NAKA Shares Experience Dramatic Plunge Amid Bitcoin Treasury Strategy Concerns
By: Eliza Bennet
The shares of KindlyMD, a healthcare company turned Bitcoin treasury firm, experienced a significant decline, falling by 54% in a single day and over 90% throughout the past month. This sharp decrease leaves the share price at merely $1.28 as of September 15. The decline follows the company's recent strategic transition and its plans to raise up to $5 billion through an at-the-market stock program after merging with Nakamoto. The objective behind this massive equity raise is to bolster its Bitcoin reserves, already marked by an acquisition of approximately 5,744 BTC valued at $635 million earlier in the month.
The stock experienced a peak above $15 in late August, followed by a rapid downward trajectory throughout September. The company's filing with the Securities and Exchange Commission (SEC), allowing for gradual issuance of shares, has instigated fears of equity dilution among investors. This dilution concern is a pivotal factor in the share price decline, as it hints at the extensive impact of such financial strategies on existing shareholders, offering no enhancements to operational cash flows.
Grayscale's recent report reflects growing investor fatigue towards digital asset treasury (DAT) companies. It highlighted Bitcoin exchange-traded products witnessing a significant outflow, marking their first monthly net redemptions since March. Particularly, $755 million in redemptions were noted, indicating a saturation of investor enthusiasm for digital assets. The analysis of 'mNAV' ratios underscores this exhaustion, portraying a convergence toward 1.0, indicating equilibrium between market capitalization and underlying asset values, and diminishing the premium investors once paid for equities providing crypto exposure.
Notably, despite the apparent exhaustion towards Bitcoin treasury companies, alternative digital assets are still seeing interest. New treasury announcements for altcoins like Solana and Cronos suggest that while interest in Bitcoin treasuries may have waned, the interest in alternative digital assets is still burgeoning. However, the stark reality of Bitcoin's price volatility exacerbates shareholder concerns, as Profits and market values remain directly linked to Bitcoin's performance rather than traditional business fundamentals. There are suspicions that the recent dramatic drop in NAKA's share price is heavily influenced by insider activity rather than broader market trends or BTC's recent price uncertainty."
