MicroStrategy extends 2-day decline to 30% as bitcoin melts down and SEC rejects its crypto accounting
- MicroStrategy extended its two-day decline to 30% on Monday amid a meltdown in bitcoin prices.
- Adding to the decline was the SEC's rejection of MicroStrategy's crypto accounting practices.
- CEO Michael Saylor has raised debt to buy nearly 125,000 bitcoins at an average price of $30,159.
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MicroStrategy extended its two-day decline to 30% on Monday amid a meltdown in bitcoin prices and after the SEC rejected its crypto accounting practices.
Bitcoin has dropped 28% year-to-date, and is down more than 50% from its record high in November. The ongoing decline in cryptocurrencies has wiped out $1.5 trillion in market value since the peak late last year.
MicroStrategy has taken out billions in debt to buy nearly 125,000 bitcoins at an average price of $30,159, which is just 10% below bitcoin's current price of about $33,390.
If bitcoin were to fall significantly below MicroStrategy's average cost basis for an extended period of time it could ultimately lead to bankruptcy as the company would not have enough assets to meet its debt obligations.
But MicroStrategy CEO Michael Saylor seems to be unfazed by the crypto decline, telling Bloomberg last week that the company will never sell its bitcoin holdings. "Never. No. We're not sellers. We're only acquiring and holding bitcoin. That's our strategy," Saylor said.
Also adding to the pain for MicroStrategy was the Securities and Exchange Commission's rejection of its crypto accounting practices.
In a SEC filing released on Thursday, the regulator told MicroStrategy, "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."
That means MicroStrategy can't strip out the volatile swings in bitcoin's price from its unofficial non-GAAP accounting measures it presents to investors. MicroStrategy has long been advocating for a change to American accounting standards to account for companies that might hold digital assets on their balance sheets.