MicroStrategy Q1 Operating Loss of $53.1M After Bitcoin Holdings Impairment Charge of $191.6M

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 MicroStrategy (MSTR) faced a significant setback in its first-quarter financials, reporting a net operating loss of $53.1 million, or $3.09 per share. This loss was primarily attributed to a digital asset impairment charge of $191.6 million, reflecting the company's conservative valuation approach towards its bitcoin holdings.

Despite the substantial rally in bitcoin prices during the first quarter, MicroStrategy chose not to adopt fair value accounting for its cryptocurrency stack. This decision led to a valuation of its bitcoin holdings at $23,680 each, significantly lower than March's closing price of $71,028 per bitcoin. Consequently, the company reported its holdings at $5.1 billion, rather than the market value of $15.2 billion.

MicroStrategy's approach contrasts with market expectations, as some analysts anticipated a sizable profit for the company if it adopted the new digital asset fair value accounting standard. This discrepancy highlights the divergence between traditional accounting practices and the evolving landscape of digital assets.



The company also disclosed a modest increase in its bitcoin holdings in April, adding 122 tokens to bring the total to 214,400 bitcoins. At the current bitcoin price of around $63,000, these holdings would be valued at $13.5 billion.

Throughout 2024, MicroStrategy has been steadily acquiring bitcoins, purchasing 25,250 coins for $1.65 billion, with an average price of $65,232 per bitcoin.

In response to inquiries about its accounting practices, CFO Andrew Kang stated during the earnings call that MicroStrategy intends to adopt the new digital asset fair value accounting rule. However, the timing of this adoption is still under evaluation. The Financial Accounting Standards Board (FASB) has mandated implementation by January 1, 2025, but the company may choose to adopt the rule earlier.




Despite the setback in its financials, there are indications that MicroStrategy's long-term strategy remains robust. The potential adoption of new accounting rules could position the company for inclusion in the S&P 500, signaling its increasing relevance in the broader market landscape.

Shares of MicroStrategy experienced a 3.3% decline in after-hours trading following the earnings announcement, reflecting investor sentiment towards the company's financial performance and accounting practices.

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