Are the wheels falling off the Bitcoin treasury play?
What do a London-listed web designer, a spinal health researcher and a metals miner all have in common? Hint: They also have this in common with an AI-powered business consultancy and a Utah-based oil and gas producer.
Figured it out? The answer: In the past few days, they have all adopted what they call a Bitcoin treasury policy. By my last count, there are at least 16 Aim or Aquis-listed companies who have made the move. And it is spreading faster than Covid on a rush hour Central line.
On Monday Coinsilium Group adopted the policy. Tuesday, it was the turn of a consumer loans business called Amazing AI. And on Wednesday, Truspine Technologies and GSTechnologies joined the party, while Zephyr Energy said it was keen to get in on the action.
“I’ve had a call from Australia this morning, from an investment company wanting to understand what we’re doing,” a CEO of one of the 16 tells me. “Already, the reach has gone global.”
The strategy, in a nutshell, is to swap your cash reserves for Bitcoin, the justification being that cash depreciates in value over time, while Bitcoin appreciates (with the odd market crash now and then).
It’s a strategy pioneered by US firm MicroStrategy, which made the move at the height of the pandemic. “People think we’re crazy,” MicroStrategy CEO Mike Saylor said when I interviewed him in 2021.
Many still do. But not a growing group of Aquis-listed execs, nor many retail investors, who are piling in. Some brokers report that Smarter Web Company, the most experienced Bitcoin treasury operator on Aquis (they’ve been doing it for more than three weeks) has become one of the top ten stock picks for their customers, ahead of most FTSE 100 constituents.
Investor enthusiasm has transformed Smarter Web Company, a tiny web designer, from a relative minnow to a £1bn market cap business in a matter of weeks. That would place it comfortably in the middle of the FTSE 250, were it ever to be admitted.
Smarter Web Company has seized the opportunity to rake in more cash, and has raised tens of millions of pounds since the start of last month. With each successive raise, and the concomitant Bitcoin purchase, the stock has popped. But it is worth many multiples of the value of its Bitcoin purchases.
Why? The terms of its subscription agreement for new shares state that they will only be placed if they are “not below the closing bid price from the previous trading day.” Some investors will hope that means the stock never stops rising.
But what goes up must come down, and since Monday, the stock has already lost around two-fifths of its value. Many latecomers to the party have suffered similar hits, wiping hundreds of millions from their combined market caps. If you bought at the top, you’d be pretty burnt. But does it mean the party’s over, or is it just getting started?