MicroStrategy Rebrands as Strategy

MicroStrategy, now simply known as Strategy, is set to receive a $12.75 billion increase to its balance sheet, according to analysts at Bernstein.

Financial Overview

On Wednesday, Strategy reported a net loss of $670.8 million in Q4 2024, with operational expenses soaring by 693% year-over-year, totaling $1.1 billion. This increase includes over $1 billion in impairment losses linked to its bitcoin holdings, compared to $39.2 million last year.

Historically, the value of digital assets on a company’s books needed to be marked down during price drops, but could not be adjusted upwards unless sold. However, with the adoption of FASB’s new fair-value accounting rules scheduled for January 2025, a one-time cumulative adjustment of $12.75 billion will occur for retained earnings. This adjustment enables the firm to recognize unrealized gains on its bitcoin for the first time.

According to Bernstein analysts led by Gautam Chhugani, “From Q1CY25 financials onward, the carrying value of bitcoin will match its market value, allowing MSTR to record any bitcoin appreciation as a gain in net income.”

Uncertainty persists regarding the tax implications of Strategy’s bitcoin holdings under these new FASB rules alongside the 2022 Inflation Reduction Act, which may necessitate a special exemption from the IRS.

Market Performance: Strategy’s stock fell 3.3% on Wednesday but is up 1.4% in pre-market trading on Thursday, as reported by TradingView.

A Bitcoin Strategy

The company’s recent name change reflects its dedication to bitcoin. Its logo features a stylized “₿”, signifying its role as a bitcoin treasury company. The new orange branding symbolizes energy and intelligence in the realm of bitcoin.

Strategy reported a 74.3% year-to-date BTC Yield, a crucial performance measure representing changes in its bitcoin holdings relative to shares. New KPIs introduced include an annual “BTC Gain” and a target of $10 billion BTC $ Gain for 2025.

On Monday, it was announced that Strategy’s 12-week bitcoin buying streak ended without any sales or purchases between Jan. 27 and Feb. 2. The company holds 471,107 BTC, valued at approximately $46 billion. Analyst assessments indicate that MSTR trades at a ~110% premium to its bitcoin NAV.

Strategy’s total bitcoin was acquired at an average price of $64,511 per BTC for a cumulative cost of $30.4 billion. Notably, this accounts for over 2.2% of the total bitcoin supply of 21 million.

21/21 Plan and Future Goals

Introduced in Q3 last year, the “21/21” plan aims for $21 billion each in equity and debt from 2025 to 2027. Analysts report that approximately $20 billion of this plan has already been utilized—$16.7 billion in equity and $3 billion in convertibles.

Strategy seeks a long-term leverage ratio of 20% to 30%, though it currently stands at 15% due to $6.2 billion in outstanding convertible debt. This situation allows for increased leverage as the company’s bitcoin initiatives evolve.