Business intelligence and mobile software firm MicroStrategy has pledged to buy more Bitcoin despite reporting impairment losses of $424.8 million in Q2.
This is only a paper loss, however, based on the price of Bitcoin at the end of the quarter and does not reflect a realized loss. Depending on how you add the figures up, MicroStrategy appears to have made nearly one billion dollars more from Bitcoin than it spent.
Along with CEO Michael Saylor’s fervent belief in Bitcoin, that may be why it’s resolved to add more Bitcoin to its reserves going forward. The report stated:
“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."
The Q2 report was announced earlier today. As of June 30, 2021, MicroStrategy held an approximate 105,085 BTC with a carrying value of $2.051 billion, at an impairment loss of $689.6 million since the acquisition. The average carrying amount per Bitcoin was an estimated $19,518.
Earlier this week, Elon Musk’s Tesla also published a Q2 report which showed a $23 million impairment loss on its Bitcoin holdings.
As both firms categorize Bitcoin as an “intangible asset,” accounting rules mandate that they must report an impairment loss 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.
The digital asset figures were calculated using Generally Accepted Accounting Principles (GAAP) — a collection of commonly accepted accounting rules used for financial reporting. The firm also provided non-GAAP calculations, which in this report exclude the “impact of share-based compensation expense and impairment losses and gains on sale from intangible assets.”
Report: Here’s how much Musk and Saylor’s tweets influenced crypto prices in Q2
The non-GAAP figures paint a different picture for MicroStrategy’s digital asset holdings, with the BTC cost basis at $2.741 billion but its market value is $3.653 billion, which reflects an average cost per BTC at $26,080 and a market price of $34,763, as of June 30.
MicroStrategy Performance
— ecoinometrics (@ecoinometrics) July 27, 2021
Jul. 27, 2021
Since the start of their #Bitcoin treasury program:$MSTR +406%$BTC +227%$NASDAQ +39.1% pic.twitter.com/Ti5Hr3PlOH
Total revenues for the second quarter totaled $125.4 million, which was a 13.4% increase compared to Q2 of 2020. Microstrategy’s Gross profit equated to $102.3 million and represented a gross margin of 81.6%, which was a minor increase of 4.2% compared to the year prior. Overall, MicroStrategy reported a second-quarter loss of $299.3 million, compared to a $3 million profit in the same quarter last year.
Saylor and MicroStrategy appear to be all-in on Bitcoin at this stage, and both have continued to accumulate the asset despite the crypto downturn that began in May, as the strategy is to hold the asset long term. The CEO did recently note, however, that if the price of Bitcoin is lower than what it is today four years from now, he will reconsider his strategy.
MicroStrategy Announces Second Quarter 2021 Financial Results.
— Michael Saylor (@michael_saylor) July 29, 2021
Join @MicroStrategy management to discuss $MSTR results at our Live Video Webinar today at 5pm EDT.https://t.co/Qch83Rj0GW