MSTR Stock Sees Setbacks From the Bitcoin Crash and the SEC

Cryptocurrencies themselves aren’t the only assets suffering at the hands of the market crash. Relevant crypto stocks are also bearing the punishment, from crypto-mining stocks to the exchange-traded funds (ETFs) that have launched in the last year around crypto. MicroStrategy (NASDAQ:MSTR) is one such company suffering from the market’s rampant volatility. Combine this with the U.S. Securities and Exchange Commission’s (SEC’s) recent blow to the company’s accounting, and the MSTR stock losses make sense.

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MicroStrategy doesn’t necessarily seem tied to crypto in any way at first glance. After all, the company deals mainly in business software and cloud-based computing. But, if one knows the company’s CEO, Michael Saylor, they’d immediately understand the connection. Saylor is a massive Bitcoin (CCC:BTC-USD) bull, using his Twitter profile to constantly promote the currency.

With Saylor at its helm, MicroStrategy has become increasingly entrenched in crypto. In fact, Bitcoin holdings account for a significant portion of the company’s capital allocation strategy. As of late December, the company is in possession of over 124,000 BTC, worth over $4 billion at its current value of around $34,000.

MSTR Stock Hits Rough Patch After SEC Ruling, Crypto Crash

Of course, with the massive BTC holdings that MicroStrategy possesses, the recent crash in Bitcoin prices is also affecting MSTR stock prices. As Bitcoin dipped below $33,000 early this afternoon, MSTR stock was down nearly 9%. But there’s another reason for MSTR’s downturn, and it’s thanks to the SEC.

Late on Thursday, the SEC responded to MicroStrategy’s unorthodox method of accounting for its Bitcoin holdings. Indeed, MicroStrategy has been using non-Generally Accepted Accounting Principles (GAAP) methods of reporting information related to its stock of Bitcoin. Previously, the company had been tweaking its data in order to exclude what it calls “cumulative impairment losses.” The company says that it is doing this in order to present investors with a consistent performance across reporting periods.

GAAP practices were not created with cryptocurrency in mind. Still, the SEC is not accepting MicroStrategy’s methods of reporting this data. The governing body is objecting to MicroStrategy’s practices and ordering the company to refrain from reporting its data in these ways going forward.

As the afternoon continues onward, Bitcoin is showing signs of life, trading up by about 3%. MSTR stock, meanwhile, continues to lose. The stock is currently down about 5%. Over 1.2 million shares of the stock are trading hands, against a daily average of just 487,000.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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