MicroStrategy announces $1.05 billion debt redemption, amid reports of a potential Corporate Alternative Minimum Tax under the Inflation Reduction Act of 2022 on $19 billion in unrealized capital gains

On January 24, 2025, MicroStrategy Incorporated (Nasdaq: MSTR) has announced plans to redeem its $1.05 billion in outstanding 0.0% Convertible Senior Notes due 2027, offering noteholders the option to convert securities into shares of the company’s Class A common stock.

This move reflects the company’s focus on consolidating its financial position while addressing potential market and regulatory challenges.

Key Details of the Redemption

• The redemption date is set for February 24, 2025.
• Note-holders have until February 24 to redeem their securities at 100% of the principal amount or convert each $1,000 notes into 7.0234 shares of Class A stock, equating to a conversion price of approximately $142 per share.
• The company will settle all conversions in shares, with cash provided only for fractional shares.

This decision comes as MicroStrategy continues its aggressive Bitcoin treasury strategy, with over 461,000 BTC currently valued at $49 billion, making it the largest corporate Bitcoin holder globally.

The company added 11,000 BTC to its reserves earlier this month, the largest single acquisition of 2025.

The announcement coincides with broader concerns over potential tax liabilities stemming from the Corporate Alternative Minimum Tax (CAMT) introduced by the Inflation Reduction Act of 2022.

CAMT imposes a tax on unrealized capital gains, a move that has sparked significant debate within the digital asset industry.

Under the Inflation Reduction Act of 2022, corporations with adjusted financial statement income exceeding $1 billion face a 15% minimum tax.

MicroStrategy reportedly has around $19 billion in unrealized capital gains tied to its Bitcoin holdings.

Unrealized capital gains may be included in the CAMT calculation, potentially resulting in a significant tax liability for the company.

MicroStrategy, alongside Coinbase, has publicly opposed the tax, arguing that the combination of CAMT and new accounting standards could create "unjust and unintended tax consequences."

Critics warn that taxing unrealized gains could discourage investment and adversely affect companies like MicroStrategy, which rely heavily on Bitcoin to preserve purchasing power.

The redemption notice has drawn mixed reactions from investors and analysts. While some view it as a positive step toward financial stability, others point to the risks associated with the company’s heavy reliance on Bitcoin.

David Krause, a finance professor at Marquette University, warned that sharp declines in Bitcoin’s price could undermine MicroStrategy’s ability to meet its debt obligations, potentially endangering shareholder equity.

“The volatility of Bitcoin creates substantial financial risks, particularly for companies using it as a primary treasury asset,” he said.

MicroStrategy’s decision to redeem its convertible notes underscores its confidence in its long-term strategy, despite ongoing debates about regulatory risks and the volatile nature of digital assets.

The company remains committed to its dual focus on Bitcoin accumulation and enterprise analytics, which it believes positions it uniquely in the digital asset and technology sectors.