Strategy’s Rebrand, STRK Launch, and Bitcoin Tax Risks

Bitcoin | Feb 7, 2025

MicroStrategy rebrand as Strategy logo

Three MicroStrategy Happenings

MicroStrategy (NASDAQ: MSTR) one of the biggest corporate holders of Bitcoin, has officially rebranded as Strategy, reflecting a deeper commitment to Bitcoin and artificial intelligence. Along with the rebrand, the company also launched a new financial product STRK now trading on Nasdaq offering an 8% dividend paying convertible preferred stock.   Lastly, (Micro)Strategy who holds over 19,000 bitcoin could now face a huge tax bill on unrealized bitcoin gains due to a recent accounting rule change.

1. MicroStrategy Becomes Strategy

On February 5, 2025, MicroStrategy announced an official rebrand and name change to Strategy (see logo with Bitcoin icon above, orange background) to better represent the company’s evolution beyond software and into a Bitcoin-focused financial strategy. The rebrand also includes a new corporate identity and website for it's AI powered business intelligence Strategy software and a separate URL to acquire Strategy's merchandise.  The About Strategy link proudly states on the page, "We are the world's first and largest Bitcoin Treasury Company, and the largest independent, publicly traded business intelligence company."

See:  National Bank Doubling Down on MicroStrategy’s Bitcoin Boom

Michael Saylor, Founder and Executive Chairman, Strategy:

“Strategy is one of the most powerful and positive words in the human language. It also represents a simplification of our company name to its most important, strategic core. Antoine de Saint-Exupery said, ‘Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.’ After 35 years, our new brand perfectly represents our pursuit of perfection.”

2. Strategy Launches STRK: A New Way to Raise Funds for Bitcoin

To fuel its Bitcoin strategy, Strategy launched STRK, an 8% dividend paying convertible preferred stock now trading on Nasdaq. The company raised $563 million from this offering which will likely be used to purchase more Bitcoin.

STRK is designed for investors who want to benefit from Bitcoin’s growth but prefer a steady income instead of dealing with Bitcoin’s price volatility. The stock pays an 8% annual dividend and can later be converted into regular Strategy (MSTR) shares, allowing investors to profit if the stock price goes up.

See:  Regulatory Clarity for Crypto: Sacks Unveils U.S. Strategy

There are risk however.  If too many STRK holders choose to convert their shares into regular stock, it could reduce the value of existing MSTR shares. Having said that, this product still shows that Strategy is using creative financial tools to increase its Bitcoin holdings without selling common stock.

3. New FASB Accounting Rules

A major Financial Accounting Standards Board (FASB) rule change now requires companies to report Bitcoin and other crypto holdings at fair market value each reporting period. This replaces the old rule which only required companies to record losses (impairments) but did not allow them to record gains unless the crypto was sold.  So this means that companies must update the value of their Bitcoin holdings regularly based on market prices by showing gains and losses as the price of Bitcoin fluctuates.

For some companies holding Bitcoin like Tesla, thanks to the new accounting rules, Tesla reported a $600 million profit from its Bitcoin holdings in Q4 2024.

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However in Strategy's case, since they hold over 190,000 Bitcoin, are now facing a huge tax bills due to unrealized Bitcoin gains. Following the Corporate Alternative Minimum Tax (CAMT) introduced by the Inflation Reduction Act, large corporations must pay a 15% tax on book profits including unrealized crypto gains.

So while the rule change benefits transparency, it also creates an unexpected tax burden for firms holding large amounts of Bitcoin.

Closing Outlook

Strategy’s aggressive Bitcoin strategy is attracting strong institutional interest with major investors backing its stock and STRK offering and company.  According to Coindesk, the world's largest asset manager, BlackRock, just increased its ownership stake in Strategy to 5% up from its previous 4.09% as of September 30, 2024.   Worth noting National Bank Doubling Down on MicroStrategy’s Bitcoin Boom.

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