United States securities and exchange commission logo
April 5, 2023
Andrew Kang
Senior Executive VP and Chief Financial Officer
Microstrategy Inc.
1840 Towers Crescent Plaza
Tysons Corner, VA 22182
Re: Microstrategy Inc
Form 10-K for
Fiscal Year Ended December 31, 2022
Filed February 16,
2023
File No. 000-24435
Dear Andrew Kang:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the year ended December 31, 2022
Item 1. Business
Custody of our Bitcoin, page 9
1. To the extent material,
please tell us how recent bankruptcies in the crypto industry and
failures of certain
financial institutions, and the downstream effects of such events, have
impacted or may impact
your business, financial condition, customers, counterparties and
custodians, either
directly or indirectly. Clarify and disclose whether you have material
assets that may not be
recovered due to these events or may otherwise be lost or
misappropriated.
2. Please tell us the
names of your custodians and the amount of bitcoin held at each.
Also, tell us and
disclose any direct custodians or other participants in the crypto asset
markets known to:
Have filed for
bankruptcy, been decreed insolvent or bankrupt, made any assignment
for the benefit of
creditors, or have had a receiver appointed for them.
Andrew Kang
FirstName LastNameAndrew Kang
Microstrategy Inc.
Comapany
April NameMicrostrategy Inc.
5, 2023
April 25, 2023 Page 2
Page
FirstName LastName
Have experienced excessive redemptions or suspended redemptions
or withdrawals
of crypto assets.
Have the crypto assets of their customers unaccounted for.
Have experienced material corporate compliance failures.
Item 15. Exhibits, Financial Statement Schedules
Notes to Consolidated Financial Statements
Note 4. Digital Assets, page 88
3. We note that both the 2025 and 2028 Secured Notes are secured by
bitcoin collateral.
Please address the following:
Tell us the name of the custodian that held the Bitcoin Collateral
Account for the
2025 Secured Notes, and whether they are a third-party,
institutional-grade, US-based
entity similar to your other bitcoin custodians.
Tell us, and revise to disclose as appropriate, whether the
bitcoin being held as
collateral for the 2028 Secured Notes is also held in a separate
custodial account and,
if so, provide us with the information requested in the previous
bullet point.
Tell us whether the lender of either loan has any rights or access
to the bitcoin, such
as the right to pledge, rehypothecate, assign, commingle or
otherwise use the
assets pledged as collateral. Alternatively, clarify whether you
retain sole custody
legal ownership and control over the bitcoin. Explain how either
parties' rights might
be impacted in the event of a default.
Provide us with your analysis of the accounting for the bitcoin
pledged as collateral.
In this regard, explain how the terms of the custodian account(s)
and/or loan
agreements support the inclusion of such bitcoin as an asset on
your balance sheet. In
addition, address your consideration to classify such bitcoin as a
restricted asset
separate from your other digital assets. Cite the accounting
guidance you relied on to
reach your conclusions.
Tell us, and consider revising to disclose, the dollar amount of
bitcoin used as
collateral for each loan as of each period end presented.
Note 16. Segment Information, page 112
4. Please revise to disclose revenue earned and long-lived assets held in
your country of
domicile, the U.S., separately from all foreign countries. Refer to
ASC 280-10-50-41.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Andrew Kang
Microstrategy Inc.
April 5, 2023
Page 3
You may contact Brittany Ebbertt, Senior Staff Accountant, at (202)
551-3572 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 or with any
questions.
Sincerely,
FirstName LastNameAndrew Kang
Division of
Corporation Finance
Comapany NameMicrostrategy Inc.
Office of Technology
April 5, 2023 Page 3
cc: Jeanine Montgomery, CAO
FirstName LastName