Michael Saylor’s Strategy flags profitability risk amid Bitcoin volatility and tax worries

Strategy (formerly MicroStrategy) faces trouble after stocking a large number of Bitcoins in recent months. Today, in a 10-K filing with the Securities and Exchange Commission (SEC), it warned of lower profits due to a possible higher tax load.

A 10-K filing is an annual financial report that publicly traded businesses must send to the SEC. It provides a detailed look at the company’s operations, risks, and financial performance.

Strategy warned that it may not be able to regain profitability in future periods. This is especially true if it loses a lot of money on the fair value of its Bitcoin holdings. It also said that a major drop in the market value of its Bitcoin could make it harder for the company to meet its financial commitments.

The filing read, “We generated a net loss for the fiscal year ended December 31, 2024, primarily due to $1.790 billion of digital asset impairment losses. We may not be able to regain profitability in future periods, particularly if we incur significant fair-value losses related to our digital assets. As a result, our results of operations and financial condition may be materially adversely affected.”

This is because the company depends heavily on the market value of its Bitcoin shares to get this kind of financing. Therefore, if the value of Bitcoin drops sharply, there could be liquidity risks that force the company to sell Bitcoin at bad prices.

The implications of this could mean that the company will fail to meet its financial responsibilities. Therefore, the company may need to use either equity or debt financing. Worse, if the company is unable to obtain equity or debt financing on favorable terms or at all, it may not be able to successfully execute its Bitcoin strategy.

Strategy’s tax implications

One worry is that if the company keeps Bitcoin and its fair value goes up, it might have to pay the corporate alternative minimum tax. The company said, “Unrealized fair value gains on our Bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act (IRA) of 2022.”

The U.S. passed the Inflation Reduction Act (IRA)in 2022. It put a 15% Corporate Alternative Minimum Tax (CAMT) on companies whose average annual adjusted financial statement income was more than $1 billion in any three years before the first tax year.

This was unless an exemption applies. In September of last year, the Treasury Department and the IRS put out suggested rules that would explain how the corporate alternative minimum tax (CAMT) could be used.

If the IRA isn’t changed or the proposed laws are changed to relief, it could be subject to the CAMT starting with the 2026 tax year and going forward.

The company said, “If we become subject to the CAMT, it could result in a material tax obligation that we would need to satisfy in cash, which could materially affect our financial results, including our earnings and cash flow, and our financial condition.”

Strategy also said it faces big tax risks in many other places because of different tax rates. This is because of the chance of tax laws changing, and not knowing what the delayed tax assets and liabilities are.  

The firm said, “In addition, if we sold any of our bitcoin at prices greater than the cost basis of the bitcoin sold, we would incur a tax liability with respect to any gain recognized, and such tax liability could be material.” 

In the same light, the company said, “We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the market price of our listed securities may fall.”

Strategy holds 2.2% of all the Bitcoins

In 2024, Strategy bought about 258,320 bitcoins for about $22.073 billion, which is about $85,447 per bitcoin. In 2023, the company bought 56,650 BTC for about $1.902 billion, which is about $33,580 per bitcoin.

Between January 1, 2025, and February 14, 2025, the company bought about 31,270 bitcoins for about $3.165 billion, which is about $101,225 per Bitcoin. 

🚨 BREAKING: Michael Saylor clarifies that @Strategy hasn’t sold any Class A common stock and did not buy Bitcoin last week.

The company still holds 478,740 $BTC, purchased for around $31.1 billion at an average price of $65,033 per coin pic.twitter.com/UwWoD9Lx8k

— Crypto Briefing (@Crypto_Briefing) February 18, 2025

The business has 478,740 BTC, which is worth more than $46  at the moment. Michael Saylor, co-founder and executive chairman of Strategy, says that the company bought all of its BTC at an average price of $65,033 each, for a total cost of about $31.1 billion. Just to show you how big this is, Strategy owns more than 2.2% of all 21 million Bitcoins.

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