In Q2 Earnings, MSTR Surges, and Coinbase Stumbles. But What's Next? - Ep. 879
🎯 Summary
Podcast Episode Summary: In Q2 Earnings, MSTR Surges, and Coinbase Stumbles. But What’s Next? - Ep. 879
This episode features a doubleheader analysis of recent Q2 earnings reports, focusing first on the aggressive performance of MicroStrategy (MSTR) and then dissecting the mixed results from Coinbase (COIN), with insights provided by equity analysts Lance Vitanza (TD Cowen) and Owen Lau (Oppenheimer), respectively.
1. Focus Area
The primary focus is a deep dive into the financial performance and capital market strategies of publicly traded Bitcoin-centric companies (PBTCs), specifically MicroStrategy, contrasted with the operational and strategic positioning of a major centralized crypto exchange, Coinbase. The discussion heavily intersects corporate finance, Bitcoin treasury strategy, and the broader crypto market structure.
2. Key Technical Insights
- FASB Rule Impact: The recent change in FASB accounting rules allowing companies like MSTR to mark Bitcoin holdings to market (instead of recording impairment losses) dramatically inflated reported Q2 net income, making recent performance look astronomically high compared to historical, pre-FASB reporting.
- Bitcoin Per Share vs. Yield: The conversation clarified that Bitcoin Yield (the percentage increase in Bitcoin held per share over time) is the more relevant metric for MSTR shareholders than the absolute Bitcoin Per Share count, as yield measures the velocity of accumulation.
- Capital Market Evolution for PBTCs: MSTR’s successful pivot from relying heavily on the convertible bond market to accessing the more efficient preferred equity market sets a potential blueprint for smaller PBTCs looking to scale their Bitcoin accumulation strategies.
3. Market/Investment Angle
- MicroStrategy’s Aggressiveness: MSTR significantly raised its full-year Bitcoin yield guidance to 25-30%, demonstrating highly effective and creative capital market execution (convertible notes, STRIP issuances) to fund aggressive BTC acquisition.
- Coinbase Long-Term Thesis: Despite weaker-than-expected earnings (likely due to lower trading volumes), the long-term investment thesis for Coinbase is argued to be strengthening due to deepening partnerships with major traditional banks and its strategic pivot toward becoming a critical piece of crypto infrastructure.
- MSTR Dilution Policy: MSTR announced a new pledge not to issue common equity to buy more Bitcoin unless its Market Value to Net Asset Value (MNAV) ratio is 2.5x or higher, a significant shift aimed at reassuring common shareholders against aggressive dilution seen at lower premiums previously.
4. Notable Companies/People
- MicroStrategy (MSTR): The central focus, lauded for its $10 billion Q2 net income (largely accounting-driven) and its ongoing aggressive Bitcoin accumulation strategy led by Michael Saylor.
- Coinbase (COIN): Discussed in the context of its earnings miss and its strategic shift toward institutional infrastructure services.
- Lance Vitanza (TD Cowen): Provided detailed analysis on MSTR’s capital structure and yield metrics.
- Owen Lau (Oppenheimer): Offered analysis on Coinbase’s strategic positioning despite short-term headwinds.
- Michael Saylor: Mentioned for his role in lobbying for the FASB rule change and his advocacy for other companies to adopt the PBTC model.
5. Regulatory/Policy Discussion
The discussion highlighted the favorable regulatory backdrop for PBTCs, specifically mentioning the FASB rule change and a recent White House crypto report emphasizing the preservation of favorable tax treatment for unrealized crypto gains, both of which support MSTR’s strategy.
6. Future Implications
The conversation suggests a bifurcation in the crypto corporate landscape:
- PBTCs like MSTR will continue to aggressively leverage capital markets to accumulate Bitcoin, potentially reaching a saturation point over the next decade (though MSTR is currently projected to own only about 4.3% of all mined BTC by 2027).
- Exchanges/Infrastructure players like Coinbase are solidifying their role as necessary intermediaries between TradFi and digital assets, suggesting long-term relevance even if trading volumes fluctuate.
7. Target Audience
This episode is highly valuable for institutional investors, equity analysts, crypto portfolio managers, and corporate finance professionals interested in the intersection of digital assets and public market corporate strategy.
🏢 Companies Mentioned
💬 Key Insights
"JP Morgan in particular, it's on board and customers can make it easy to deposit funds, send funds, and withdraw funds"
"the partnership with JP Morgan and then the partnership with PNC Bank. Obviously, those are massive new distribution channels."
"What I think would happen is, yeah, it's JP Morgan, City Bank group, they will develop their own stablecoin but that's good because once they develop the infrastructure... it becomes another payment rail. So once they have that rail, why don't they also accept... Circle on USDC or USDT because they provide neutrality just like general purpose credit card?"
"USDC is I guess seen as somewhat neutral compared to like a JPM Coin or City Bank Coin... I could imagine some users not wanting to keep track of 10 different stablecoins and they might just like USDC because it's neutral. It's fair for everybody."
"We realized that perhaps Coinbase was making 10 times as much money from USDC as Circle itself."
"There will come a point necessarily someday when they own about as much Bitcoin as they can own before owning more Bitcoin starts to be counterproductive to the establishment, the further development of Bitcoin throughout the financial systems."