Bitcoin Treasury Companies’ Stocks Plunge As BTC Falls Below Key Levels

Onchain analytics firm CryptoQuant has warned that some Bitcoin treasury companies could fall more than 50% in value. The firm disclosed this in a weekly report focusing on treasury companies that raised funds through private investments.

The report was released during a steep drop in Bitcoin treasury stocks. This decline followed Bitcoin’s fall below the $110,000 mark. The market reaction highlights growing investor caution.

Bitcoin Treasury Companies Using PIPE Are At More Risk

CryptoQuant reports that Bitcoin treasury companies relying on PIPE funding face heightened risk. Their capital-raising method may be more vulnerable during market downturns.

PIPE is a way for publicly traded companies to raise capital by selling new shares to private accredited investors. While this is an efficient and easy way to raise capital, analysts observed that it also poses a problem.

Per CryptoQuant data, stocks of most of these companies that used PIPE have fallen since the raises. In some cases, the stock declined to the level it was at the time of the capital raise.

This was the case for Kindly MD (NAKA). It saw its stock value increase by 18.5x after announcing its PIPE raise. NAKA is now down 97 with over 50% fall in a single day after the stock unlock.

However, other treasury companies have already fallen below their PIPE price. Empery Digital (EMPD) raised $500 Million at a $10 share price but has dropped to $7.94. Sequan Communications (SQNS) is also trading below its PIPE offering price.

Meanwhile, some companies with PIPE raises are still trading above the PIPE price despite declines.  Strive Inc. (ASST) is down 78% from its year high but is still worth $3, above its $1.35 PIPE price.

However, CryptoQuant analysts do not expect the stock to maintain that price for long. They noted that the PIPE shares will unlock next month and expect that to increase selling pressure for the stocks.

The analysts explained the impact of PIPE on stock performance, noting that it is due to stock dilution.

It said

Beyond that, most PIPE shares are also issued at a discount to the market price. This makes it easier for PIPE investors to profit even when the stock trades at the PIPE price.

Treasury Companies Face More Pressure

Meanwhile, the pressure on Bitcoin treasury companies’ stocks is not limited to those with PIPE raises. Companies that adopted other forms of capital raises have seen their stock value drop following BTC’s recent performance.

For instance, Strategy (MSTR) is down more than 12% in the past month, falling to $300. Metaplanet has declined further with a 41% drop in the same period. Their performance correlates with BTC’s 12% decline from its peak price.

Interestingly, there are already concerns about these companies losing their multiple-to-Net Asset Value (mNAV) premium. That mNAV is now trending towards 1 for most of these companies.

According to Strategy, MSTR mNAV has fallen to 1.44. At the same time, Metaplanet is not doing much better with its mNAV, also at 1.21.

Despite the clear headwinds, Bitcoin treasury companies are still buying. Strategy and Metaplanet recently announced buying 850 BTC and  5,419 BTC, respectively, a few days ago.

River data also shows that businesses have surpassed exchange-traded funds (ETFs) in Bitcoin holdings. It is a sign that companies are still buying.

Nevertheless, it is unclear how long this will last if BTC keeps declining. CryptoQuant analysts note that a sustained BTC rally is crucial for the treasury companies to halt their decline and recover.