Due to MicroStrategy’s continued exposure in the flagship cryptocurrency asset, Bitcoin, the company has recorded an impairment of approximately $425 million on its 105,085 BTC holdings which as of today amounts to $4.05 billion (using the current market price of $38,500 as of the time of writing this report).
MicroStrategy CEO, Michael Saylor is a Bitcoin enthusiast and is known for using his social media platforms to promote the acquisition and use of cryptocurrencies to his 1.4 million followers. He is also the creator of the North American Bitcoin Mining Council that promotes the use of renewable energy for the mining of cryptocurrencies.
Since cryptocurrencies are regarded as intangible assets, accounting rules mandate that they must report an impairment when the asset’s price drops below its cost basis. However, they are not required to report price appreciation in the specified asset until the position is realized through a sale.
As earlier reported by Nairametrics, MicroStrategy has been increasing their Bitcoin holdings by raising funds for the purchase through the debt market. In its latest attempt, the company was able to raise $500 million through senior secured notes, the proceeds from which were used to buy Bitcoin.
Although the company’s result revealed a growth in revenue by 11.82% from $222 million in the first half of 2020 to $248 million in the first half of 2021, the company recorded a loss after tax of $409 million in the first half of 2021, majorly attributable to the impairment loss recorded in the second quarter of the year.
MicroStrategy’s total digital asset impairment now stands at $619 million for the year with $194 million recorded in the first quarter of the year.
Earlier this week, Tesla, the electric car company run by Elon Musk, also published its Q2 report which revealed a $23 million impairment loss on its Bitcoin holdings.
What they are saying
The company had this to say of their results:
“We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 Bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”
Bottomline
Although MicroStrategy recorded a loss after tax of approximately $409 million for the first half of the year, according to the company, the average carrying amount per Bitcoin is an estimated $26,080. This puts the total cost of its Bitcoin holdings at approximately $2.7 billion. This means MicroStrategy, at Bitcoin’s current price, will be making 50% return on its holdings should they decide to sell. This is approximately $1.3 billion.
MicroStrategy share price currently stands at $625 as of yesterday’s close. Year-to-date, the stock is still up over 45%.