MicroStrategy Posts Loss on Impairment Charge, Revenue Declines

Olga Kharif, Bloomberg News

, Bloomberg

(Bloomberg) -- MicroStrategy Inc. posted a first-quarter loss after taking an impairment change against the value of its roughly $13 billion in Bitcoin holdings even though the cryptocurrency surged during the period.

The enterprise-software maker run by Bitcoin advocate Michael Saylor, said in a statement Monday that it had a net loss of $53 million, or $3.09 a share. Revenue fell 5.5% to $115.2 million, missing the average estimate of analysts surveyed by Bloomberg.

Under current accounting rules, MicroStrategy can’t recognize any increases in its Bitcoin holding, such as the almost 67% jump in the recent quarter. That’s changing under a recently passed accounting rule that requires valuing the digital asset at market prices. Companies have until 2025 to implement the revision. MicroStrategy didn’t adopt the revision for the first quarter, instead it recorded a $191.6 million digital-asset impairment loss.

The Tysons Corner, Virginia-based company had net income of $461.2 million, or $38.97 a share a year earlier, after registering a tax benefit.

In 2020, MicroStategy became the first public company to buy Bitcoin as a capital allocation strategy, with Saylor citing the need to hedge against inflation. While Saylor has won the admiration of digital-asset proponents, no other US public company besides Tesla Inc. and a handful of crypto-related firms have decided to hold the volatile cryptocurrency on its balance sheet.

The firm’s Bitcoin cache has increased by 25,250 since the end of the fourth quarter. MicroStrategy is holding 214,400 Bitcoin as of April 26, it said.

MicroStrategy’s shares fell about 7% in the after-hours trading. The stock had more than doubled this year, outperforming the price of Bitcoin, which has risen by about 50%. The premium that MicroStrategy is getting over Bitcoin prompted Kerrisdale Capital Management LLC to start shorting the stock in March.

Saylor sold an estimated $400 million or so worth of stock during the first quarter, according to Bloomberg estimates. The share sales followed the exercising of options awarded in 2014 that were set to expire.

--With assistance from Tom Contiliano.