MICROSTRATEGY posted a first-quarter loss after taking an impairment charge against the value of its roughly US$13 billion in Bitcoin holdings even though the cryptocurrency surged during the period.

The enterprise software maker run by Bitcoin advocate Michael Saylor, said on Monday (Apr 29) that it had a net loss of US$53 million, or US$3.09 a share. Revenue fell 5.5 per cent to US$115.2 million, missing the average estimate of analysts surveyed by Bloomberg.

Under current accounting rules, MicroStrategy cannot recognise any increases in its Bitcoin holding, such as the almost 67 per cent jump in the recent quarter. That’s changing under a recently passed accounting rule that requires valuing the digital asset at market prices. Companies have until 2025 to implement the revision. MicroStrategy did not adopt the revision for the first quarter, instead it recorded a US$191.6 million digital-asset impairment loss.

The Tysons Corner, Virginia-based company had a net income of US$461.2 million, or US$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 Saylor citing the need to hedge against inflation. While Saylor has won the admiration of digital-asset proponents, no other US public company besides Tesla and a handful of crypto-related firms have decided to hold the volatile cryptocurrency on its balance sheet.

The firm’s Bitcoin cache has increased by 25,250 since the end of the fourth quarter. MicroStrategy is holding 214,400 Bitcoin as at Apr 26, it said.

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MicroStrategy’s shares fell about 7 per cent in the after-hours trading. The stock had more than doubled this year, outperforming the price of Bitcoin, which has risen by about 50 per cent. The premium that MicroStrategy is getting over Bitcoin prompted Kerrisdale Capital Management to start shorting the stock in March.

Saylor sold an estimated US$400 million or so 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. BLOOMBERG