Despite reporting impairment losses of $424.8 million in the second quarter, business intelligence and mobile software company MicroStrategy has pledged to buy more bitcoins.
However, this is only a book loss based on the bitcoin price at the end of the quarter and does not reflect realized losses. Depending on how you add these numbers together, MicroStrategy seems to make nearly $1 billion more money from Bitcoin than it spends.
Coupled with CEO Michael Saylor’s strong belief in Bitcoin, this may be why it decided to add more Bitcoin to its reserves in the future. The report states:
“We continue to be pleased with the results of the implementation of our digital asset strategy. Our recent financing has allowed us to expand our digital assets, which currently exceed 105,000 Bitcoins. Looking ahead, we intend to continue to build on our digital asset strategy. Additional funds are deployed in China.”
The second quarter report was released earlier today. As of June 30, 2021, MicoStrategy hold Approximately 105,085 BTC, with a book value of US$2.051 billion, and an impairment loss of US$689.6 million since the acquisition. The average book value of each bitcoin is estimated to be $19,518.
Earlier this week Elon Musk’s Tesla A Q2 report was also issued, which showed Its Bitcoin holdings have an impairment loss of 23 million U.S. dollars.
Since both companies classify Bitcoin as an “intangible asset”, accounting rules require them to report Impairment loss When the price of an asset is lower than its cost basis. However, they do not need to report price appreciation of the designated asset before realizing the position through sale.
Digital asset numbers are calculated using generally accepted accounting principles (GAAP), which is a collection of generally accepted accounting rules used for financial reporting. The company also provides non-GAAP calculations and does not include “share-based compensation and impairment losses and the impact of intangible asset sales gains” in this report.
Non-GAAP data paints a different picture for MicroStrategy’s digital asset holdings. The cost base of BTC is US$2.741 billion, but its market value is US$3.653 billion, which reflects the average cost per BTC as of June 30. US$26,080 and the market price is US$34,763.
Micro strategy performance
July 27, 2021
-Econometrics (@ecoinometrics) July 27, 2021
Total revenue in the second quarter was $125.4 million, an increase of 13.4% over the second quarter of 2020. Microstrategy’s gross profit was US$102.3 million and gross profit margin was 81.6%, a slight increase of 4.2% year-on-year. Overall, MicroStrategy reported a loss of US$299.3 million in the second quarter, compared with a profit of US$3 million in the same period last year.
Saylor and MicroStrategy seem to be all-in on Bitcoin at this stage. Although the cryptocurrency downturn began in May, both parties continue to increase their holdings because the strategy is to hold assets for a long time.However, the CEO did point out recently that if the price of Bitcoin is lower than today’s price in four years, he will Reconsider his strategy.
MicroStrategy announces financial results for the second quarter of 2021.
— Michael Saylor (@michael_saylor) July 29, 2021