MicroStrategy Inc.’s new chief financial officer on Wednesday said its strategy to buy and hold bitcoin long term won’t change despite the recent selloff in the digital asset, which has dented the value of the analytics-software company’s holdings.
Bitcoin and other cryptocurrencies have plummeted this month, in part due to investor concerns over persistent high inflation and the collapse of the TerraUSD stablecoin. Bitcoin’s price has slumped by 32% over the past year to $29,128.50 through Wednesday, while MicroStrategy’s shares have slipped 56.6% to $197.44 over the same period. Technology stocks have also declined in recent weeks as investors adjusted to rising interest rates.
Tysons Corner, Va.-based MicroStrategy is among a handful of businesses with substantial bitcoin holdings, alongside payment firm Block Inc. and auto maker Tesla Inc. The companies say the investments will generate value for shareholders.
MicroStrategy said it held $2.9 billion of the cryptocurrency in book value as of March 31, up from $1.95 billion a year earlier. The company has bought 129,218 bitcoins to date, at an average price of $30,700 per bitcoin, as of May 2. MicroStrategy declined to comment on whether it has bought any more bitcoin since then.
“At this time, we do not have any intention to sell,” said Andrew Kang, who joined the company on May 9 from home-improvement lender GreenSky Inc., where he served as CFO. “There are no scenarios that I’m aware [in which] we would sell.”
Andrew Kang, MicroStrategy Inc.’s new chief financial officer.
Photo: MicroStrategy Inc.
MicroStrategy hasn’t faced pressure from shareholders to sell any of its bitcoin holdings, he said, adding that, “Our investors are very much aligned with our strategy.”
MicroStrategy said it monitors bitcoin prices, but declined to comment on its plans for future purchases of the cryptocurrency. The recent bitcoin market selloff has no impact on the company’s strategy, Mr. Kang said.
“Some of the more recent volatility was certainly around some of the activity outside of bitcoin,” he said. “For us, we monitor that from a market perspective, but there [isn’t] anything fundamental to bitcoin that we believe presents any issues against our strategy.”
Mr. Kang said the recent volatility could result in new regulation of the cryptocurrency market, which MicroStrategy supports. President Biden in March signed an executive order to study digital currencies and the Financial Accounting Standards Board, which sets accounting rules for U.S. companies, last week said it would tackle a project on the accounting and disclosure of cryptocurrencies.
Additionally, the Securities and Exchange Commission this month said it would add 20 investigators and litigators to a unit that investigates cryptocurrency fraud. SEC Chairman Gary Gensler on Wednesday said he worries more crypto investors will be harmed after the TerraUSD crash.
“We’re very encouraged by the addition of this to their agenda,” Mr. Kang said, referring to FASB’s move. MicroStrategy and other companies have pushed FASB to require fair-value accounting rules for crypto because that would reflect the value of their holdings.
Companies that own cryptocurrencies account for them as indefinite-lived intangible assets, based on nonbinding guidelines from the Association of International Certified Professional Accountants. The companies must write down the value of the assets if they drop below purchase prices, depending on the result of impairment tests. If the value rises, companies only can record a gain when they sell a crypto asset, not while holding it.
MicroStrategy’s bet on bitcoin isn’t paying off and its software business continues to lose market share to competitors including Microsoft Corp. and Salesforce.com Inc., said Brent Thill, a senior analyst at financial-services firm Jefferies Group LLC.
“If they don’t improve the core operations of the software business, they can’t keep buying more bitcoin,” Mr. Thill said. “You have an investment strategy in bitcoin that’s clearly not working for the company financially.”
Write to Mark Maurer at [email protected]
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