VanEck Warns Public Companies Holding Bitcoin Face Shareholder Dilution Risk

Matthew Sigel, the Head of Digital Asset Research at VanEck, has issued a warning regarding the practices of publicly listed companies that hold Bitcoin. According to Sigel, at least one such company, SMLR, is nearing a point where its stock price is equivalent to its net asset value. This situation raises concerns about the potential dilution of shareholder value if the company continues to issue shares to purchase more Bitcoin.

Sigel emphasized that issuing additional shares to acquire Bitcoin in this scenario would not enhance shareholder value but rather dilute it. He suggested that companies implement safeguard mechanisms to protect against such outcomes. These mechanisms could include suspending share issuance when the stock price falls below the net asset value, prioritizing share buybacks, and adjusting executive compensation structures to align with shareholder interests.

Sigel urged the boards of directors of these companies to take proactive measures to avoid the pitfalls commonly seen in mining companies, such as excessive stock issuance and inflated executive compensation. By establishing these protective mechanisms, companies can better safeguard shareholder value and ensure sustainable growth.