MicroStrategy, recognized as the largest corporate holder of Bitcoin, has reported a significant net loss of $53.1 million for the first quarter of 2024. Despite Bitcoin’s robust 65% price rally during the same period, the company continued its aggressive Bitcoin purchasing strategy.
Financial Challenges Amid Cryptocurrency Gains
In its Q1 earnings report, MicroStrategy revealed a sharp increase in digital asset impairment losses, which surged to $191.6 million, a tenfold increase from the previous year. This substantial loss contributed to the company’s overall net loss, while its revenue also declined by 5.5% year-over-year to $115.2 million.
Interestingly, MicroStrategy has not yet adopted the new digital asset fair value accounting standard. This standard would allow the company to report the increased market value of Bitcoin, which rose 65% in value over the quarter. Under the current accounting practices, the firm reported the carrying value of its Bitcoin holdings at $5.07 million at a price of $23,680 per Bitcoin, far below the $15.2 billion that would be recognized under the fair value method.
Also Read: MicroStrategy’s Bitcoin Strategy Yields $6.2 Billion Unrealized Profit
Strategic Bitcoin Investments Continue
Despite the financial downturn, MicroStrategy remains steadfast in its Bitcoin investment strategy. In April, the company added 122 Bitcoins to its holdings at a cost of $7.8 million. This purchase increased its total Bitcoin portfolio to 214,400 units, valued at $13.5 billion, with an average purchase price of $35,180 per Bitcoin.
To support these acquisitions, MicroStrategy raised $1.5 billion through two convertible note offerings during the quarter. This funding facilitated the purchase of an additional 25,250 Bitcoins, marking the company’s 14th consecutive quarter of Bitcoin accumulation.
Market Reactions and Forward Outlook
Following the earnings announcement, MicroStrategy’s stock experienced a 3.3% drop in after-hours trading. Despite the company’s financial losses, the first quarter saw a significant rally in MicroStrategy’s stock, which surged over 170% to $1704 by March end, largely fueled by the rising Bitcoin prices. However, the stock price has since adjusted to $1,292.
As the company navigates the complexities of cryptocurrency investments and regulatory changes, the potential adoption of the fair value accounting standard in December 2024 could markedly improve how its assets are valued and reported.
