Crypto Treasury Stocks at Risk as PIPE Deal Lock-Ups Expire
Several crypto treasury companies that raised capital through private investment in public equity (PIPE) deals could face steep share price declines, according to a report by analytics firm CryptoQuant. The report highlights increased selling pressure as investors approach the end of PIPE lock-up periods.
PIPE Deals Exacerbate Stock Dilution
PIPE arrangements allow private investors to purchase new shares at prices below market value, giving companies quick access to capital. These deals have been widely used by crypto treasury firms seeking to bolster cash reserves during periods of market uncertainty.
CryptoQuant cautioned that while PIPE deals offer flexibility, they also dilute existing shareholders and often create a significant overhang. "The resale of these new shares creates an �overhang� that pressures the stock price," the report stated. As investors become eligible to sell their unlocked shares, many are likely to realize profits, putting further strain on stock prices.
Recent Examples Show Sharp Declines
The report cited several examples of crypto treasury firms experiencing major drawdowns following PIPE transactions:
- Kindly MD (NAKA): Shares surged from $1.80 to nearly $35 after its PIPE deal, but fell by 97% to a low of $1.16 as the PIPE lock-up expired, matching its $1.12 PIPE price.
- Strive Inc. (ASST): Shares dropped 78% from their May peak, closing at $2.75. With the PIPE priced at $1.35 and more shares unlocking next month, a further 55% decline is possible.
- Cantor Equity Partners (CEP): The company�s PIPE was set at $10. Its shares have fallen almost 70% from their high, currently below $20 and still above the PIPE price, implying more room for declines.
Outlook Remains Cautious
CryptoQuant noted that anticipated selling by PIPE investors continues to pressure share prices, especially as the values of crypto holdings held by these companies approach the companies� own valuations. Other analysts have echoed these concerns, warning that even established crypto treasury firms are not immune to such downtrends.
Citing the link to the broader market, CryptoQuant said, "A sustained rally in Bitcoin is the only likely catalyst that could prevent further declines in these stocks. Without it, many are poised to continue trending toward�or below�their PIPE prices."
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