MicroStrategy Inc., a business intelligence software company, plans to continue buying Bitcoin as it is still the best long-term storage of value.
MicroStrategy, Inc. is continuing its plan to buy Bitcoin despite the market tumble. The company’s Chief Financial Officer said that they will continue buying Bitcoin as long as it is available on a “reasonable price.”
Despite recent drops in the value of bitcoin and a request from US securities authorities to amend its disclosure in future filings, MicroStrategy Inc. wants to keep investing in the virtual asset.
Along with automaker Tesla Inc. and payment processor Square, which just rebranded itself Block Inc., the Tysons Corner, Va.-based software business is one of a handful of corporations with bitcoin holdings.
“Our approach with bitcoin has been to purchase and keep,” said Chief Financial Officer Phong Le. “To the degree we have extra cash flows or discover other methods to acquire money, we continue to invest it into bitcoin.”
As of September 30, the corporation has $2.41 billion in cryptocurrency, up from $1.05 billion at the end of 2020. MicroStrategy also said 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 company is expected to release its fourth-quarter earnings.
MicroStrategy’s chief financial officer, Phong Le.
MicroStrategy Inc. photo
After reaching a seven-month low in the morning, bitcoin sank below $36,800 late Monday, down almost 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 absence of clearly defined accounting rules.
Mr. Le said MicroStrategy would continue to acquire bitcoin this year, but it’s unclear how much more it will buy than last year; the business has no intentions to sell the asset. MicroStrategy is also contemplating purchasing 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 has dropped 19 percent since Thursday, ending at $370.45 on Monday. Mr. Le blamed the dip on a larger sell-off in technology and bitcoin-related companies.
While the SEC hasn’t taken any substantial steps against large crypto exchanges, it has threatened to punish firms that provide crypto loans. Dion Rabouin of the Wall Street Journal discusses why this particular aspect of the crypto market has sparked such a significant response. Mark Lennihan/Associated Press photo
The Securities and Exchange Commission advised MicroStrategy in letters made public last week that company should adjust the way it reports its bitcoin holdings in future filings. The SEC’s corporate finance division often sends public firms comment letters inquiring about their disclosures or accounting methods.
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When employing measurements not specified by US generally accepted accounting standards, or GAAP, MicroStrategy has been filtering out bitcoin volatility.
In a letter dated Dec. 3, the regulator said, “We disagree to your adjustment for bitcoin impairment costs in your non-GAAP metrics.”
Mr. Le wrote to the SEC in October, saying that including such impairment losses, as the SEC subsequently requested, may detract from investors’ view of the company’s operational performance. MicroStrategy, on the other hand, informed the SEC on Dec. 16 that company will amend its disclosures as a result.
On Monday, Mr. Le said, “Accounting is black and white, but disclosures tend to be gray,” adding that the SEC’s remarks made sense.
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.
Businesses must examine the value of these assets at least once a year under these rules. Depending on the outcome of their impairment test, companies must write down the value if it falls below the acquisition price. If the value grows, however, corporations only need to declare a profit when they sell the assets, not while they are held.
MicroStrategy said in a September letter to the Financial Accounting Standards Board that this method does not correctly represent the company’s financial condition and results of operations. MicroStrategy and others, on the other hand, have argued for the application of fair-value accounting norms to digital assets. Companies use fair-value accounting to recognize losses and gains in value promptly, and digital assets are treated as financial assets rather than intangibles.
According to Brent Thill, a senior analyst at Jefferies Group LLC, MicroStrategy has profited more than $750 million on its bitcoin investment at the current pricing. However, he claimed that some investors are unhappy that the firm 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 meanwhile, revenue increased 0.5 percent year over year to $128 million for the quarter.
Mark Maurer can be reached at [email protected]
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