Companies Turn to Bitcoin to Revive Stocks, but Risks Loom

As companies grapple with stagnation and declining revenues, some are turning to an unconventional strategy to reignite investor interest—buying Bitcoin (BTC). Firms are now emulating MicroStrategy, which has gained significant attention for its Bitcoin accumulation commitment.

Rather than reinvesting in their core operations, companies like Goodfood Market Corp are using Bitcoin as a financial maneuver to create buzz around their stocks. According to reports, Goodfood CEO Jonathan Ferrari, who previously led a promising meal-delivery startup, invested corporate funds in Bitcoin after the company's stock plummeted 98% from its pandemic-era highs. Ferrari hopes that this strategy will create more liquidity in the stock and attract investors.

This tactic is centered on the hope that these firms will replicate the success of Michael Saylor's MicroStrategy. Goodfood is not alone; dozens of public companies are following in Saylor's footsteps with their Bitcoin strategies. The report cites firms in social media, video gaming, and even coal mining that are diverting corporate cash to invest in Bitcoin. Some firms, like Semler Scientific, are even borrowing funds to invest in the pioneer crypto.

Recently, GameStop is mulling a Bitcoin investment. The American video game retailer's pivot to BTC is motivated by the need for financial stability. However, this speculative strategy carries significant risks, raising concerns. As reported, MicroStrategy faces a billion-dollar tax dilemma over Bitcoin gains. The firm may owe billions under the US corporate alternative minimum tax (CAMT) for its $47 billion Bitcoin holdings, including $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. MicroStrategy disclosed that this change would add up to $12.8 billion to its retained earnings and potentially $4 billion to its deferred tax liabilities. This means that companies' Bitcoin holdings could directly affect their financial statements, making 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.