As a researcher with a background in finance and accounting, I find MicroStrategy’s Q1 2024 financial results intriguing, given the company’s significant investment in Bitcoin (BTC). The net loss of $53.1 million and digital asset impairment loss of $191.6 million can be attributed to the marked-to-market decline in the value of Bitcoin during the quarter. However, it’s important to note that MicroStrategy has yet to adopt the new digital asset fair value accounting standard, which would have resulted in a significantly higher carrying value of Bitcoin on its balance sheet.
In the initial quarter of 2024, MicroStrategy, which holds the most Bitcoin among corporations, recorded a loss of $53.1 million. Despite this setback, they persisted in amassing even more Bitcoin during April.
As a researcher examining MicroStrategy’s Q1 financial report, I discovered that the company incurred a net loss due to a significant digital asset impairment loss of $191.6 million. This loss is marked tenfold larger than the same period last year. Furthermore, the quarter’s revenue decreased by 5.5% from the first quarter of 2023, amounting to $115.2 million.
The company hasn’t implemented the latest accounting rule for digital assets yet, despite a significant 65% rise in Bitcoin’s worth during that period. This new standard would have factored in this increase when calculating fair value.
From a researcher’s perspective, utilizing the conventional accounting method for MicroStrategy’s Bitcoin holdings resulted in an reported carrying value of approximately $5.07 million, equivalent to $23,680 per Bitcoin. However, had we opted for the fair value approach, the figure would have been significantly larger at around $15.2 billion.
As a researcher looking into this topic, I’ve come across an interesting development. Although the company in question penned a letter to the Financial Accounting Standards Board (FASB) back in May 2023, advocating for the adoption of the new standard, approximately seven months later, FASB made a significant amendment to its regulations. Starting from fiscal years commencing after December 15, 2024, digital assets are now required to be reported at fair value.
During the month of April, the software company, now specialized in Bitcoin development, purchased an additional 122 Bitcoins for approximately $7.8 million, according to the financial records.
It now holds 214,400 Bitcoin, worth $13.5 billion, bought at an average purchase price of $35,180.
In the first quarter, MicroStrategy’s president and CEO, Phong Le, announced that the company had successfully secured $1.5 billion through two separate convertible note debt offerings. This substantial fundraising enabled the firm to purchase an additional 25,250 Bitcoin for its balance sheet – marking the company’s 14th consecutive quarter of Bitcoin acquisitions.
After the announcement, MicroStrategy (MSTR) shares experienced a 3.3% decrease in value during extended trading hours, as indicated by Google Finance’s data.
In Q1 this year, the approximately 65% surge in Bitcoin’s value led to an extraordinary price jump for MicroStrategy, with shares soaring over 170% and reaching $1704 by the close of March.
However, MicroStrategy’s stock has since fallen to $1,292, according to Google Finance.
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2024-04-30 03:03