Some people viewed the rapid growth of crypto treasuries in recent months as a bubble with an unsustainable business model. It would appear that events are currently proving them right, given a number of critical situations, such as the 97% collapse in Nakamoto Holdings’ share price.
Nakamoto Holdings: a Bitcoin Treasury victim of its PIPE financing
The party is definitely over for Digital Asset Treasuries (DATs), which have been very popular since the beginning of the year. These publicly traded companies with coffers full of cryptocurrencies are currently facing the limits of their unstable business models.
This reality is hitting some players in the sector harder than others, such as Nakamoto Holdings, led by Bitcoin Magazine CEO David Bailey, following a strategic merger with US healthcare provider KindlyMD to take advantage of its Nasdaq listing. The goal: “to become the world’s number one Bitcoin company.”
The move quickly became very popular, causing its share price to skyrocket by more than 1,000% in the space of two weeks last May. But the party was short-lived, as its shareholders are now facing a decline of more than 97% a few months later.
The problem? A PIPE (Private Investment in Public Equity) financing strategy that has a definite tendency to play nasty tricks on these crypto companies’ cash reserves.
This strategy involves selling a large number of shares to private investors at a price well below market value, with the direct consequence of significantly diluting existing shareholders… and clearly not retaining the investors concerned for very long.
“For us, it’s a total gamble, a 100% commitment.”
In the case of Nakamoto Holdings, this financing brought in approximately $563 million, with a deadline for the release of the shares in question set for last September. This was an opportunity for their holders to rush to cash in their profits, even though the stock had already fallen 86% from its May peak.
The situation was clearly exacerbated by David Bailey, who was exasperated to see these massive sales weighing down his share price. In fact, he explained at the time in a letter to his shareholders that anyone who was only there for quick gains would be better off jumping ship.
People who are just looking for a quick trade are actually very costly for us. I have received feedback that some people did not appreciate this point of view, but we want partners who are aligned with us for the long term. For us, this is a total commitment, a 100% commitment.
David Bailey
In order to manage this crisis, David Bailey has announced that he will quickly integrate his other companies—BTC Inc. and UTXO Management—into Nakamoto Holdings, bringing their operational and profitable activities to the company.
The goal is to buy more and more BTC based on the model of the leader Strategy, whose current estimated stock of 640,808 BTC allows it to not worry about this type of requirement.
