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MicroStrategy to Proceed Shopping for Bitcoin Regardless of Market Tumble, CFO Says

MicroStrategy to Proceed Shopping for Bitcoin Regardless of Market Tumble, CFO Says

MicroStrategy Inc.

plans to proceed investing in bitcoin regardless of latest declines within the worth of the cryptocurrency asset and a name by U.S. securities regulators to revise its disclosure in future filings.

The Tysons Nook, Va.-based software program firm is considered one of a handful of firms with bitcoin holdings, alongside auto maker

Tesla Inc.

and fee firm Sq., which not too long ago renamed itself

Block Inc.

“Our technique with bitcoin has been to purchase and maintain, so to the extent we now have extra money flows or we discover different methods to boost cash, we proceed to place it into bitcoin,” Chief Monetary Officer

Phong Le

mentioned.

The corporate held $2.41 billion of the cryptocurrency as of Sept. 30, up from $1.05 billion on the finish of 2020. MicroStrategy additionally mentioned it bought bitcoins for $2.04 billion in money for the primary 9 months of 2021, up from $425 million within the prior-year interval.

The corporate is scheduled to launch its fourth quarter earnings on Feb. 1.

Phong Le, chief monetary officer of MicroStrategy.



Picture:

MicroStrategy Inc.

Bitcoin fell to $36,800 late Monday—down practically half from its document excessive of $68,990.90 in November—after hitting a seven-month low within the morning. Market volatility is among the many high causes many CFOs are avoiding placing company money into crypto property. The dearth of outlined accounting requirements has additionally spooked them.

MicroStrategy will proceed shopping for bitcoin this 12 months, Mr. Le mentioned, although it’s unclear if it might purchase greater than it did final 12 months; the corporate has no plans to promote the asset. MicroStrategy can also be contemplating shopping for bitcoin-backed bonds if the market turns into extra liquid, presumably within the subsequent 12 months or two, he mentioned. “We’re continually different methods to be additive to our shareholders because it pertains to bitcoin,” he mentioned.

MicroStrategy’s personal inventory has declined 19% since Thursday, closing at $370.45 on Monday. Mr. Le attributed the drop largely to the broader selloff of expertise and bitcoin-related shares.

Whereas the SEC hasn’t introduced main actions towards large crypto exchanges, the fee has threatened to sue firms providing crypto lending. WSJ’s Dion Rabouin explains why this one a part of the crypto market has drawn such a robust response. Picture: Mark Lennihan/Related Press

In letters made public final week, the Securities and Alternate Fee advised MicroStrategy to revise the best way it discloses its bitcoin holdings in future filings. The SEC’s corporate-finance division usually sends remark letters to public firms to inquire on their disclosures or accounting practices.

MicroStrategy has been stripping out bitcoin volatility when utilizing measures not outlined below U.S. typically accepted accounting rules, or GAAP.

“We object to your adjustment for bitcoin impairment expenses in your non-GAAP measures,” the regulator wrote in a Dec. 3 letter.

In an October letter to the SEC, Mr. Le had mentioned the inclusion of such impairment losses, as later sought by the SEC, might distract from traders’ evaluation of the corporate’s working outcomes. On Dec. 16, nonetheless, MicroStrategy advised the SEC it might revise its disclosures accordingly.

“Accounting is black and white, however disclosures are usually grey,” Mr. Le mentioned on Monday, including that the SEC’s feedback made sense.

The SEC, in the meantime, is working to make clear the principles for the roughly $2 trillion cryptocurrency market.

Firms with crypto holdings account for them as indefinite-lived intangible property—just like emblems and web site domains—based mostly on nonbinding pointers from the Affiliation of Worldwide Licensed Skilled Accountants.

Beneath these pointers, companies need to overview the worth of those property at the least every year. Firms have to jot down down the worth if it drops beneath the acquisition worth, relying on the results of their impairment check. But when the worth rises, firms want solely document a achieve after they promote the property, not whereas holding them.

In a September letter to the Monetary Accounting Requirements Board, MicroStrategy mentioned this method doesn’t precisely mirror its monetary situation and outcomes of operations. As an alternative, MicroStrategy and others have pushed to use fair-value accounting guidelines to digital property. Beneath fair-value accounting, firms acknowledge losses and beneficial properties in worth instantly and deal with the digital property as monetary property, not as intangibles.

MicroStrategy has made greater than $750 million on its bitcoin funding on the present worth, mentioned

Brent Thill,

a senior analyst at

Jefferies

Group LLC, a financial-services agency. However some traders are involved the corporate isn’t focusing sufficient on its core enterprise, he mentioned.

MicroStrategy reported a web lack of $36.1 million for the quarter ended Sept. 30, widening from a lack of $14.2 million within the prior-year interval. Income, in the meantime, grew 0.5% to $128 million for the quarter from a 12 months earlier.

Write to Mark Maurer at Mark.Maurer@wsj.com

Copyright ©2022 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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