tl;dr
Some companies are turning to Bitcoin as a strategy to regain investor interest and boost stock value, following the example set by MicroStrategy. This includes firms in various industries diverting corporate funds to invest in Bitcoin. However, this approach carries significant risks, including pot...
Some companies are turning to Bitcoin as a strategy to regain investor interest and boost stock value, following the example set by MicroStrategy. This includes firms in various industries diverting corporate funds to invest in Bitcoin. However, this approach carries significant risks, including potential tax and regulatory issues. There is a broader concern about the speculative nature of this strategy and its impact on financial statements and market volatility.
Rather than reinvesting in their core operations, firms like Goodfood Market Corp are using Bitcoin as a financial maneuver to create buzz around their stocks. According to Bloomberg, Goodfood CEO Jonathan Ferrari once led a promising meal-delivery startup. However, the company’s stock plummeted 98% from its pandemic-era highs. Ferrari then sought a drastic measure, investing corporate funds in Bitcoin, to reinvigorate investor interest.
This tactic centers on the hope that these firms will replicate the success of Michael Saylor’s MicroStrategy. Meanwhile, dozens of public companies, including those in social media, video gaming, and even coal mining, are following in Saylor’s footsteps with their Bitcoin strategies. This suggests that firms beyond retail are also banking on Bitcoin’s volatile yet historically upward-trending value to boost their stock appeal.
However, the speculative strategy carries significant risks, raising concerns. As BeInCrypto reported, MicroStrategy faces a billion-dollar tax dilemma over Bitcoin gains. Specifically, the firm may owe billions under the US corporate alternative minimum tax (CAMT) for its $47 billion Bitcoin holdings. This includes $18 billion in unrealized gains. New Financial Accounting Standards Board (FASB) rules compound the issue. Starting this year, companies must report the fair value of cryptocurrencies on their balance sheets.
Such an outcome would make them more susceptible to regulatory scrutiny and market volatility. Similarly, the IRS is set to begin tracking cryptocurrency transactions on centralized exchanges in 2025, signaling a broader regulatory crackdown.