Altcoin encryption treasury fourth quarter breakout battle: PIPE issuance, NAV discount and unlocking mechanism

Author: Timothée

Compiled by: Shenchao TechFlow

“I will make him an offer he can't refuse.” — The altcoin crypto treasury reserve company offers PIPE investors discounted mNAV entry tickets and will unlock them as soon as possible.

How to invest in crypto treasury reserve companies (or not invest).

The current DAT (Digital Asset Trust) market will be driven by the Alt DAT (altcoin digital asset trust) issued through PIPE in the fourth quarter, as these altcoin digital asset trusts are listing the fastest and will immediately impact the scale of the underlying tokens. Currently, the BTC and ETH markets are saturated, while SOL is about to face a critical moment. Altcoins are on the rise.

TL;DR

Please refer to the detailed bank comparison table Ask yourself, who is the ultimate owner? Some concerns are reasonable, most are not, please do your own research (DYOR) and read relevant documents! The press conference has ended, and the true winners will emerge.

<If you are building projects in this field, please DM me>

Why are altcoin crypto treasury reserve companies doing DAT? The reason is simple:

1. New listing method: no longer Binance, but NASDAQ!
2. Buyback + Burn… but can be monetized!

Here are some data on the reserve companies of altcoin crypto vaults that I have collected, ignoring the following content:

• Some Alt SPACs (Note: a type of altcoin special purpose acquisition company, also known as a “blank check company.” This is a publicly traded shell company created to acquire or merge with an existing company), such as $TLGY (the SPAC company “TLGY Acquisition Corporation” that serves the $ENA project) and $ETHM (the SPAC company “The Ether Machine” that serves $ETH related businesses), are expected to go live by the end of the year. While I am optimistic about $TLGY, these projects cannot use funds before completing the deSPAC (Note: refers to the process by which a SPAC completes a merger with its target company. This is a crucial stage in the SPAC lifecycle, marking the transition from a “blank check company” to one that has actual business operations) at the end of the year, and pushing media publicity before that is pointless.
• Increase the listing operating companies of BTC strategies, as they are not purely cryptocurrency projects. These companies (e.g., $SMLR) may trade at a premium from Q3 2024 to Q3 2025, but I believe that in the long term, they will trade at a discount to net asset value (NAV) per share, as investors have more and better options to express their exposure to the market.
• Use ELOCs (Equity Loop Credit) instead of PIPE for crypto treasury reserve companies (without immediate cash flow).

If you find any inaccuracies, please message me privately and I will update the content.

Key points to note

• RDO (Rapid Unlock): The unregistered portion will be unlocked after the registration takes effect, which is expected to take 30-45 days, but if the PIPE portion is completed in physical form, it may now require a shareholder vote from NASDAQ (specific guidance to be determined).
• Pre-financing warrants: Typically used to avoid exceeding a certain ownership threshold to meet reporting requirements.
• Warrants as an Incentive: Although warrants are typically seen as a sweetener for investments, they help DAT lock in future financing prices to prevent mNAV from turning into a discount.
• Behavior of PIPE investors: It can be assumed that 99% of PIPE investors will sell upon unlocking.
• Large-scale fundraising strategy: Some players achieve WKSI (Well-Known Seasoned Issuer) status through large-scale fundraising and high circulation, thereby immediately launching ATM (At-the-Market) and monetizing the premium (we have seen this strategy on $BMNR, $SBET, and possibly $OCTO).

• The importance of structure: Focus on the net asset value (NAV) per share price, and whether there is future hanging pressure from warrants, etc.
• Pay attention to the spending situation of crypto treasury reserve companies on bank fees. Currently, crypto treasury reserve companies with a scale of less than 100 million USD often pay excessive fees during the startup phase. The performance of banks varies from person to person; some excel in brand building, some in structural design, and others in finding shell companies, etc.

Data that needs to be supplemented in the future / Questions to ask during due diligence:

• Key Spokesperson (Attention ROI): Who can drive market attention? Distributing content is certainly important, but telling a good story is equally crucial. While not everyone can become an industry leader like Tom Lee (@fundstrat), there's no need for a spokesperson of that caliber to drive grassroots development. For example, the crypto treasury reserve company $SHOT of $BONK has core contributor @theonlynom.

Ideally, the spokesperson should frequently appear in the news, such as Bloomberg.

• Financial Management: What are the expenses of the crypto treasury reserve company? Is it a drag on cash flow?
• Liquidity: The percentage of circulation and trading volume relative to the fundraising scale.
• Buying Pressure: The percentage of net new funds raised relative to the circulating market value of the token—how much is considered too much? How much is significant enough? 10%? 20%?
• Target company's business: Before the crypto treasury reserve company completely divests from traditional business, does the target company have any existing liabilities or long-term risks?
• Foundation Participation: Is this cryptocurrency reserve company supported by a foundation, or is it just one of many cryptocurrency reserve companies?
• Buyback: Does the cryptocurrency treasury reserve company use part of the raised funds for defensive buybacks? Has it raised warrants or convertible bonds to establish a separate fund pool?
• Future Strategy: If a crypto treasury reserve company raises funds in a one-time PIPE deal, this is just a one-time cash acquisition. Attention needs to be paid to proactive communication from the target company or new team (or foundation). This is not the cryptocurrency domain; there will be real-world consequences.
• PR/IR for Retail Investors: If a crypto treasury reserve company places data before the narrative, their strategy is flawed. Check their tweets—who do you think is writing these tweets? Who is the target audience? Altcoin crypto treasury reserve companies need to establish awareness among retail investors first.

Key Concerns (FUD) and Countermeasures

Yes, this is true for crypto treasury reserve companies that cannot compete to become market leaders. For example, with ETH, mNAV compression is caused by excessive dilution from ATMs and overall market dynamics. But you should ask yourself whether a certain crypto treasury reserve company can increase its per-share value within a few months instead of just holding spot. If the answer is yes, then this discounted mNAV is your opportunity. Not all crypto treasury reserve companies are the same; there should be a top winner in each sector (such as BTC/ETH/SOL and Altcoin), depending on their ability to tell their story. So far, we have not seen any crazy leverage behavior among these crypto treasury reserve companies, as most of them are financed through equity. If leverage does occur, it will not create a crazy chain reaction, but is more likely to result in a larger market slowdown, such as indigestion. Less efficient crypto treasury reserve companies may need to sell tokens to buy back shares, which could put some pressure on token prices. You have to believe that NASDAQ has stricter listing requirements. Companies that lock tokens in physical form will not perform well. The market has already noticed this (thanks for your attention!), and I believe the market will act as a price arbitrator at the time of listing.

My outlook for the fourth quarter

• The market for BTC/ETH/SOL has basically completed its layout, and unless it's a regional project, there won't be too many new competitors entering the market.
• We may see a small number of the top 50 crypto treasury reserve companies supported by the foundation, with a total fundraising scale expected to be around 250 million USD, including in-kind contributions.
• The potential obstacles of mNAV compression and physical contributions may mean that traditional VCs may no longer participate in these transactions, leading to a potential depletion of funds. This also means that the prices of shell companies may decline.
• Structure is crucial - we will soon see whether the cryptocurrency treasury reserve company launching in July/August can lay the groundwork for long-term success in the fourth quarter, specifically whether it can gain meaningful media attention and effectively operate its capital structure after unlocking.
• I am not optimistic about SPACs unless you have a star team and tell a very differentiated story. You can refer to the development of the ETH crypto treasury reserve company sector, for example, the leading performance of $BMNR, and assume that BTC projects will be similar—if you choose to challenge the king (like $MSTR), you must ensure success.
• I still believe that crypto treasury reserve companies have a net positive impact on the crypto industry as long as they can raise net new capital from the equity markets and use it to drive the flywheel effect of their own ecosystems.