PIPE private placements backfire! If coin prices fall into a bear market, “treasury companies” face a “vicious cycle”

PIPE private placements backfire! If coin prices fall into a bear market, “treasury companies” face a “vicious cycle”

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The “treasury companies” that made large-scale Bitcoin purchases through PIPE (Private Investment in Public Equity) financing are now facing tremendous pressure as their share prices fall back toward the discounted issuance levels, exposing current investors to potential losses of up to 55%. The share prices of several companies have shown similar trajectories, indicating that the structural risks of this model are becoming apparent.

According to a CryptoSlate report on September 25, this pressure pattern is consistent among several companies that used PIPE transactions to fund Bitcoin purchases. Some companies’ share prices have already fallen below their PIPE issuance prices, while others face similar risks.

As PIPE investors’ restricted shares become tradable and start trading, the selling pressure may intensify further. The report notes that five Bitcoin treasury companies jointly raised over $2.5 billion through PIPE transactions, holding between 3,205 and 43,514 Bitcoins.

This dynamic creates a feedback loop: Weak Bitcoin prices put pressure on treasury company stocks, possibly forcing additional selling that further drags down both Bitcoin and the companies’ share prices.

Stock Price Crashes Are Already a Reality, Multiple Companies Approaching PIPE Price

The “free fall” of stock prices towards PIPE issuance prices has already manifested in some companies.

The most notable example is Kindly MD. After announcing its PIPE financing at $1.12 per share, its stock price once surged 18.5 times from $1.88 to an intraday high of $34.77. However, after the PIPE shares were unlocked, the price plummeted by more than half in a single day and ultimately crashed 97%, dropping to $1.26—almost equal to the PIPE issuance price.

The shares of other Bitcoin treasury companies show similar trajectories. Strive (ASST) is currently priced at $3.00, down 78% from its 2025 peak, with its PIPE issuance price only $1.35. This gap means that if the share price returns to the issuance level, there is still up to 55% downside risk.

Cantor Equity Partners faces similar risks. Its current share price is $19.74, while the common stock PIPE price is $10.00, meaning a potential drop of nearly 50%, reflecting the substantial built-in discount of these private placements. Even more, some companies' shares have already fallen below the issuance price. Empery Digital is trading at $7.94, 21% lower than its $10.00 PIPE price. After hitting a high of $11.37 on August 13, it dropped as low as $6.50—a 42% pullback, and its market cap has even fallen below the value of its held Bitcoins.

Structural Drawbacks of PIPE Financing

The reason these Bitcoin treasury companies rely on PIPE financing is that they need quick access to large sums of cash to execute their Bitcoin strategies, but often lack traditional financing channels or sufficient operating revenue. PIPE deals offer speed and flexibility, but also inflict severe negative impact on existing shareholders.

The report points out that there are several inherent flaws in the PIPE structure. The first is immediate equity dilution. More importantly, the discounted issuance price creates a huge “overhang effect.” PIPE investors typically get registration rights, allowing them to liquidate their positions in the open market after filing a resale statement. Because their cost basis is much lower than market price, once unlocked, they are highly motivated to sell shares and lock in profits, thus subjecting the stock price to ongoing selling pressure.

This structure effectively provides early PIPE investors with a low-risk arbitrage opportunity, but passes the risk of price declines onto ordinary secondary market investors.

A Spiral Sell-off Is Feared

Most concerning for the market is that this share price drop and the weakness in the crypto market could reinforce each other in a self-perpetuating “spiral sell-off.”

CryptoQuant’s report confirms that five Bitcoin treasury companies have collectively raised over $2.5 billion via PIPE deals, with Bitcoin holdings ranging from 3,205 to 43,514 coins.

The mechanism of this negative feedback loop is as follows: Weaker Bitcoin prices pressure the treasury companies’ stock; share prices approach PIPE level, triggering selling from PIPE investors; massive sell-offs cause share prices to collapse, potentially forcing companies to sell part of their Bitcoin reserves to stabilize finances, which then further drags down Bitcoin prices and starts a new vicious cycle.

The report's conclusion is clear: Absent a renewed rally in the cryptocurrency market, many treasury companies’ share prices will continue sliding towards or even below their PIPE prices. For investors, this means that the unique financing structure and potential selling pressure must be considered key risks when assessing the investment value of such companies.

Risk Disclosure and DisclaimerMarkets have risks; investments should be made cautiously. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular circumstances. Investing based on this content is at your own risk. ```