MicroStrategy stock has taken its biggest tumble in two decades amid scrutiny from the US Securities and Exchange Commission (SEC) over the firm’s accounting of Bitcoin losses, reports Bloomberg
The SEC took issue with how the Virginia-headquartered data intelligence unit reflected Bitcoin’s price volatility in its recent filing.
Using non-generally accepted accounting principles (non-GAAP), MicroStrategy’s number folk attempted to report the company’s finances as if Bitcoin’s price hadn’t fallen.
Only, Bitcoin’s price has halved since November. MicroStrategy currently owns 124,391 BTC, worth about $4.65 billion at press time, more than any other public company by far.
The company, run by stubborn Bitcoin bull Michael Saylor, closed Tuesday trade down 45% from its six-month high.
Bloomberg noted the stock’s recent 30% dip over two days is second only to a 42% two-day price crash from June 2002.
MicroStrategy’s market value is now just $3.81 billion. The Bitcoin on its balance sheet is technically worth more than the entire company right now.
MicroStrategy still up on its Bitcoin overall
According to guidance for certified public accountants in the US, digital assets like cryptocurrency are “intangible assets.”
The SEC demands losses associated with intangible assets — such as their value dropping — be disclosed to shareholders (the nerve).
In a letter addressed to MicroStrategy’s chief financial officer Phong Le, the SEC requested MicroStrategy ditch the funky accounting technique.
“We object to your adjustment for Bitcoin impairment charges in your non-GAAP measures. Please revise to remove this adjustment in future filings,” said the regulator, our emphasis.
In last year’s third quarter, MicroStrategy reported $65 million in impairment losses (paper losses) on its Bitcoin purchases in that period.
The quarter previous, the company felt nearly $483 million in impairment losses.
Still, MicroStrategy is up about 20% on its Bitcoin overall, according to Bitcoin Treasuries.
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