According to its second quarter 2022 earnings call on Tuesday, MicroStrategy charged a non-cash digital impairment charge of $917.8 million in the second quarter of 2022.
An impairment charge describes a substantial reduction or loss in the realizable value of an asset. In the case of MicroStrategy’s bitcoin holdings, the loss fee reflects a drop in the price of bitcoin when MicroStrategy purchased it.
Losses may be due to policy changes or changes in economic conditions such as the current crypto winter.
MicroStrategy’s 2022 Q2 non-GAAP (generally accepted accounting principles) expenses.
MicroStrategy’s $917.8 digital asset repair charge is a sharp increase from its $170.1 million charge in the first quarter of 2022.
Since August 2020, MicroStrategy has purchased 129,699 bitcoins at an average price of $30,664 per coin. When bitcoin hit its all-time high of $68,000 per coin in November 2021, the total value of the company’s bitcoin holdings was approximately $8 billion. With bitcoin trading at $23,000 per coin, those holdings would total about $2.9 billion.
The company has also acquired 421 bitcoins for $20,000.
Chief Financial Officer Andrew Kang said 14,000 bitcoins are held by Microstrategy’s parent company, with the remaining 115 bitcoins with subsidiary Macrostrategy. Of these, 85,000 bitcoins are pledged and free of charge.
“We have more than enough collateral to cover any price volatility,” he said.
“Digital asset loss charges every quarter have always been higher than non-GAP operating losses,” Kang said, implying that bitcoin volatility is a major factor in the loss side of the company’s balance sheet.
“We anticipate the volatility of bitcoin,” said Michael Sayler, who announced his transition as the company’s executive chairman before launching in 1989 as the company’s CEO.
“Volatility means that bitcoin is more interesting, and therefore more interesting microstrategy,” he explained. “Volatility is vitality.”
Founded in 1989, MicroStrategy is the largest publicly traded independent cloud software company and claims to be the most prominent holding bitcoin.
“Because people fear volatility and are put off by accounting, we have been able to develop a lead as the largest operating company on the bitcoin benchmarks, and this gives us a competitive edge and a competitive edge to create shareholder value going forward.” provides the differentiator,” Sailor said.
Sailor is being formally replaced by Chairman and Chief Financial Officer Fong Le, who became Chief Executive Officer effective Monday. During the Q2 call, Le said that he has not sold any bitcoins to date.
“Microstrategy is in the category of one; We are the largest corporate holder of bitcoin in the world,” he said. “Our strategy is buy and hold for the long term, and that is it.”