- Strategy plans to raise $2 billion through debt to buy more Bitcoin and expand its corporate holdings.
- The company now holds 478740 Bitcoin but reported a $670.8 million loss in the last quarter.
- New accounting rules in 2025 may cause large swings in Strategy’s reported earnings based on Bitcoin’s market value.
Strategy is preparing to raise $2 billion through 0% senior convertible notes. This move aligns with its ongoing plan to expand Bitcoin holdings. The company announced that the notes will mature in 2030 unless repurchased, redeemed, or converted earlier.
Investors have an option to buy an extra $300 million in notes within five business days of issuance. Strategy intends to use the funds for purchasing more Bitcoin and general corporate purposes.
Ongoing Plan to Increase Bitcoin Holdings
The company has been using debt financing to acquire Bitcoin for years. Its 21/21 Plan aims to secure $42 billion over three years through equity and fixed-income securities. More than half of this target has been met since October 30, 2024. The company now holds 478,740 Bitcoin, making it the largest corporate Bitcoin holder.
The company reported a $670.8 million net loss in Q4 despite accumulating more Bitcoin. Bitcoin’s price fluctuations and accounting rules impacted financial results. The company expects new fair-value accounting rules in January 2025 to change how Bitcoin gains and losses appear in earnings reports. The new regulations will reflect unrealized gains and losses each quarter, affecting reported profits.
Financial Risks and Tax Implications
Strategy’s growing Bitcoin position comes with financial risks. The company has $7.27 billion in outstanding debt and annual interest costs of $35.1 million. It has not sold any Bitcoin despite price changes. If Bitcoin’s market value drops, Strategy’s ability to meet financial obligations may weaken. A recent SEC filing indicated concerns about long-term profitability if Bitcoin’s fair value declines.
The company also faces potential tax liabilities under the Corporate Alternative Minimum Tax (CAMT). Unrealized Bitcoin gains could trigger taxes by 2026. The company warned that if it falls under the tax rule, it may face significant cash obligations. The debt offering is private, limited to institutional buyers under Rule 144A. Investors must attend a webinar on February 19, 2025, to review terms and risks.
