conditions (in the case of equity awards), the exercise price of any stock option awards or any contractual conditions limiting convertibility of convertible debt instruments.
The Company uses BTC Yield as a KPI to help assess the performance of its strategy of acquiring Bitcoin in a manner the Company believes is accretive to stockholders. The Company believes this KPI can be used to supplement an investor’s understanding of its decision to fund the purchase of Bitcoin by issuing additional shares of its common stock or instruments convertible to common stock. When the Company uses this KPI, management also takes into account the various limitations of this metric, including that it does not take into account debt and other liabilities and claims on Company assets that would be senior to common equity and that it assumes that all indebtedness will be refinanced or, in the case of the Company’s senior convertible debt instruments, converted into shares of common stock in accordance with their respective terms.
Additionally, this KPI is not, and should not be understood as, an operating performance measure or a financial or liquidity measure. BTC Yield is not equivalent to “yield” in the traditional financial context. It is not a measure of the return on investment the Company’s stockholders may have achieved historically or can achieve in the future by purchasing stock of the Company, or a measure of income generated by the Company’s operations or its Bitcoin holdings, return on investment on its Bitcoin holdings, or any other similar financial measure of the performance of its business or assets.
The trading price of the Company’s common stock is informed by numerous factors including, but not limited to, the amount of Bitcoin the Company holds and the number of shares of Company stock then outstanding, and as a result, the market value of the Company’s shares may trade at a discount or a premium relative to the market value of the Bitcoin the Company holds. BTC Yield is not indicative nor predictive of the trading price of the Company’s shares of common stock.
As noted above, this KPI is narrow in its purpose and is used by management to assist it in assessing whether the Company is using equity capital in a manner accretive to stockholders solely as it pertains to its Bitcoin holdings.
In calculating this KPI, the Company does not take into account the source of capital used for the acquisition of its Bitcoin. The Company notes in particular, it has acquired Bitcoin using a portion of the net proceeds from the offering of its 0.75% Convertible Senior Notes due 2030 (the “2030 Notes”), which are convertible into shares of the Company’s common stock, as well as cash on hand, which includes a portion of the net proceeds from the sale of the Company’s common stock through its ATM. Such offerings have had the effect of increasing the BTC Yield without taking into account the corresponding debt. Conversely, if any of the Company’s 2030 Notes mature or are redeemed without being converted into common stock, the Company may be required to sell shares in quantities greater than the shares the 2030 Notes are convertible into or generate cash proceeds from the sale of Bitcoin, either of which would have the effect of decreasing the BTC Yield due to changes in the Company’s Bitcoin holdings and shares in ways that were not contemplated by the assumptions in calculating BTC Yield. Accordingly, this metric might overstate or understate the accretive nature of the Company’s use of equity capital to buy Bitcoin because not all Bitcoin may be acquired using proceeds of debt or equity offerings and not all issuances of debt or equity may involve the acquisition of Bitcoin.
The Company determines its KPI targets based on its history and future goals. The Company’s ability to achieve positive BTC Yield may depend on a variety of factors, including its ability to generate cash from operations in excess of its fixed charges and other expenses, as well as factors outside of its control, such as the availability of debt and equity financing on favorable terms. Past performance is not indicative of future results.
The Company has historically not paid any dividends on its shares of common stock, and by presenting this KPI the Company makes no suggestion that it intends to do so in the future. Ownership of common stock does not represent an ownership interest in the Bitcoin the Company holds.
Investors should rely on the financial statements and other disclosures contained in the Company’s filings with the Securities and Exchange Commission. This KPI is merely a supplement, not a substitute to the Company’s financial statements and other disclosures. It should be used only by sophisticated investors who understand its limited purpose and many limitations.
