According to the analysis platform CryptoQuant, cryptocurrency treasury companies that have raised funds through Private Investment in Public Equity (PIPE) transactions may see their stock prices drop by half as selling pressure emerges.
CryptoQuant stated in a market report released on Thursday that cryptocurrency treasury companies that raised funds through PIPE transactions "have encountered significant pullbacks, with stock prices typically approaching their PIPE pricing."
The report added that some companies' stocks could drop by as much as 50% more, as current stock prices are above PIPE pricing, and investors nearing the lock-up expiration are likely preparing to sell their shares.
PIPE transactions allow private investors to purchase new shares at prices below market value, which has become a common quick financing method for cryptocurrency treasury companies during periods of intense industry competition.
CryptoQuant pointed out that PIPE transactions provide companies with a fast and flexible financing channel, but also indicated that such transactions may negatively impact stock price performance, as investors tend to lock in profits.
The report stated: "PIPE increases the number of shares in circulation, diluting the equity of existing shareholders. When PIPE investors are able to sell, the resale of these new shares creates 'excess supply,' putting pressure on stock prices."
CryptoQuant analyzed the stock prices of several Bitcoin (BTC) treasury companies after conducting PIPE transactions and found that many companies experienced significant stock price declines, with prices often approaching PIPE pricing.
The report noted that the actual or anticipated selling behavior of PIPE investors led to stock price pullbacks, highlighting that Kindly MD (token code: NAKA), which transitioned from a medical company to a Bitcoin treasury, saw its stock price drop by more than half on the day the PIPE shares were unlocked.
CryptoQuant stated that Kindly MD's stock price rose from about $1.80 in late April to an intraday high of nearly $35 on the day of the PIPE announcement in late May. Subsequently, the stock price plummeted by 97%, reaching a low of $1.16, nearly touching its PIPE pricing of $1.12.
CryptoQuant noted that other cryptocurrency treasury companies that raised funds through PIPE also seem to be experiencing similar trends, with stock prices declining after PIPE transactions.
Strive Inc. (ASST) closed at $2.75 on Thursday, down 78% from its late May high of $13.
CryptoQuant stated that Strive's PIPE pricing was $1.35, indicating a potential further decline of 55% from the current price level, as its PIPE investors will be allowed to sell shares next month, adding further pressure on the stock price.
The report added that the special purpose acquisition company (SPAC) Cantor Equity Partners (CEP) merged with treasury company Twenty One Capital, with a PIPE pricing of $10. Its stock price has also dropped nearly 70% from its peak, to below $20, indicating a potential further decline of 50% from current levels.
Other analysts have also warned that even established cryptocurrency treasury companies are under pressure, as the value of their crypto assets is approaching the overall valuation of the company, which could trigger a new round of selling.
CryptoQuant stated that the continued rise of Bitcoin is the only catalyst likely to prevent these stocks from declining further. Otherwise, many companies' stock prices are likely to continue to converge towards PIPE pricing, or even fall below that level.
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Original text: “Crypto Treasuries Face 50% Downside Risk Due to PIPE Selling Pressure”
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