Strategy has hinted at another Bitcoin purchase, going all in on the digital asset like before. According to the latest development, the company is raising $2 billion in convertible senior notes to purchase the asset, expanding its bet on its future.
The debt offering will be opened to only qualified institutional investors, with a high patronage guaranteeing an extra $300 million. In its announcement, the notes will mature in 2030, without interest and an increase in value over that period. The investors will then be able to convert them to cash or strategy stock when due.
The notes can be redeemed in 2027, provided the strategy’s stock hits 130% of the conversion price. If it happens, strategy will trigger a buyback on the notes, adding any special interest it will accrue to it. Should strategy undergo a restructuring or change in management, investors could demand repayment by March 1, 2028. However, the final price and rates will be determined according to the stock’s performance.
Debt strategy and Bitcoin acquisition
Strategy has been using funds to purchase Bitcoin, but the recent one has a set pattern where money is raised to buy the asset and investors wait for it to increase. The $2 billion is being raised for general corporate expenses, but its focus is on accumulating more BTC. Last year, the firm bought 258,320 BTC for $22.07 billion, paying an average of $85,447 per Bitcoin, including fees.
In December 2024, the company mentioned that it had 447,470 BTC, worth $23.9 billion. At the time, its outstanding debt hit around $7 billion, with its annual interest costs hitting $35 million. The company announced a loss of $1.7 billion in 2024, with most of it tied to Bitcoin impairment losses. If the price of Bitcoin slides, the company could struggle to meet financial expectations. The company also mentioned that if Bitcoin’s fair value drops, it may not be able to regain profitability.
Strategy has been battling with old accounting methods that recognize Bitcoin losses and do not allow firms to write profits unless it sells the assets. The rule, however, is set to change as companies will be able to account for both losses and gains, signifying a fluctuation in reported prices. However, the company’s tax liabilities could increase in the process.
The company may be subjected to the Corporate Alternative Minimum Tax, which will trigger a 15% deduction under the Inflation Reduction Act in 2022. “If we become subject to the CAMT, it could result in a material tax obligation that we would need to satisfy in cash,” Strategy said. The tax applies to companies with over $1 billion in annual adjusted financial income, and unless the law is amended, Strategy could owe huge taxes by 2026.