Private investment deals may trigger heavy stock declines for crypto treasury firms
Crypto treasury companies that raised capital through private investment in public equity (PIPE) deals are now facing serious downside risks, with analysts warning of potential share price drops of up to 50%.
According to market research, many PIPE-backed firms have already suffered sharp drawdowns, with stock prices trending back toward their PIPE issuance levels. The risk comes as investor lock-up periods near their end, creating pressure to sell shares purchased at discounted prices.
PIPE funding creates selling pressure
PIPE deals allow private investors to buy newly issued shares below market value, providing companies with quick cash. While effective for raising funds, this process dilutes existing shareholders and often results in selling pressure once shares become tradable.
, “The PIPE increases the amount of shares in circulation. When investors resell, the overhang tends to push stock prices toward PIPE levels.”
Case study: Kindly MD collapse
One striking example is Kindly MD (NAKA), a medical firm turned Bitcoin treasury. Its shares surged from $1.80 in April to nearly $35 in May following a PIPE announcement. However, once PIPE shares unlocked, the stock plunged 97% to $1.16, nearly matching its $1.12 PIPE issuance price.
Analysts noted that this pattern could repeat across other treasury companies, as PIPE investors move to secure profits.
Strive Inc. (ASST) saw its stock close at $2.75, down 78% from its May peak of $13. Its PIPE was priced at $1.35, implying another 55% downside if investors sell when lock-ups expire.
Similarly, Cantor Equity Partners (CEP), merging with Twenty One Capital, priced its PIPE at $10. The stock has already dropped nearly 70% from its high and could face an additional 50% decline from current levels.
Experts emphasize that a sustained Bitcoin rally is the only likely catalyst that could prevent further declines. Without stronger crypto markets, many treasury stocks are expected to continue sliding toward — or even below — their PIPE pricing.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.