Microstrategy sells bitcoin for 1st time, citing tax purposes

Yahoo Finance’s David Hollerith discusses the latest news in crypto that Microstrategy has sold bitcoin for the first time, stating it was for tax-loss harvesting purposes.

Video Transcript

BRIAN SOZZI: All right, we’re starting off this hour with the latest in the FTX saga. $200 million were taken from customer funds by the crypto exchange to fuel venture capital investments, according to the Securities and Exchange Commission. Meanwhile, Michael Saylor’s MicroStrategy has sold Bitcoin for the first time, something he said he’d never do, citing tax reasons for the move. Though the company remains a net buyer, the sale did raise some eyebrows. We spoke with him last month in the wake of the FTX collapse.

MICHAEL SAYLOR: I think that this is going to be really helpful for Bitcoin because this is an educational moment. And people are realizing the benefits of buying a crypto asset that’s backed by the world’s most powerful computing network and by 10 gigawatts of energy and the difference between that and the 20,000 other cryptos that are, in essence, backed by nothing, and they’re just like other fiat currencies.

BRIAN SOZZI: To dig into all of this, we have Yahoo Finance’s crypto reporter David Hollerith here. David, hit us with some analysis.

DAVID HOLLERITH: Yeah, Brian, so in regards to Michael Saylor’s comments and MicroStrategy’s recent disclosure, the company bought roughly $42 million in Bitcoin at the beginning of November through December 21. It then sold 704 bitcoins. And a day later, it bought back 810 bitcoins. That was December 24 was the last transaction.

So what to make of all of this? It appears that MicroStrategy, according to their disclosure, was doing a tax loss harvesting strategy, in which they bought Bitcoin and then sold partially– sold it partially and then bought it back again as a way to use the losses from the middle selling period to offset their capital gains tax for the taxable year.

Now, obviously, as Saylor has pointed out, the company is meant to acquire Bitcoin and hold it for a period of time. It looks like in terms of the tax season, that doesn’t exclude it from making tax loss harvesting strategies as a way to shore up more cash. MicroStrategy also disclosed in that same filing, which came out on Wednesday, that during the period between October 1 and December 27, it had raised an incremental $46 million after selling more than 218,000 shares of its common stock at $213 per share. Now the stock is down 75% year to date, and it’s trading now at $142.