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MicroStrategy Registers $170M Impairment Charge in 2022 Q1

The software company holds 129,218 BTCs, purchased for approximately $3.97 billion.

MicroStrategy is among the leading institutional BTC holders. The company witnessed $170.1 million in a non-cash impairment charge in the 2022 second quarter. That reflected a 16% increase from the $146.6 million seen in 2021 Q4 (the previous quarter).

The virtual asset impairment indicated declines in Bitcoin prices from the acquisition prices. Standard accounting rules suggest digital assets like cryptos are recorded at their prices and only adjusted in conditions when their values drop or are impaired. Meanwhile, reports of asset gains remain hidden unless the firm sells the product.

MicroStrategy also declared Andrew Kang as the new CFO, taking Phong Le’s position from 9 May. Le will remain in his role as the company’s president. Previously, Kang worked as a chief financial officer of Greensky Inc., a tech company.

What You Need to Know

Michael Saylor, a BTC maximalist, runs the company. His reign saw MicroStrategy on rapid and continued BTC accumulation. As March 2022 ended, the company took a BTC-backed loan of $205M from SI (Silvergate Bank) to potentially purchase more $BTC.

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The company’s report shows MicroStrategy holds 129,218 BTCs, purchased for $3.97bn. That reflects an average of nearly $30,700 cost per $BTC. The current Bitcoin price of around $38,050 gives the holding a value of about $4.92 billion.

Phong Le highlighted MicroStrategy’s earnings call that BTC has to decline by about 50% from current prices before a margin sign emerges on the Silvergate Bank’s loan. Le added that the company might dedicate more BTC to the collateral package to dodge such scenarios.

MicroStrategy’s total impairment losses for digital assets stood at $831 for 2021, higher than the 2020s $71 million.

The company bought 4,167 BTC between 15 February and 4 April, totaling $190.5 million. That reflected $45,714 as the average price per BTC.

In January, MicroStrategy declared to stop announcing adjusted outcomes for impairment gains and losses on sales associated with BTC in reaction to the US SEC objections. Meanwhile, the firm’s share traded at $343.30/share on NASDAQ. Though surging 1.01% amid the pre-market battle, the stock remains nearly 40% down in YTD performance.

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James Carr (Australia)

James is a new research writer for Tokenhell. His articles include broker and exchange reviews, guides and news from all over the crypto-verse. Stay tuned for his recent articles.

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