Public companies buying up Bitcoin should consider sunsetting the tactic altogether if their stock prices drastically drop, according to a VanEck executive who warns that a major Bitcoin-scooping firm is close to being caught out.
“As some of these companies raise capital through large at-the-market (ATM) programs to buy BTC, a risk is emerging: If the stock trades at or near NAV [net asset value], continued equity issuance can dilute rather than create value,” VanEck's head of digital assets research, Matthew Sigel, said in an X post on Monday.
He added that no public company has traded below the net asset value of its Bitcoin (BTC) for a sustained period, but that Semler Scientific, Inc. (SMLR) “is now approaching parity.”
Semler stock drops by half as Bitcoin soars
Semler is a medical technology firm that first bought Bitcoin in May 2024 and has grown its holdings to the 13th largest among public firms, with 3,808 BTC worth $404.6 million.
Bitcoin has continued to hit new highs this year, but Semler’s share price has fallen by over 45% this year as of the end of trading on Friday to the same level from when the company first started buying Bitcoin, pulling its market cap down to around $434.7 million.
Semler’s multiple of NAV (mNAV), which takes its market capitalization and divides it by its Bitcoin stack, has dropped below 1x to around 0.821x, according to data from Coinkite.
Bitcoin buying firms need “safeguards now”
Semler, as is typical among other Bitcoin-buying firms, has undertaken multiple rounds of shares and debt issuance to raise money to buy more Bitcoin, with the company and investors betting the cryptocurrency will lift Semler’s stock.
However, as gains may not always be the case, Sigel warned Bitcoin buying firms to “adopt safeguards now, while premiums still exist.”
He advised that companies investing heavily in Bitcoin should pause their at-the-market offerings if their stock trades below a net asset value of 0.95x for at least 10 days.
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Those firms should also “prioritize buybacks when BTC appreciates, but the equity fails to reflect that value.”
Finally, Sigel said companies should “launch a strategic review if NAV discount persists.”
“That might include a merger, spinoff, or sunset of the BTC strategy.”
Pay execs for growth, not Bitcoin stack size
Sigel said that Bitcoin buying companies should align compensation for their executives with the growth of net asset value per share, “not with the size of the Bitcoin position or total share count.”
He again urged company leaders to “act with discipline now, while they still have the benefit of optionality.”
“Once you are trading at NAV, shareholder dilution is no longer strategic. It is extractive,” Sigel said.
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