The premiums of digital asset treasury (DAT) firms are falling and it’s likely to worsen in the near future unless they take action, says New York Digital Investment Group (NYDIG).
NYDIG global head of research Greg Cipolaro said on Friday that the gap between stock price and net asset values (NAV) of major Bitcoin
BTC$111,058buying firms such as Metaplanet and Strategy “continue to compress” even as BTC has reached new highs.
“The forces behind this compression appear to be varied,” Cipolaro added. “Investor anxiety over forthcoming supply unlocks, changing corporate objectives from DAT management teams, tangible increases in share issuance, investor profit-taking, and limited differentiation across treasury strategies.”
Crypto treasury firms have become the latest fad on Wall Street and have garnered billions of dollars in the last year. Investors will typically compare share prices to the value of the assets they hold as a metric to assess their health.
Share buyback programs needed to boost health
Cipolaro said a “bumpy ride may be ahead” for crypto treasury firms as many are awaiting mergers or financing deals to go public, which could see a “substantial wave of selling” from existing shareholders.
He added many treasury companies, including KindlyMD and Twenty One Capital, are trading at or below the value of recent fundraises, and a share price drop “might exacerbate selling once shares are freely tradeable.”
If shares in a treasury company traded below its NAV, “the most straightforward course of action would be stock buybacks,” Cipolaro said, which aim to increase share prices by reducing supply.
“If we were to give one piece of advice to DATs, it’s to save some of the funds raised aside to support shares via buybacks.”
Company Bitcoin holdings hit peak, but buying slows
The holdings of Bitcoin buying companies have reached a peak high this year, at 840,000 BTC, with Strategy holding 76%, or 637,000, of the total, with the rest spread across 32 other firms, according to a CryptoQuant report on Friday.