MicroStrategy (MSTR), a leading Bitcoin-heavy corporation, has announced plans to redeem its 2027 convertible senior notes, valued at $1.05 billion. According to the company’s January 24 statement, note-holders have until February 24 to either redeem their securities at full principal value or convert every $1,000 of notes into Class A MicroStrategy stock at an approximate price of $142 per share.
Tax Issues Loom Over Bitcoin Holdings
The redemption announcement follows speculation about a looming tax bill tied to $19 billion in unrealized capital gains. This is due to the Corporate Alternative Minimum Tax (CAMT) outlined in the Inflation Reduction Act of 2022, which has stirred debates about taxing unrealized gains in volatile markets like crypto. Critics argue that taxing unrealized gains could deter investment and harm Bitcoin-focused companies like MicroStrategy, which rely on crypto assets to hedge against inflation.
MicroStrategy and Coinbase Push Back on CAMT
In a joint letter to the U.S. Internal Revenue Service (IRS) on January 2, Coinbase and MicroStrategy criticized the CAMT for causing “unjust and unintended tax consequences.” They pointed to the combined impact of the tax and new accounting standards as particularly problematic for firms with significant cryptocurrency holdings.
MicroStrategy’s Bitcoin strategy remains bold. In January 2025, the firm surpassed 450,000 BTC in total holdings, cementing its status as the largest corporate Bitcoin owner. Its most recent acquisition, a purchase of 11,000 BTC on January 21, brought its holdings to 461,000 BTC, currently valued at $49 billion. This marks a 68% return on investment, according to the SaylorTracker website.
Expert Warnings on Risk and Volatility
Despite its success, the company’s Bitcoin-focused approach has raised concerns. David Krause, a finance professor at Marquette University, warned that the company’s aggressive Bitcoin acquisitions could harm shareholder equity. He cautioned that sharp declines in Bitcoin’s price might hinder MicroStrategy’s ability to service debt, potentially leading to bankruptcy.
