Strategy (the company formerly known as MicroStrategy) is bracing for a painful year-end hit after Bitcoin’s fall from the $126,000-plus highs earlier in the year to below $90,000. Bloomberg reports the company will likely announce multibillion-dollar losses when it publishes fourth-quarter results—marking a dramatic reversal from the $2.8 billion profit it recorded in Q3 of last year. Why the hit is so large - An accounting change in Q1 forced Strategy to mark its crypto holdings to current market prices (mark-to-market). That policy meant the company had to record paper losses as Bitcoin slid roughly 24% in Q4. - “There was this one-time pop, but that is a different story in this quarter. It is going to be a sizable loss,” said Aaron Jacob, associate professor at Brigham Young University and senior adviser at Taxbit. Company performance and guidance - Strategy’s shares have tumbled nearly 48% through 2025, trading around $156. - To address liquidity concerns, the firm sold common shares on December 1 to build a cash reserve amid worries it might need to liquidate some BTC to cover expenses like dividends and interest. - At the start of last month, Strategy updated its full-year guidance assuming Bitcoin would trade between $85,000 and $110,000 by year-end. Under that range, operating income was forecast anywhere from a $7 billion loss to a $9.5 billion gain. With Bitcoin finishing the year down about 6.5%, the odds now favor a result nearer the loss end of that spectrum. Market and investor implications - The company’s enterprise value—including debt and the notional value of perpetual preferred stock—is roughly $61 billion. That figure is approaching the point where the enterprise value could fall below the value of Strategy’s Bitcoin holdings for the first time in more than two years—a development that could erode investor confidence. - Strategy’s market-to-net-asset-value (mNAV) ratio, which compares market capitalization (plus debt) to token holdings, has plunged to just above 1. Shares are down nearly 70% from their November 2024 peak. Impact on leadership - Bloomberg’s Billionaires Index shows co-founder and chairman Michael Saylor’s net worth has dropped by roughly 40% to around $3.8 billion amid the sell-off. What to watch next - Strategy’s Q4 financial release for the precise impairment figures and any additional liquidity plans. - Whether the firm will need to sell Bitcoin to meet cash obligations and how that would affect both its balance sheet and the market’s view of a company long known for aggressive BTC accumulation. Image credit: DALL·E. Chart: TradingView.com. Read more AI-generated news on: undefined/news

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