Ark Invest and MicroStrategy Double Down on Their Investment Strategies

Granted the two firms operate in different spheres, the resolve of Ark Invest and MicroStrategy to carry on with their respective ventures in the digital assets space even in the face of uncertainty has been impressive. Not all is well with the business intelligence company well known for its huge bet on Bitcoin but the Q1 numbers it posted earlier this week show that the largest public corporate is getting back up on their feet. Meanwhile, Ark Invest whose exposure is significantly. has started of the month with a new scoop of Coinbase stock.

MicroStrategy recovers to post a $94 million profit in Q1

In the three-month period ended March 31, MicroStrategy recorded a net income of $461 million which it attributed to income tax and debt extinguishment proceeds, equivalent to about $32 per share. Also, the firm recorded a profit on its Bitcoin holdings for the first time since 2020, with a gross figure of $94 million. Phong Lee, who took over as CEO from Michael Saylor said a press release accompanying the financial results that the strong revenue growth was fueled by its resilient business intelligence platform and loyal customer base. Lee added that the company’s Bitcoin strategy remains unwavering in the face of a rapidly evolving digital asset landscape.

Into the numbers

In the first quarter of the year, the company's total revenue reached $122 million, a slight 2.2% increase relative to corresponding quarter in 2022. The growth in revenue was driven by a surge in product licenses and subscription services, which reached $36.2 million, an increase of 23.4% from the same time the year before. MicroStrategy's $94 million in gross profit represented a slight dip in gross margin to 77.1%, compared to 78.5% ($93.6 million in profit) in the same period last year.

The company's loss from operations fell from $170 million in the first quarter of 2022 to just over $20 million in the Q1 of 2023. The company's digital assets, which consisted approximately 140,000 Bitcoin, had a carrying valued of $2 billion, while its cash and cash equivalents as of March 31, were $94.3 million. The firm also repaid the $161 million Bitcoin-backed loan owed to the fallen Silvergate Bank, effectively releasing all the Bitcoin that had been tied down as collateral.

The Bitcoin conviction continues

Consistent with filings with the SEC, Of course, the Michael Saylor firm added 7,500 Bitcoin to its stash in this financial period via two purchases on March 23 and April 5. The impairment loss on the holdings since acquisition is now about $2.17 billion and the average carrying amount per Bitcoin of $14,289. As of March 31, MicroStrategy's original cost basis and market value of its Bitcoin were $4.17 billion and $3.99 billion, respectively, while the average cost per Bitcoin was $29,803, with the market price per Bitcoin at $28,468.

ARK Invest purchased over $8M in Coinbase stock on International Workers' Day

The recent troubles around with the SEC are not shaking Cathie Wood’s conviction in crypto exchange Coinbase. ARK Invest, Wood’s flagship fund bought another 129,604 Bitcoin worth over $6.4 million to its Ark Innovation exchange-traded fund on Monday. The serial investor stockpiled a further 23,456 shares ($1.1 million) to its Ark Next Generation Internet ETF and another 15,809 shares ($790,000) to its Fintech Innovation ETF.

Notably, ARK Invest investments have extended from similar efforts last month, when the US investment management firm purchased $8.6 million in shares on the same day it announced a suit against the securities regulator. Overall, ARK bought 304,300 shares worth $17.5 million last month, and 2.4 million shares worth about $117 million the month before.

ARK Invest and 21Shares seek approval for a Bitcoin spot ETF again, despite previous rejections from the SEC

Last year, the US SEC was faulted by many applicants for failing to approve a spot bitcoin exchange-traded fund (ETF). Cathie Woods’ Ark Investment Management and financial investment firm 21Shares have been attempting this very effort, also not successfully. The most recent disappointment came in January from a May 2022 re-application, with the SEC pouring cold water on the ARK 21Shares Bitcoin ETF for the second consecutive time, citing inadequate preparation and failure to fulfill the necessary investor protection measures on the part of Cboe Exchange, which would have played host for the joint effort.

Early last week, ARK and 21Shares had their third stab at attempting to gain approval for this particular investment product, though the two acknowledged that it would take some effort before the regulatory environment is suitable to allow and advance a spot crypto product. The newest ETF proposal stresses the importance of a regulated ETF that can be accessed via standard brokerage accounts. It banks on the fact that this type of investment would safeguard investors against insolvency, cyber-attacks, and other related risks, providing available, easy, and regulated options for Americans, who would otherwise be impacted by crypto scams in the international market.

Banking on Grayscale to get one over the SEC in court

The timing of 21Shares and Cathie Wood's investment firm refiling for a Bitcoin spot ETF is particularly interesting, given that another fund manager Grayscale has a pending case in court involving the SEC. The digital asset manager faulted the regulator's decision to continually deny a spot Bitcoin product as arbitrary, capricious, and discriminatory in a filing last June asking the US Court of Appeals for the District of Columbia Circuit to review the SEC’s stance.  SEC chair Gary Gensler has previously communicated his preference for Bitcoin ETFs that trade futures, meaning that until the courts communicate otherwise, Grayscale is stuck in its efforts to convert the Grayscale Bitcoin Trust into an ETF.

ARK and 21Shares want a ride-along

Grayscale CEO Michael Sonnenshein revealed during CoinDesk's Consensus 2023 conference that the firm anticipates getting clarification on whether it can convert its $2.7 billion Grayscale Bitcoin Trust (GBTC) into an ETF by the end of September, pursuant to the suit it filed against the SEC last year. With that in mind, senior ETF.com analyst Summit Roy believes 21Shares and ARK Invest probably want to piggyback a potential favorable hearing for Grayscale.

Dave Nadig, a financial futurist for VettaFi, explained that the filing may be part of the getting-in-line process for issuers to prepare for the final decision in Grayscale's lawsuit against the SEC. Nevertheless, Nadig predicts that even if Grayscale were to win the case, the conversion process would take longer than if a clean filing were to be approved, and that is what the ARK 21Shares Bitcoin ETF filing is.

Temasek keen to steer clear of crypto, denies $10M investment in algorithmic currency Array

In other news, Singaporean state-owned investment fund manager Temasek, that was forced to swallow a $275 million hit on the FTX collapse, has denied reports that it has invested $10 million in algorithmic currency startup Array. As per an announcement by Array on Monday, the investment marked its second round, allegedly taking its valuation to $100 million. Notwithstanding, Temasek termed the said investment fake news, adding that it has no relationship with Array. The $403 billion portfolio institution had been named investor alongside some other major names including Binance Labs, whose spokesperson has also denied any involvement of the nature.