, outperforming the median return of all products offered since 2015. Strike is trading with an average daily volume of roughly $33 million, which is nearly 80 times the typical preferred trading volumes, demonstrating strong institutional demand and a deepening market for this product, which has strengthened through a $21 billion ATM, institutional block trades and follow-on retail demand. Strife, our 10% fixed coupon perpetual preferred has shown even stronger liquidity and investor demand and has quickly emerged as a top-tier preferred instrument. With a price return of 7.5% since issuance, it has meaningfully outpaced the broader preferred market as well. Average daily volume for Strife has been $26 million, again, significantly higher than the peer set. When you compare the strong BTC risk and BTC credit profiles of these preferred stocks, there is tremendous unlock through the eventual recognition of the underlying BTC support of these instruments and the potential changes in the rate environment in the future. Both Strike and Strife stand out as some of the most liquid and high-performing preferred stocks issued in the last decade. They serve to provide innovative securities to institutional investors, insurance companies, retail investors as well as the broader fixed income universe. This slide highlights why we believe Strike and Strife were structurally superior to traditional debt. These instruments provide us with permanent capital with no maturity, no refinancing risk, no restrictive covenants and no collateral requirements that are also publicly listed, giving us flexibility to tap follow-on capital as needed, both institutionally and for retail investors. In contrast, traditional bonds come with fixed maturities, repayment or refinancing risk and often require covenants and collateral over a 30-year period that can lead to significant leakage from refinancing costs and added operational complexity. Our preferred equity allows us to maintain leverage without repayment risk while providing durability and scalability. Bitcoin is a 100-plus year asset. These instruments provide 100-plus year exposure. In Q1, we issued a new $2.0 billion convertible note, which was well received by the market. The notes due March 2030 have a 0% coupon and price with a 35% conversion premium reflecting a conversion price of $433 per share. We also redeemed our 2027 convertible notes in Q1, and our nearest debt maturity is now not until late 2028. The remainder of our scheduled debt maturities are evenly spread out through 2032 with a weighted average scheduled debt maturity of approximately 4.9 years. We now have $8.2 billion of total unsecured convertible debt outstanding with a low blended interest rate of approximately 0.42%. Since issuance, nearly all of our converts have increased in value significantly. On a blended basis, convertible bonds are up 62%, even outperforming Bitcoin itself. What is even more striking is Strategy's converts in comparison to other traditional securities such as U.S. high-yield and investment-grade corporates and other U.S. convertible bonds. The traditional convert market has historically offered investors such as funds access to volatility across different industries and asset classes. The innovation we introduced through our converts still provides volatility, but our converts offer increased volatility through Bitcoin exposure. The differentiation of our converts from others is the credit coverage that we offer, which Michael will discuss in more detail shortly. Strategy was the largest issuer of converts in 2024, and our success can be attributed to expanding the investor base of this historically closed market. In addition to traditional hedge funds, we have seen increasing participation from long-only investors and now with access for retail investors through vehicles like the VMAX ETF, the Bitcoin Corporate Treasury convertible bond ETF. Our outstanding debt and preferred securities, including converts, Strike and Strife are significantly supported by the value of our Bitcoin reserves and even more so by the scale of our common equity market value. As of April 28, we have $109 billion in equity market cap. Therefore, we have about $100 billion in equity cushion and over $43 billion in Bitcoin cushion over our fixed income liabilities. The point is that we believe our capital structure is extremely well qualified. This chart gives you a simple way to think about our capital stack across both seniority and volatility. In the far right, you'll see MSTR equity. That's your full exposure to our high-performance Bitcoin strategy. Then there's Strike, our convertible preferred. That's a step-up in seniority and it pays an 8% dividend but it also gives investors some upside through equity conversion to MSTR. Above that is Strife, our 10% perpetual preferred. It's non-convertible, non-callable and really meant for the kind of capital that wants long-dated fixed income exposure to our balance sheet without the volatility of the equity. And at the top, we've got our convertible notes, senior instruments that are capped on upside but provide higher protection in the capital structure. So what you're seeing here is a full spectrum of choices for investors, whether someone wants equity upside, yield with optionality or pure senior exposure. That makes our overall capital structure so scalable. We are building a platform where investors can pick their spot on the risk-return curve, and we can raise capital intelligently from each part of that curve. Thank you for your time today, and for your continued support of Strategy. I'll now turn the call over to Michael for his remarks.

Michael Saylor, Executive Chairman

Okay. I want to thank everybody for being with us today. I'm going to start with an observation. Strategy is the world's most widely held Bitcoin security, and you could think of it as the most widely held Bitcoin proxy. In fact, it's substantially more widely held than any of the spot ETFs in the world. We did some review of that in the past few months, and we found that there are 13,000 institutions that have accounts holding MSTR. These institutions are not just asset managers, they include a lot of pension funds, insurance companies and even sovereign wealth funds. We traced 814,000 retail accounts. We have 500-plus ETFs and funds and indices that were embedded in like the NASDAQ 100, the Russell 1000, and the MSCI index. Some of these are extraordinary. For example, the Norway Sovereign Wealth Fund, it's benefiting every single citizen of Norway. We've traced our holdings to insurance companies that have millions of beneficiaries and pension funds that have many millions of beneficiaries. So all told, our best estimate is 55 million beneficiaries were either indirect holders of MSTR or their beneficiaries of the institutions that are invested in MSTR. I'd like to talk a bit about our BTC models. You're probably familiar with BTC Yield and BTC gain because we've talked about those a lot over the past 6 months. This information is vital for understanding how we create shareholder value. If you want to understand how we continue to outperform Bitcoin and grow the stock, one has to look out much more than just on the current period. We look out a decade and consider the consequences of all of our capital markets transactions. We internally use a variety of these BTC metrics and I'm sharing them with you today. We have some valuation metrics, some credit metrics, some forecast metrics like volatility and ARR, and then we have treasury metrics where we're calculating the value of our treasury and have metrics that allow us to assess how accretive any particular trade or any particular transaction is at any point in time. We even have some risk metrics. We have not just credit risk metrics for the credit instruments but we have BTC risk metrics where we assess the hurdle rates and the breakeven points of our various capital markets transactions. So let's dive right in. First of all, the degree to which any capital markets transaction is accretive and going to create shareholder value is a function of some outlook or expectations. One important point is what do you think about BTC? Do you think that Bitcoin is going to go up 0% a year forever? If you do, we call that a skeptic. Do you think that Bitcoin is going to track the S&P Index, about 10% a year or so on average? We call that a trader. Do you think that Bitcoin looks like a magnificent 7 stock? Those normally have growth rates of 20%. We call that an investor, or even a tech investor. And then do you believe that Bitcoin is destined to demonetize lots of other assets as digital capital? That makes you a maximalist. My long-term forecast personally that I shared last July in Nashville was that I thought Bitcoin was going to go up 29% annually on average for the next 21 years. So if you are more aggressive than that, in the near term, especially over the next 5 years or 10 years, you might have a shorter time horizon. Or you might just think that the base case is conservative and you might have a more bullish case. You might think a 40% gain is coming or even a triple maxi thinking a 50% a year ARR is possible. The important takeaway is your view of the equity and the credit instruments as an investor will be a function of your view of Bitcoin. So why do people want to hold MSTR? What drives the premium to NAV and what creates the magnetic appeal or the gravitational traction of this asset? One thing is the volatility. We have a volatility which is higher than BTC and also higher than any of the S&P 500. When you have that kind of volatility, you can generate yield by simply selling that volatility. We've quantified that value of that volatility in a metric we call the MSTR rate. Think of it as the simple annualized yield you can generate by selling at-the-market call options with a 30-day expiry. If you just keep rolling those call options and keep selling them all the time, you can generate a 103% simple annualized yield on MSTR. That's substantially higher than NVIDIA or IBIT and is substantially higher than the NASDAQ 100. You can look at it as, again, it's like the magnetic attraction to capital. People might very well buy MSTR to sell that volatility, not even knowing what BTC is or what MSTR is: all they know is they want that 103%. Now another point I will make is, if you're in a taxable account and you're getting a 103% yield that’s taxable. Your after-tax yield is going to be 70%, 60%, whatever that is. But if you’re in a tax-free or tax-advantaged account, or if you’re an offshore trader, you could be sitting in Dubai or in a 0% income tax environment and if you reinvest this rate, you could get to 200% or more in the effective yield. So that makes our security, MSTR, globally interesting to traders and very interesting to people that would simply like to sell volatility. And another point that I’ll make is, when you consider an equity to sell volatility on, what you would like is volatility. You would also like liquidity, durability, and credibility. So think volatility, liquidity, durability, credibility. Now think about three classes of companies. Weak struggling companies occasionally are volatile, but their underlying operating business is losing money. So they’re not durable. If you have a volatile business and you're losing cash, it’s interesting to trade for a while, but the trade doesn't stick around. On the other hand, strong companies like Microsoft engage in decisive actions to strip the volatility away from the balance sheet and the volatility away from the P&L. So you've got a well-run company creating a volatility engine. What we're doing is cultivating a fire, making a fire into a furnace, and if you’re smart, you make it a reactor and it becomes a power plant. So what we're doing is creating a crypto reactor that could run for a long, long period of time. So that rate, combined with the credibility of the management team, transparency, and durability drives a lot of capital to MSTR. Next, let's talk about equity analytics. On any given day, we consider how we’re going to raise money, generate yield, create gains, and generate shareholder value. If we were to sell $100 million of MSTR equity at a multiple to NAV of 2, then generally, what happens is we capture a BTC dollar gain of half of that. The spread is 50%. We capture $50 million of that as the gain, which converts to a BTC gain of 526 Bitcoin. That converts into a yield that is the BTC gain divided by our entire stack of Bitcoin which works out to 9 basis points. So we’re capturing a yield by selling the equity and buying the Bitcoin. When we do that with convertible notes, we do it at a 0 coupon, up 40% in this model. That same transaction results in a 12 basis point yield, a $64 million BTC dollar gain and a 64% spread. If we do the same thing with Strike it results in a 15 basis point yield, 842 Bitcoin and an $80 million gain. So you see that the leverage is getting greater. That 842 Bitcoin will be achieved without dilution to the common stock. So all of the capital, all of the investment income, or the capital gain, from the 842 Bitcoin will accrue to the existing shareholders and not to the new Strike shareholders. So that’s how we’re creating an upside opportunity. Now when we go to Strife, Strife is the simplest model because we’re selling $100 million of a preferred. We’re not diluted in the common stock at all. So we’ve got a $100 million gain of Bitcoin without share dilution, which works out to 1,053 Bitcoin. That’s a 19 basis point yield. As we calculate through this process, you can see as we add debt-like instruments, we generate less dilution and these become more accretive, generating a higher BTC dollar gain. That we call BTC KPIs. We report that upfront, and you have access to that information week by week. Think about the next 10 years. When we sell that $100 million of equity, we capture the $50 million gain upfront. But over 10 years, that investment will grow. Most investors don’t really have the patience for that, but they think about a 10-year outlook. If you are a maximalist like me, you crank in a 30% BTC ARR forecast. That $100 million grows to be $1.379 billion in year 10. We created $50 million in gain right on time, but we created quite a bit of investment income and half of that investment income is attributable to the equity dilution. The other half of the investment income is captured by the existing common stock shareholders that existed before the transaction. The value we created for shareholders over this decade works out to be what we call BTC dollar income, which amounts to $689 million. So you could see right here if we create $689 million of either gains or incremental investment income without dilution. That’s the creation of value. We’re creating $6.9 of value for every dollar of capital raised using this transaction method. There's another metric you can calculate known as BTC multiple. In this case, it’s equal to the total BTC NAV, like $1.379 billion over the equity issued. You can see B shares from which we sold $100 million of equity. Half of it is a gain, and the other half is investment income. We've also discovered that when selling equity at 1x NAV, you simply haven't created shareholder value. The first order result merely expands the equity capital of the company. This is not always an idea. You might be expanding the equity capital of the company, improving the credit of the instruments, increasing liquidity, and might boost the volatility of the name recognition. Our capital markets activity must also maximize this lever. When we get to the end of this, you can see, when selling equity at MNAVs of 2, 3, 4, 5, we’re derisking the company. We’re not increasing risk at all. When capital is raised at greater than 1x NAV, that’s accretive and should not be dilutive to shareholders. When we look at this BTC credit, it allows our operations to outperform as BTC performance reflects the business's health. So let’s go ahead and look at the BTC multiple and BTC ratings together. BTC risk refers to the probability assets may not generate the liquidity to back liabilities over the years. Our BTC credit process evaluates various assumptions for BTC, including the ARR. The market views our securities similar to distressed debt. There is a disruption coming. We think we could emerge as the world's first investment-grade Bitcoin treasury company. If you hold our equity, reach out to credit rating agencies and request coverage for our securities. We invite investors to reevaluate our fixed income instruments and explore these opportunities to engage with our BTC leverage model.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Thank you, Michael, for the very insightful session today. I know we went a lot over the original 1-hour mark, but we’ll take 3 quick questions here, and I’ll begin with the first one for Andrew. So now that you have adopted the fair value accounting, how do you feel about the big swings in earnings as a result of the Bitcoin price volatility?

Andrew Kang, CFO

Sure. Thanks, Shirish. First of all, fair value accounting, despite the fluctuations, offers much greater transparency for our investors and more accurately represents the true value of our Bitcoin holdings compared to the previous accounting standards. This is definitely a positive development for us and other companies utilizing Bitcoin. The previous accounting system was quite restrictive, but now that this barrier has been removed, we expect to see a continued influx of new corporate adopters of Bitcoin as a treasury asset. Transparency is crucial. Regarding the fluctuations, we definitely prefer the positive changes to the negative ones. However, the reality is that Bitcoin is inherently volatile. Overall, we remain unaffected by the downturns and believe that, over time, there will be more upward movements. As I previously mentioned, if Bitcoin reaches $95,000, that would result in a $6.7 billion gain. Currently, Bitcoin is priced around $96,500. Therefore, if that were the quarter's closing price, our unrealized gain could approach $7.6 billion in just one quarter. We are all optimistic that Bitcoin's price will increase in the long run, and likewise, our reported gains will follow that upward trend in our overall earnings.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Great. Thanks, Andrew. The next one is for Michael. What are your thoughts on the recent MSTR playbook adoptions from other companies? And how does the company plan to sustain its leading role?

Michael Saylor, Executive Chairman

I think it's a very virtuous cycle, and it's mutually beneficial competition. The more companies that adopt the Bitcoin standard, the more legitimizing it is. As more companies adopt the Bitcoin standard, they're out there educating equity investors, and that brings more equity capital to the market. As they start to issue credit instruments, they will educate fixed income investors and credit investors that brings new capital to the market. There's only 450 Bitcoin a day. And so as we're all buying that Bitcoin, the price of Bitcoin is stabilized, supported and then driven up. 99.9% of the capital in the world is invested in the traditional fiat physical financial economy. We're just at 1% or 0.1%. If it grows from 0.1% to 1%, then the advantages of accelerating institutional adoption are profound, and they offset any possible competition for capital. So I also think each capital market needs its own set of BTC companies. In France, you need a local French company, a local company in Brazil, and a company in Japan. The U.S. market can absorb dozens and dozens of companies because there are so many ways to differentiate. Every company will have its own approach. And, of course, a lot of investors, they say one incident or one data point is just a random point. Two is a line, maybe, but three is a trend. So as you have more companies, a lot of investors become more comfortable investing in the space because they want to limit their exposure to certain risks in their portfolio but look for the next one and the next one. The more companies that join, the better it is for Bitcoin and the better it is for the companies in the space.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Great. And the last one here for Phong. Can you please update us on the pace of capital raises under the 42-42 plan? How do you think about striking the right balance between equity capital and the fixed income capital going forward? And how do you think about the impact of dilution from another $21 billion equity?

Phong Le, President and CEO

I'll begin by highlighting the essential question we've been discussing for the past two hours. We firmly believe in our capital raises and the expansion of our capital plan, which we've elaborated on. It's crucial to understand why we developed a BTC financial framework, as the current fiat financial system does not effectively support BTC. We evaluate dilution and our BTC key performance indicators focusing on BTC yield, BTC per share, and BTC gain basis. Every capital raise we've initiated through our ATM has been beneficial in terms of BTC yield, BTC per share, and BTC gain. Issuing ATM or equity at a rate higher than 1x NAV, assuming all else is equal, is beneficial and does not dilute shareholder value. Moreover, our fixed-income instruments are even more advantageous when considering BTC yield, provided all other factors remain constant. We need the fixed income market to mature and operate more efficiently. As NAV increases, the yield curve begins to flatten, making equity issuance increasingly similar to fixed income issuance. However, fixed income instruments demand more BTC annual recurring revenue to generate positive income. We recognize the need to enhance the efficiency of the fixed-income market, despite the fact that we have focused more on the ATM than on fixed income. It is essential for us as Bitcoin investors to improve the fixed-income market's efficiency, and we are committed to that effort. Moving forward, we will continue to issue both equity and debt in ways that benefit our shareholders. As everyone reflects on our discussions over the last few hours, they will begin to grasp the BTC financial framework and our approach to capital raising.

Shirish Jajodia, Corporate Treasurer and Head of Investor Relations

Excellent. I think that brings us to the end of this webinar. Any final remarks from Phong?

Phong Le, President and CEO

Yes. I want to share with Mike and Andrew and Shirish, thanks for everybody for sitting through and understanding more about how we think about Bitcoin and Strategy over the last 2 hours and 10 minutes. We appreciate all of your support. For those who will be in Orlando next week, I'm very excited to meet and interact with all of you. For those who won't, we will talk to you again in 12 weeks or so. Thanks, and have a good evening.