Crypto Treasury Stocks At Risk Of 50% Crash After Pipe Deals

What Happened

Crypto treasury companies that raised capital through private investment in public equity (PIPE) deals face a growing risk of their stock prices crashing by as much as 50%, according to a new market report from analytics platform CryptoQuant.

Researchers noted that when lock-up periods expire, investors frequently exit positions to secure profits, creating heavy selling pressure.

PIPE deals allow private investors to buy new shares below market price, offering companies fast access to liquidity in a competitive sector.

CryptoQuant said its PIPE was priced at $1.35, implying the stock could face another 55% decline as investors prepare to sell when the lock-up ends next month.

CryptoQuant suggested the stock could fall another 50% from current levels once PIPE investors begin to sell.

This dynamic could further accelerate sell-offs if investors perceive limited upside in stock performance compared to direct crypto exposure.

At present, the trend has already left PIPE-funded crypto treasury stocks exposed to sharp losses, with investors closely watching how upcoming unlocks will impact market sentiment in the weeks ahead.

According to a CryptoNews report, at least seven firms, including gaming, biotech, and electric vehicle companies, have launched repurchase programs despite trading below the value of their crypto holdings.

Analysts say the trend reflects investor skepticism and undermines the premise that digital assets alone can boost stock performance.

Market Context

The firm said PIPE-backed companies have already suffered steep declines, with share prices often gravitating toward their PIPE issuance levels.

Its stock surged from $1.80 in late April to nearly $35 by late May after announcing a PIPE raise. However, once PIPE shares unlocked, the stock collapsed 97%, falling to $1.16, almost identical to its PIPE offering price of $1.12.

CryptoQuant described the retracement as a case of “PIPE price gravity.”

Cantor Equity Partners (CEP), a special purpose acquisition company merging with Twenty One Capital, also conducted a PIPE priced at $10. CEP’s shares have already slipped nearly 70% from their highs to below $20.

Small-Cap Firms Turn to Borrowing as Crypto Treasury Strategy Falters

On the other hand, the crypto treasury strategy that surged across small-cap firms in 2024 is showing signs of strain as companies turn to debt-funded share buybacks to support collapsing valuations.

Why It Matters

Other crypto treasury firms may now be following the same path. Strive Inc. (ASST) peaked at $13 in May but has since dropped 78% to $2.75.

CryptoQuant concluded that only a strong and sustained Bitcoin rally is likely to counteract the downward pressure facing treasury stocks tied to PIPE deals.

Without such a rebound, it warned that many companies are likely to continue trending toward or below their PIPE issuance levels.

Details

PIPE Issuances Create Overhang Across Crypto Treasury Sector, Analysts Warn

While effective for raising cash, CryptoQuant warned that these arrangements dilute existing shareholders and leave an overhang of shares that weighs on stock performance.

One of the starkest examples is Kindly MD (NAKA), a medical company that pivoted into Bitcoin treasury holdings earlier this year.

The report noted that even well-established crypto treasuries are under pressure as the value of their digital asset holdings approaches parity with their overall company valuations.

One high-profile case is ETHZilla, formerly 180 Life Sciences, which rebranded after buying ether. Its stock has fallen 76% since August.

The company recently secured $80 million in debt from Cumberland DRW to finance a $250 million buyback.