MicroStrategy Stock Falls After SEC Objects to Bitcoin Accounting

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MicroStrategy

stock continued its downward spiral Monday, dragged down by plunging Bitcoin prices and newly released filings showing that the Securities and Exchange Commission objected to how the software company accounts for its cryptocurrency holdings.

Shares of

MicroStrategy

(ticker: MSTR) were down 10.4% on Monday to $337. The stock lost around 17% on Friday and has fallen 38% this year.

MicroStrategy has been buying

Bitcoin (BTC) since September 2020, when it announced the cryptocurrency would be a significant part of its capital allocation strategy. As a result, the shares have been falling alongside Bitcoin, which slumped under $35,000 last week. Bitcoin continued to drop on Monday, losing almost 6% to trade around $33,589.

To account for Bitcoin’s volatility and any losses incurred from it, MicroStrategy has been reporting non-GAAP income from operations and non-GAAP net income that “exclude bitcoin impairment losses to better enable a comparison” of the company’s performance across reporting periods, the company said in an October filing to the Securities and Exchange Commission that was released on Thursday.

In a response, also released on Thursday, the SEC objected to these accounting measures.

“We object to your adjustment for Bitcoin impairment charges in your non-GAAP measures,” the SEC wrote. “Please revise to remove this adjustment in future filings.” Including Bitcoin-related losses could negatively affect the company’s non-GAAP bottom line, especially if a downward swing is drawn-out.

The company said it would revise its non-GAAP disclosures.

As of Dec. 29, the company held approximately 124,391 Bitcoins that were acquired at an aggregate purchase price of $3.75 billion, paying on average $30,159 per bitcoin, according to an SEC filing.

Write to Sabrina Escobar at [email protected]