- Strategy resumes Bitcoin buying, adding 7,633 BTC, pushing holdings to 478,740 BTC worth $46.5B after a brief pause.
- The firm’s “21/21 Plan” aims to raise $42B via equity and debt for further BTC buys, sparking investor concerns over valuation.
- New FASB rules may impact Strategy’s bookkeeping, with potential tax complications under the 2022 Inflation Reduction Act.
Software company Strategy, formerly MicroStrategy, resumed its Bitcoin buying spree last week after a brief hiatus. Between February 3 and February 9, the company purchased 7,633 BTC for $742.4 million. This marks the company’s return to its aggressive Bitcoin strategy after a 12-week buying spree that totaled $20 billion.
The firm’s last Bitcoin purchase came at the end of January when it paused its buying efforts, sparking curiosity among investors. At that time, Strategy did not make any Bitcoin purchases or sell any shares of Class A common stock. However, the firm resumed its Bitcoin acquisition strategy last week, pushing its holdings to 478,740 BTC, worth $46.5 billion at today’s price of $97,757.
Strategy’s Bold Bitcoin Strategy Continues
The long-term plan for Strategy includes its ongoing investment in Bitcoin, which is part of the entire plan called “21/21 Plan” with the hope to raise $42 billion to further procure more Bitcoin. This plan contains a collection of $21 billion from equity and $21 billion through fixed-income security. This is according to the SEC filing, which shows that, on average, the company spent $65,033 per Bitcoin.
This aggressive Bitcoin accumulation approach raises some concerns. Strategy currently has a market capitalization of $82.3 billion, but its share price trades at a premium over its Bitcoin net asset value NAV. Some investors are reportedly nervous about this premium as well as the fact that the company has been buying its Bitcoins through equity and debt.
Accounting Shift and Potential Tax Implications
In addition to its extensive Bitcoin acquisitions, The company wants to employ the new fair-value accounting principles specified by the Financial Accounting Standards Board (FASB), and this may cause some problems with Strategy’s bookkeeping policies or procedures. Once these changes are effected, Strategy would on balance be carrying out a one-off cumulative adjustment to the opening balance of its retained earnings of $12.75 billion.
However, it is yet unclear how Strategy’s Bitcoin holdings will be treated tax-wise in light of these new regulations and the stipulations of the 2022 Inflation Reduction Act. The business might need a special IRS exemption, which would complicate its already bold plan.
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