MicroStrategy stock plunges as Bitcoin sinks to six-month low

SEC rebukes MicroStrategy's Bitcoin accounting methods

BTC MicroStrategy                                 
In order to finance purchases, MicroStrategy has taken on substantial levels of debt - Photo: Shutterstock
                                

MicroStrategy stock sank by more than 20% at the start of Monday trading, as investors and traders reacted to a turbulent weekend in the cryptocurrency market.

MicroStrategy holding

The business intelligence company is the world’s largest corporate owner of Bitcoin. 

According to a late-December 2021 filing with the U.S. Securities and Exchange Commission (SEC), it holds approximately 124,391 bitcoins acquired at an aggregate purchase price of $3.75bn (£2.79bn) and an average purchase price of about $30,159 per bitcoin, inclusive of fees and expenses.

In order to finance these purchases, MicroStrategy has taken on substantial levels of debt.

Market volatility

Since its November all-time high of $68,789.63, however, the world’s first and largest cryptocurrency has been in steady decline. 

This trend has accelerated in the new year in light of imminent interest rate hikes by the Federal Reserve, disruption to mining activity in Kazakhstan and the prospect of a full regulatory crackdown in Russia. 

In the past week, Bitcoin has fallen by 21.1% to $33,641, MicroStrategy stock has fallen by more than 30% in this time period. 

SEC

The company’s declining stock price is also a result of a recent rebuke by the SEC. In a filing the regulator told MicroStrategy that it cannot strip Bitcoin volatility from the unofficial non-GAAP accounting measures that it provides to investors, stating: 

"We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures. Please remove this adjustment in future filings."

Saylor shrugs off uncertainty

Seemingly unphased by his company’s falling stock price and Bitcoin’s current turmoil, MicroStrategy CEO Michael Saylor quoted the rapper Eminem, tweeting: “We’ll walk this road together, through the storm. Whatever weather, cold or warm.” 

A strident believer in Bitcoin’s transformational potential, Saylor also posted a photoshopped photograph of himself wearing a Tahini’s restaurant employee baseball cap. This was a reference to the argument made by crypto-sceptics that those who have overly invested in the market with hopes of unimagined riches will one day have to return to the real economy and their real jobs.

The President of El Salvador Nayib Bukele, who spearheaded the push to adopt Bitcoin as legal tender, similarly joked that he would return to working at McDonalds.

By 15:25 (GMT), MicroStrategy traded down by 17% at $332.98.

 

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