Analytics platform CryptoQuant has issued a stark warning that crypto treasury companies which raised capital through Private Investment in Public Equity (PIPE) deals face a high risk of their stock prices crashing by up to 50% due to impending selling pressure.
PIPE deals allow private investors to purchase new shares below market price, providing companies with rapid liquidity in a competitive sector but diluting existing shareholders and creating an overhang of shares. When lock-up periods expire, investors frequently exit positions to lock in profits, leading to significant drawdowns. Key examples include Kindly MD (NAKA), whose stock surged from $1.80 in late April to nearly $35 by late May after a PIPE announcement, then collapsed 97% to $1.16 once PIPE shares unlocked, almost matching the $1.12 PIPE price—a phenomenon CryptoQuant termed "PIPE price gravity."
Other affected firms include Strive Inc. (ASST), which peaked at $13 in May and has dropped 78% to $2.75, with its PIPE priced at $1.35 implying a potential 55% decline when lock-ups end next month. Cantor Equity Partners (CEP), with a PIPE at $10, has fallen nearly 70% from highs to below $20, suggesting a possible 50% drop from current levels. The report notes that even well-established crypto treasuries face pressure as their digital asset holdings approach parity with company valuations, potentially accelerating sell-offs if investors perceive limited upside compared to direct crypto exposure.
Additionally, small-cap firms are showing strain, with at least seven companies turning to debt-funded share buybacks despite trading below the value of their crypto holdings. For instance, ETHZilla secured $80 million in debt for a $250 million buyback after its stock fell 76% since August. Research indicates one in four public Bitcoin treasuries now trade below net asset value, with the average NAV multiple falling to 2.8 from 3.76 in April.
CryptoQuant emphasized that only a strong and sustained Bitcoin rally is likely to counteract this downward pressure, warning that without it, many stocks may continue trending toward or below PIPE issuance levels.