Microstrategy to continue buying bitcoin despite market slump, says CFO

Tyson’s Corner, a VA-based software company, is one of a handful of companies with Bitcoin Holdings, along with auto maker Tesla Inc. and payments company Square, which recently renamed itself Block Inc.

“Our strategy with bitcoin has been to buy and hold so we have additional cash flow or we find other ways to raise money, we continue to put it in bitcoin,” said Chief Financial Officer Fong Le.

The company held $2.41 billion in cryptocurrency as of September 30, up from $1.05 billion at the end of 2020. Microstrategy also said it bought bitcoin for $2.04 billion in cash for the first nine months of 2021, up from $425 million previously. – The duration of the year.

The company is scheduled to release its fourth quarter earnings on February 1.

Bitcoin fell to $36,800 late on Monday, almost halfway down from its record high of $68,990.90 in November – after hitting a seven-month low in the morning. Market volatility is one of the top reasons why many CFOs are avoiding putting corporate cash into crypto assets. The lack of defined accounting standards has also frightened them.

MicroStrategy will continue to buy bitcoin this year, Mr. Le said, although it is unclear whether it will buy more than it did last year; The company has no plans to sell its assets. He added that if the market becomes more liquid, it is likely in the next year or two that Microstrategy is looking at buying bitcoin-backed bonds. “We are constantly looking at other ways for our shareholders as it relates to bitcoin,” he said.

MicroStrategy’s own stock is down 19% since Thursday, closing Monday at $370.45. Mr. Le attributed the decline primarily to the widespread selling of stocks related to technology and bitcoin.

In letters made public last week, the Securities and Exchange Commission called on Microstrategy to revise the way it discloses its bitcoin holdings in future filings. The SEC’s corporate-finance division often sends comment letters to public companies to inquire about their disclosures or accounting practices.

MicroStrategy is addressing the volatility of bitcoin while using measures not defined in the US under generally accepted accounting principles, or GAAP.

“We object to your adjustment for bitcoin loss charges in our non-GAAP measures,” the regulator wrote in a letter dated December 3.

In an October letter to the SEC, Mr. Lay said that the inclusion of such impairment losses, as subsequently sought by the SEC, could detract from investors’ analysis of the company’s operating results. On December 16, however, MicroStrategy told the SEC that it would revise its disclosures accordingly.

“Accounting is black and white, but disclosures turn gray,” Mr Ley said on Monday, implying the SEC’s comments.

Meanwhile, the SEC is working to clarify the rules for the nearly $2 trillion cryptocurrency market.

Companies with crypto holdings, based on the non-binding guidelines of the Association of International Certified Professional Accountants, are subject to them as an indefinite intangible asset-trademark and website domain.

Under those guidelines, businesses are required to review the value of these assets at least once a year. Companies have to write off the price if it goes below the purchase price, based on the result of their loss test. But if the value rises, companies only need to record profits when selling assets, not while holding them.

In a September letter to the Financial Accounting Standards Board, Microstrategy said that this outlook does not accurately reflect its financial position and results of operations. Instead, MicroStrategy and others have focused on implementing fair value accounting rules for digital assets. Under fair value accounting, companies recognize loss and gain in value immediately and treat digital assets as financial assets, not intangibles.

Microstrategy has made more than $750 million on its bitcoin investment at the current price, said Brent Thiel, a senior analyst at Jefferies Group LLC, a financial services firm. But some investors are concerned that the company is not paying enough attention to its core business, he said.

MicroStrategy reported a net loss of $36.1 million for the quarter ended September 30, widening from a loss of $14.2 million in the prior-year period. Meanwhile, revenue rose 0.5% to $128 million for the year-ago quarter.

This story has been published without modification to the text from a wire agency feed