Bitcoin treasury company’s reverse stock split raises Bitcoin dumping fears on Wall Street
Bitcoin treasury agency Sequans Communications mentioned it should reverse split its American Depositary Shares (ADSs) to stay listed on the New York Stock Exchange and attraction to bigger institutional traders.
In a Sept. 4 statement, the corporate confirmed that every ADS will quickly characterize 100 odd shares as an alternative of 10. The adjustment will take impact on Sept. 17, lowering the variety of excellent ADSs whereas lifting the per-share worth.
By doing so, Sequans goals to satisfy NYSE compliance necessities and attraction to funds that solely allocate capital to shares buying and selling above sure thresholds.
Sequans additionally linked the measure to its company technique, noting that the corporate stays dedicated to its Bitcoin treasury holdings. According to Bitcoin Treasuries, Sequans controls 3,205 BTC, which is valued at roughly $355 million.
Despite the reason, traders reacted cautiously to the reverse splits, with the company’s stock falling 5% to $0.80 as of press time.
According to Google Finance knowledge, this continues a year-long pattern that has seen the stock decline greater than 75% since January.
Bitcoin group considerations
The transfer has raised considerations inside the Bitcoin group, with Pledditor, a well known commentator on X, arguing that Sequans’ shares risked delisting with out the measure.
The analyst stated:
“[Sequans is] the very first Bitcoin Treasury firm pressured to carry out a reverse split as a result of poor worth efficiency…Will additionally they turn out to be the primary firm to dump their cash?”
This growth highlights the contrasting fortunes of companies holding Bitcoin on their stability sheet.
Strategy (formerly MicroStrategy) noticed its stock’s worth soar to document highs after Michael Saylor embraced the approach in August 2020.
That success has inspired a number of smaller companies like Sequans to undertake related treasury insurance policies this 12 months.
Yet analysts warn that these sorts of smaller firms face better dangers, particularly if their core enterprise underperforms.
A latest Franklin Templeton report highlighted these challenges by explaining that if the market-to-net-asset-value ratio of a Bitcoin treasury firm falls beneath 1, new fairness issuance turns into dilutive, limiting a company’s potential to boost capital.
It additionally added that falling crypto costs can set off a self-reinforcing cycle by which firms promote belongings to defend their share worth, additional miserable market sentiment.
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