MSTR - MicroStrategy's Accounting Problem For Bitcoin Poses Profit Conundrum - Analyst Lays Out Answers | Benzinga
Benchmark analyst Mark Palmer reiterated MicroStrategy Inc (NASDAQ:MSTR) with a Buy and a $1875 price target.
Since adopting its bitcoin acquisition strategy in August 2020, MicroStrategy has seen its share price increase by more than 10x, a performance that during that span significantly outpaced the returns of bitcoin, the major stock indices, commodities such as gold, and big tech stocks, Palmer said.
At the same time, MSTR, since it started to hold bitcoin on its balance sheet, recorded $2.269 billion in cumulative impairment losses due to a Financial Accounting Standards Board (FASB) rule (ASC 350) that has required the company to account for its bitcoin holdings as indefinite-lived intangible assets, and to treat any decline in their carrying value during a given quarter due to a drop in bitcoin’s price as an impairment loss, the analyst stated.
Also Read: MicroStrategy’s Winning Streak: How Bitcoin Holdings Sparked a $1.92B Blow to Short Sellers
Under ASC 350, MSTR and other firms that hold bitcoin on their balance sheets cannot reverse those impairment losses in subsequent quarters if the price of bitcoin increases, the analyst said.
As such, ...