Some viewed the rapid growth of crypto treasuries over the past few months as a bubble with an unsustainable business model. It appears that recent events are now proving them right, given numerous critical situations, such as the 97% plunge in Nakamoto Holdings’ stock.
Nakamoto Holdings: A Bitcoin Treasury Falling Victim to Its PIPE Financing
The party is definitely over for Digital Asset Treasuries (DATs), which have been very popular since the start of the year. Indeed, these publicly traded companies with treasuries inflated by cryptocurrencies are currently facing the limits of their unstable business models.
This reality is hitting certain players in the sector particularly hard, such as Nakamoto Holdings—led by Bitcoin Magazine CEO David Bailey—following a strategic merger with the U.S. healthcare provider KindlyMD, aimed at capitalizing on its Nasdaq listing. The goal: “to become the world’s number one Bitcoin company.”
The move quickly gained popularity, causing the stock price to skyrocket by more than 1,000% in just two weeks last May. But the celebration was short-lived, as shareholders now face a decline of more than 97% just a few months later.
Nakamoto Holdings’ stock price plummets 97%
The problem? A PIPE (Private Investment in Public Equity) financing strategy that seems to consistently backfire on these crypto companies’ cash flows.
Essentially, this 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’ stakes… and apparently failing to retain those investors for very long.
“For us, this is a total gamble, a 100% commitment”
In the case of Nakamoto Holdings, this financing raised approximately $563 million, with the lock-up period for these shares set to expire last September. This gave shareholders the opportunity to rush to cash in their profits, even as the stock had already plummeted 86% from its May peak.
The situation was clearly exacerbated by David Bailey, who was exasperated to see these massive sell-offs dragging down his stock price. In fact, he explained at the time in a letter to his shareholders that anyone there solely for quick profits would be better off jumping ship.
People who are only looking for a quick trade actually represent very costly capital for us. I’ve received feedback indicating that some didn’t appreciate this viewpoint, but we want partners who are aligned with our long-term vision. For us, this is an all-in bet, a 100% commitment.
David Bailey
To manage this crisis, David Bailey announces that he will quickly integrate his other companies—BTC Inc. and UTXO Management—into Nakamoto Holdings, bringing their operational and profitable activities into the company.
The goal is to continue buying more and more BTC, following the model of Strategy, whose holdings—currently estimated at 640,808 BTC—allow it to remain unconcerned about such requirements.
