Strategy Adds $765 Million In Bitcoin, Faces Lawsuit Over BTC Holdings
U.S.-based Bitcoin treasury firm Strategy (NASDAQ:MSTR) has made another major Bitcoin (CRYPTO: BTC) purchase even as it faces legal scrutiny over its accounting disclosures.
What Happened: According to a regulatory filing with the SEC, the company acquired 7,390 BTC between May 12 and May 18 for approximately $764.9 million, increasing its total Bitcoin holdings to 576,230 BTC, more than 2.7% of Bitcoin's fixed 21 million supply.
The latest tranche was bought at an average price of $103,498 per coin, with the firm’s average purchase price now at $69,726 per BTC, bringing its unrealized gains to roughly $18.8 billion.
However, the company's aggressive Bitcoin acquisition strategy has come under legal challenge.
A class action lawsuit was filed against Strategy and its executives in the Eastern District of Virginia by law firm Pomerantz LLP.
The suit alleges that the company made misleading public statements regarding its financial outlook, particularly following its adoption of new fair value accounting rules (ASU 2023-08) for crypto assets.
The plaintiffs claim Strategy understated the risks associated with applying the fair value method to its Bitcoin holdings, and overemphasized new metrics such as “BTC Yield” and “BTC Gain” while downplaying the actual losses it could incur.
In April, the company disclosed a $5.91 billion unrealized loss under the new accounting treatment, triggering an 8.67% drop in its stock price.
Why It Matters: Despite the legal proceedings and reported Q1 losses, Strategy has continued raising capital through equity and preferred share offerings.
Its "42/42" capital program aims to raise $84 billion by 2027 to fund further Bitcoin purchases, an expansion of its original $42 billion "21/21" strategy.
As the lawsuit unfolds, analysts remain divided on the sustainability of Strategy's high-leverage Bitcoin strategy, particularly given the mismatch between its net asset value and its market capitalization, which exceeds $109 billion.
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