The SEC alleged the company overstated revenue and earnings, prompting it to restate results for the years ending 1998 and 1999. When the company restated its results Microstrategy stock lost 60% of its value, falling from to $86 per share from $260 per share in one day.
According to the SEC, company chief executive Michael Saylor, co-founder and chief operating officer Sanjeev Bansal and former chief financial officer Mark Lynch, did not admit or deny the allegations of irregularities, but agreed to pay the penalties.
In addition, Microstrategy agreed to a cease-and-desist order and to undertake significant corporate governance changes to ensure future compliance with the securities laws. Two Microstrategy accounting employees also consented to cease-and-desist orders for reporting and record-keeping violations.
SEC Director of Enforcement Richard H. Walker said: ‘This case illustrates how critical it is for all companies – and especially for companies new to the public markets – to implement effective internal controls and to strictly adhere to the letter and the spirit of the accounting rules for revenue recognition.’
At the time of the alleged irregularities, Microstrategy was audited by Big Five firm PricewaterhouseCoopers.
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