MicroStrategy reports $170 million impairment loss on Bitcoin holdings in Q1

The global giant's portfolio constitutes over 129,218 bitcoins worth $5 billion approximately

  • Published:
  • 04/05/2022 01:56 PM

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MicroStrategy, the largest publicly-traded business intelligence company, announced in its financial results for the first quarter of 2022, that the company bore a non-cash digital asset impairment charge of $170.1 million, up from last quarter. The fourth quarter of 2021 had the company taking digital asset impairment charges worth $146.6 million.  

Standard accounting rules say that the value of digital assets, including cryptocurrencies, should be recorded at the cost price and only adjusted if their value goes down. In an opposite-case scenario, when the digital asset price rises, the asset value doesn’t get adjusted unless the firm sells it. Digital asset impairment is a figure that reflects the decrease in the price of Bitcoin or any other digital asset against the price at which it was acquired. 

MicroStrategy also made an announcement about Andrew Kang Lee taking on the position of the chief financial officer, while Phong Le, who earlier held this position will continue as its president. Phong Le had earlier served at the tech company Greensky Inc. The officials would take charge of their positions officially from May 9. 

MicroStrategy had reported $71 million yearly impairment losses in 2020, which increased to $831 million in 2021. The total bitcoin holdings of 129.218 bitcoins as of March 31st, 2022, were acquired at $3.97 billion. The average cost of one bitcoin comes to $30,700. Considering Bitcoin’s current price, the average price per coin comes to $37,662, with a total valuation of $4.9 billion. 

MicroStrategy added 4,167 bitcoins to its portfolio between February 15 and April 4. The total cost of these bitcoins was $190.5 million, with each bitcoin costing $45,714. This bitcoin acquisition comes in the wake of Microstrategy securing a $205 million loan from Silvergate Bank (SI) backed by its existing BTC holdings to buy more bitcoins. 

MicroStrategy is led by CEO Michael Saylor, who is a Bitcoin maximalist. CFO Phong Le integrated that for a margin call to occur on the Silvergate loan, Bitcoin prices would have to fall by half from their existing levels. If that ever happens, MicroStrategy would be ready to add more bitcoins to its collateral package to avoid that scenario.  

Michael Saylor, CEO of Microstrategy, said, “We also furthered our position as the leading public company investor in bitcoin through the issuance of our first bitcoin-backed term loan. We have demonstrated that our bitcoin can be productively used as collateral in capital raising transactions, which allows us to further execute against our business strategy. Today, MicroStrategy is the world’s largest publicly traded corporate owner of bitcoin with over 129,200 bitcoins.”

Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash