Are we already witnessing the decline of publicly traded companies involved in the Digital Asset Treasury (DAT) movement? The question arises as the U.S. company ETHZilla begins selling its ETH to fund a stock buyback program.
ETHZilla: Is a Digital Asset Treasury Failing?
Just a few months ago, crypto corporate treasuries were popping up everywhere with the goal of revitalizing often-moribund stock market activity through massive purchases, frequently focused on Bitcoin. This model quickly spread to the altcoin market, with a clear preference for Ethereum and its associated staking option.
Then, the initial euphoria quickly gave way to a noticeable slowdown, even for the industry leader, Strategy. This led to the emergence of the first critical situations, with companies whose market capitalization fell below their BTC holdings.
A reality that does not sit well with their shareholders, who flocked in droves to take advantage of a market net asset value (mNAV)—the ratio between the value of the cryptocurrencies held and the company’s market capitalization—capable of boosting their returns.
The shareholders of ETHZilla certainly wouldn’t disagree, judging by the company’s stock price over the last 6 months.
ETHZilla’s stock price shows a significant decline
In fact, this “technology company bridging traditional and decentralized finance,” which is heavily backed by billionaire Peter Thiel, has just announced a significant shift in its Digital Asset Treasury strategy.
The plan involves an initial sale of $40 million worth of its ETH holdings to finance a share buyback program.
Selling ETH to Buy Back Its Own Shares
According to its press release, the U.S. company reportedly launched this program on October 24 following a decision by its board of directors. The goal? To initiate the buyback of $250 million worth of the company’s shares.
To finance this program, ETHZilla announced that it has already sold “approximately $40 million of its ETH cash holdings.” This transaction has reportedly allowed the company to repurchase 600,000 common shares for approximately $12 million so far, as part of an initial phase that will involve “repurchasing its shares until its net asset value (NAV) is normalized.”
According to ETHZilla’s Chairman of the Board and CEO, McAndrew Rudisill, this move “leverages the strength of the company’s balance sheet” to carry out share buybacks described as “immediately accretive.”
By opportunistically repurchasing shares while our stock trades below NAV, we plan to reduce the number of shares available for securities lending and borrowing activities, while increasing the Company’s net asset value per share
McAndrew Rudisill
A step backward that clearly does not mark the end of the race, as “ETHZilla continues to hold approximately $400 million in ETH on its balance sheet to support future strategic initiatives.” But for how long?
