According to Bloomberg, MicroStrategy, the enterprise-software maker led by Bitcoin advocate, is unable to recognize any increases in its Bitcoin holdings under current accounting rules. This includes the nearly 67% surge in the recent quarter. However, a recently passed accounting rule that mandates the valuation of the digital asset at market prices is set to change this. Companies have until 2025 to implement this revision.
MicroStrategy did not adopt the revision for the first quarter, instead, it recorded a $191.6 million digital-asset impairment loss. The Tysons Corner, Virginia-based company had a net income of $461.2 million, or $38.97 a share a year earlier, after registering a tax benefit. In 2020, MicroStrategy became the first public company to buy Bitcoin as a capital allocation strategy, with the company's leader citing the need to hedge against inflation.
Despite the admiration of digital-asset proponents, no other US public company besides Tesla Inc. and a few crypto-related firms have decided to hold the volatile cryptocurrency on its balance sheet. MicroStrategy's Bitcoin cache has increased by 25,250 since the end of the fourth quarter. As of April 26, the company is holding 214,400 Bitcoin.
MicroStrategy's shares fell about 7% in after-hours trading. The stock had more than doubled this year. The company's leader sold an estimated $400 million worth of stock during the first quarter, according to Bloomberg estimates. The share sales followed the exercising of options awarded in 2014 that were set to expire.