Matthew Sigel, head of digital assets at VanEck, has issued a warning for public companies holding Bitcoin in their treasuries. He highlighted that shareholders may face increasing risks if companies do not reevaluate their capital allocation strategies.
Risks for Shareholders
Sigel emphasized that companies with Bitcoin treasuries may face growing risks for shareholders as their stock prices start to converge with net asset value (NAV). NAV reflects the value of a company's Bitcoin holdings per outstanding share. If a company's stock trades above NAV, it can increase shareholder value; however, there is a risk that companies may issue new shares to acquire more Bitcoin.
Sigel's Recommendations
To counter potential value erosion, Sigel proposed several protective measures for companies. He suggested halting at-the-market offerings if stocks remain below 0.95 times NAV for ten consecutive trading days, initiating buybacks when Bitcoin prices rise but stocks do not follow, and conducting a strategic review if the discount persists.
State of the Bitcoin Treasury Market
Sigel also noted that Bitcoin treasury strategies continue to gain traction in public markets. A report from Standard Chartered revealed that 61 public companies now hold a combined 673,897 BTC, representing approximately 3.2% of Bitcoin’s total supply. Among them, 58 are still trading above NAV, demonstrating sustained investor interest in gaining Bitcoin exposure through equities.
Matthew Sigel's attention to issues surrounding Bitcoin treasuries underscores the need for a strategic approach to safeguard shareholder interests and optimize capital investments in a changing market.
