MicroStrategy stock crashed 30% as Bitcoin price halved in two months
Shares of MicroStrategy are trading under pressure amid strong sell-off in crypto markets and after an unfavorable accounting ruling by the Securities and Exchange Commission.
MicroStrategy (NASDAQ:MSTR) stock is falling faster than the crypto’s price, just as it outpaced bitcoin’s climb last year. At one point, it fell as much as 30% over two days before recovering nearly half of the losses as equity markets rebounded late Monday.
Saylor’s business intelligence firm traded down at $320 on Wednesday, its lowest point since December 2020. The stock lost nearly 70% of its value since it hit a record high above $1000 a year ago. Shares of business intelligence specialist and cryptocurrency investor have seen a monumental 800% during the period between October 2020 and February 2021 as bitcoin climbed.
MSTR crashed further after a SEC filing released on Thursday told MicroStrategy it can’t strip out the volatile swings in bitcoin’s price from its unofficial non-GAAP accounting measures.
“We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures. Please remove this adjustment in future filings,” the SEC said.
MicroStrategy has long urged that US accounting standards should be reconsidered to accommodate companies that hold cryptocurrencies on their balance sheets. Currently, MicroStrategy reports its cryptocurrency holdings as intangible assets, which are then impaired if the value dips. However, the value can never be revised upward if the crypto price increases.
MicroStrategy CEO unfazed by the crypto decline
For instance, the Nasdaq-listed firm posted a cumulative impairment loss of $754.7 million on its cryptocurrency holdings for 2021’s third quarter. Under the US generally accepted accounting principles, or GAAP, the original cost of MicroStrategy’s digital assets was $3.160 billion. But at September’s price, the company’s bitcoins were worth more than $7.09 billion. This means that MicroStrategy would have made nearly $4 billion in profit if all BTC holdings were sold at the time.
The analytics software maker, run by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency.
With its most recent purchase, MicroStrategy holds an aggregate of 124,391 bitcoins, which were acquired at a total cost of around $3.7 billion and an average purchase price of approximately $30,159 apiece.
Bitcoin has shed more than 50% from its record high in November, adding further momentum to the meltdown in cryptocurrencies. However, Microstrategy CEO, who expects the price of bitcoin to hit $6 million, told Bloomberg last week that the company will never sell its bitcoin holdings. The executive also revealed that he personally owns 17,732 bitcoins, noting that the primary cryptocurrency is “unstoppable” and will replace gold.
“Never. No. We’re not sellers. We’re only acquiring and holding bitcoin. That’s our strategy,” Saylor said.
He also highlighted the latest purchase of bitcoin and outlined that the company is looking into opportunities to generate yield off of its enormous holdings. The potential options for such a strategy include opportunities to mortgage the cryptocurrency trove and generate long-term debt.