MicroStrategy loses $1.28 billion buying over 8,800 bitcoins

MicroStrategy loses $1.28 billion buying over 8,800 bitcoins

MicroStrategy took an impairment loss of $1.28 billion after buying 8,813 units of bitcoin during the major crypto fall of 2022. According to its fourth-quarter report, the company had spent $3.9 billion on bitcoin purchases at an average price of $30,137.

At the end of the fourth quarter, MicroStrategy had about $1.8 billion worth of bitcoins. As of Thursday, its bitcoin holdings were worth a little over $3 billion.

CFO Andrew Kang said MicroStrategy’s plan “remains unchanged,” which means the company will continue to acquire and hold bitcoin.

“Our corporate strategy and conviction in acquiring, holding, and growing our bitcoin position for the long term remains unchanged.”Andrew Kang, CFO of MicroStrategy

Despite the plunging investment value, the business intelligence software company reported revenue of $132.6 million in the fourth quarter of 2022, against analysts’ estimates of $131 million.

Cryptocurrency bookkeeping

During Q4 of 2022, the company issued $46.2 million worth of shares. As of December 31, MicroStrategy had approximately $450 million worth of available stock.

The company sold bitcoin for the first time during the quarter, harvesting losses to reduce its capital gains tax liability.

Following its massive bitcoin write-downs, there were questions about how to report cryptocurrencies on a public corporation’s balance sheet.

Under current accounting standards, crypto assets are considered intangible assets. Therefore, they must be written down to their lowest price point during a certain period and can only be marked up once sold at a higher price.

The Financial Accounting Standards Board (FASB) voted Wednesday to propose that the accounting standard be changed by 2024. It explained that the change would allow U.S. companies to recognize the value of cryptocurrencies on a more fair basis, like stocks.

A different set of rules applies outside the U.S. Most non-U.S. companies that sell digital coins as part of their regular business keep them as inventories. Broker-traders, for instance, are allowed to hold such inventories at market value.