MicroStrategy’s equity premium toward bitcoin holdings has expanded materially over the past few months. But I think we’re getting a little bit better at it, and I think we’re starting to understand our unique advantages as time goes on. We are a bitcoin development company in the same way that you might have a real estate development company.
GAAP serves as the framework for how financial statements are prepared and presented, ensuring consistency, comparability, and transparency in financial reporting. The FASB was formed in 1973 to succeed the Accounting Principles Board and carry on its mission. Currently, the market value of our bitcoin holdings is significantly above our average cost basis, which is equal to an average purchase price of approximately $35,200. The new accounting rule that was approved by the FASB last December requires companies holding digital assets, including bitcoin, to adopt fair value accounting treatment by Q1 of 2025. We fully plan to adopt the change by when the rule takes effect, and we are determining when the most appropriate time to do so would be. Overall, 2024 started off as a tremendously successful year, taking into account our bitcoin purchases and appreciation of our bitcoin holdings year to date.
Standardizing Tax Reporting
Ultimately, you know, the company’s premium is a function of our ability to execute over a long period of time and also, you know, the market’s view as to whether or not they appreciate that. And of course, that’s a shifting sentiment, and there’s uncertainty into the future. So, there will continue to be uncertainty about what the right premium ought to be.
- I think, perhaps, the question is more specific about the development portion and whether we’re doing any software development in the bitcoin area.
- And MicroStrategy has now developed a very balanced strategy of acquiring bitcoin with cash flows with equity, with debt.
- For those of you attending the conference here in Las Vegas, we look forward to seeing you in person.
- Instead, both FASB and GASB recommend modified accrual accounting.
- A recent change made by the FASB allows companies to restrict the information that is conveyed to the investors, which may not be as relevant.
Overall, we continue to see further global adoption of our cloud platform as a result of transitioning our business strategy and product offerings from an on-prem perpetual license software company to a cloud native organization. You would have the option to raise financing, not just from banks but also from the public capital markets. And that gives us a flexible, you know, control or active control over our capital structure. Non-GAP subscription billings, which represent new cloud bookings in the quarter, also grew by 30% in the first quarter to $17.7 million, which was our fourth straight year of quarterly double-digit growth in cloud bookings.
How the Financial Accounting Standards Board (FASB) Works
In this example, adding leverage to acquire more bitcoin would return between approximately 395% to 425%, depending on the amount of leverage, further boosting returns compared to simply holding spot bitcoin. If the market value of our bitcoin increases, we what does fasb do believe this would create more opportunities to manage our leverage targets. Since 2020 we’ve invested $825 million of total cash on our balance sheet. We’ve issued $3.2 billion in equity in a manner that we believe to be creative to existing shareholders.
- As I mentioned in prior calls, we continue to transition our business to the cloud, and we fully anticipate lower product license revenues to continue as we migrate existing customers off on-prem licenses and bring them on to the cloud.
- Q4 last year was an important milestone for us in the progress toward cloud transition, where, for the first time, our subscription services revenues were higher than our product license revenues.
- And so we have harnessed volatility, and we’ve also harnessed our unique ability to issue securities, such as convertible bonds.
- FASB accomplishes its mission through a comprehensive due process that involves soliciting public input, conducting research, deliberating, and issuing Accounting Standards Updates (ASUs).
- As mentioned earlier, investors are one of the most impacted by the efforts of the FASB.
- We assume no obligation to update these forward-looking statements which speak only as of today.
I guess we talked quite extensively during our prepared remarks about the bitcoin development company. I think, perhaps, the question is more specific about the development portion and whether we’re doing any software development in the bitcoin area. In the last four years, it has emerged in the Western world as that global, digital, scarce commodity, i.e. digital property. Now, MicroStrategy, if it had just simply adopted bitcoin purely, perhaps, it would have had the same performance as bitcoin. You can see all the Big Tech stocks over the last three and three quarters of years.
Financial Accounting Standards Board (FASB): Definition and How It Works
And if the average price of bitcoin in that time frame is 250,000, that’s the same as a $164 billion of capital being put into this network. So, the network was chopping along at 900 BTC a day before the halving. But after the halving, you just have a very reflexive protocol change that is going to remove 450 bitcoin a day for sale at any price for the next four years. Bitcoin spot ETFs were approved in January of this quarter, and that was a very big milestone. And as we go into this next quarter, it’s pretty clear that bitcoin is the only crypto asset that’s going to be approved for sale in the form of a spot ETF in the United States.
Debt financing helps us maintain healthy leverage relative to the market value of our bitcoin holdings, and raising equity helps us to deleverage our balance sheet when needed. The primary use of proceeds from our debt and equity capital activities to date have been to acquire additional bitcoin, which we have done in a manner we believe to be extremely accretive. Our overall capital allocation strategy continues to be focused on increasing our total bitcoin holdings while managing our debt very closely and prudently. Leverage remains a key component of our active capital allocation strategy which when opportunistically deployed, enables us to add more bitcoin holdings at an attractive cost. Our two recent convertible note financings were both upsized and well-received by the market. We’ve issued $3.6 billion in debt through the issuance of both senior secured notes and convertible notes.
