Despite recent drops in the value of Bitcoin and a request from US securities regulators to amend its disclosure in future filings, MicroStrategy Inc. wants to keep investing in Bitcoin.
MicroStrategy Inc. wants to keep investing in Bitcoin
Along with automaker Tesla Inc. and payment company Square, which just renamed itself Block Inc., the Tysons Corner, Va.-based software company is one of a handful of companies with bitcoin holdings.
“Our strategy with bitcoin has been to buy and hold,” said Chief Financial Officer Phong Le. “To the degree, we have excess cash flows or find other methods to acquire money, we continue to invest it into bitcoin.”
As of September 30, the corporation had $2.41 billion in cryptocurrency, up from $1.05 billion at the end of 2020. MicroStrategy also revealed that it paid $2.04 billion in cash for bitcoins in the first nine months of 2021, up from $425 million the previous year.
On February 1, the corporation is expected to disclose its fourth-quarter earnings. After hitting a seven-month low in the morning, bitcoin sank below $36,800 late Monday, down nearly half from its record high of $68,990.90 in November. Market volatility is one of the main reasons why many CFOs are hesitant to invest corporate funds in crypto assets. They’ve also been scared by the lack of clearly defined accounting rules.
Mr. Le said MicroStrategy will continue to buy bitcoin this year, though it’s unclear how much more it will buy than last year; the company has no intentions to sell the asset. MicroStrategy is also considering buying bitcoin-backed bonds if the market gets more liquid, which he believes would happen within the next year or two. “We’re always looking for new methods to provide value to our shareholders in terms of bitcoin,” he stated.
The shares of MicroStrategy have dropped 19 percent since Thursday, ending at $370.45 on Monday. Mr. Le blamed the dip on a broader sell-off in technology and bitcoin-related stocks.
The Securities and Exchange Commission advised MicroStrategy in letters made public last week that the company should adjust the way it reports its bitcoin holdings in future filings. The SEC’s corporate finance division frequently sends public firms comment letters inquiring about their disclosures or accounting methods.
When employing measurements not defined by the US generally accepted accounting standards, or GAAP, MicroStrategy has been filtering out bitcoin volatility.
In a letter dated Dec. 3, the regulator stated, “We object to your adjustment for bitcoin impairment charges in your non-GAAP measures.”
Mr. Le wrote to the SEC in October, saying that including such impairment losses, as the SEC later requested, could detract from investors’ view of the company’s operating results. MicroStrategy, on the other hand, informed the SEC on Dec. 16 that the company will amend its disclosures as a result.
Meanwhile, the SEC is seeking to clarify the regulations governing the $2 trillion bitcoin sector.
Based on nonbinding rules from the Association of International Certified Professional Accountants, companies with crypto holdings account for them as indefinite-lived intangible assets, analogous to trademarks and website domains.
According to Brent Thill, a senior analyst at Jefferies Group LLC, MicroStrategy has made more than $750 million on its bitcoin investment at the current pricing. However, he claimed that some investors are unhappy that the company isn’t focused sufficiently on its core industry.
MicroStrategy reported a net loss of $36.1 million for the quarter ending September 30, up from $14.2 million the year before. In the meantime, revenue increased 0.5 percent year over year to $128 million for the quarter. On Monday, Mr. Le said, “Accounting is black and white, but disclosures tend to be grey,” adding that the SEC’s comments made sense.
