MicroStrategy CEO steps down as company takes a $917 million hit on its Bitcoin investments

Bitcoin advocate Michael Saylor is stepping down as the CEO of the software company he co-founded, MicroStrategy, and will instead take on the role of executive chairman. Saylor’s belief in Bitcoin has turned the company into a holding vehicle for the cryptocurrency. The news came as the company reported its second-quarter earnings. It noted a loss of $1.062 billion, mostly due to an impairment charge of $917 million based on the value of its Bitcoin holdings, which have plunged since the price peaked in November last year.

Phong Le, MicroStrategy’s current president, will take Saylor’s place as CEO. “I look forward to leading the organization for the long-term health and growth of our enterprise software and bitcoin acquisition strategies,” Le said in a statement to shareholders.

In 2020, MicroStrategy acquired $250 million in Bitcoin, and as of June 30th, 2022, MicroStrategy reports it currently holds $1.988 billion in Bitcoin.

Digital Assets: As of June 30, 2022, the carrying value of MicroStrategy’s digital assets (comprised of approximately 129,699 bitcoins) was $1.988 billion, which reflects cumulative impairment losses of $1.989 billion since acquisition and an average carrying amount per bitcoin of approximately $15,326. As of June 30, 2022, the original cost basis and market value of MicroStrategy’s bitcoin were $3.977 billion and $2.451 billion, respectively, which reflects an average cost per bitcoin of approximately $30,664 and a market price per bitcoin of $18,895.02, respectively.

MicroStrategy’s message to investors says Saylor will continue to “provide oversight of the Company’s bitcoin acquisition strategy as head of the Board’s Investments Committee.” It’s unclear what prompted the organizational shakeup, as Saylor has helmed MicroStrategy since he founded the company in 1989.

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business,” Saylor says. “As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.”

In April, Saylor announced that MicroStrategy would be the first company to adopt Fidelity’s Bitcoin-based 401(k) retirement plan for its employees.

The Securities and Exchange Commission opened an investigation into MicroStrategy, as it objected to the way the company accounted for its Bitcoin in one of its 2021 filings. As noted by Bloomberg Tax, Microstrategy used non-GAAP measures to record its Bitcoin assets, which aren’t based on the Generally Accepted Accounting Principles (GAAP). Companies typically use non-GAAP methods sparingly.

MicroStategy was also the subject of an SEC investigation over allegations of civil accounting fraud back in 2000. The SEC accused Saylor and his top executives of overstating the company’s revenue and earnings after it went public in June 1998 up until March 2000. Saylor and two of his executives settled with the agency for $11 million, with none of them “admitting or denying the Commission’s allegations.”

https://www.theverge.com/2022/8/2/23289397/michael-saylor-bitcoin-microstrategy-ceo-steps-down