VanEck Warns of Shareholder Dilution Risks in Bitcoin Holding Firms

VanEck has raised concerns about the potential risks of capital erosion for companies that hold Bitcoin as a treasury asset. The primary issue is the issuance of new shares near or below the company's Net Asset Value (NAV), which can lead to shareholder dilution and devalue the company’s equity. This risk is particularly pronounced in firms that engage in aggressive at-the-market (ATM) equity programs.

Matthew Sigel, the head of digital assets research at VanEck, has warned that as the stock prices of these companies approach their NAV, the issuance of new shares to acquire more Bitcoin could lead to shareholder dilution. This dilution occurs because each share represents a smaller piece of the company’s Bitcoin holdings, which can erode shareholder value rather than create it. Sigel pointed out that under normal circumstances, companies like Semler and Strategy have stock prices that trade above the value of their Bitcoin holdings, indicating that investors are willing to pay a premium for the stock. However, if a company’s stock price falls to or below its Bitcoin NAV, it signals a red flag. At this point, selling new shares becomes detrimental as it dilutes the value for existing shareholders. Sigel emphasized that at the break-even level, offerings no longer create value; instead, they destroy shareholder value. This situation can become extractive, where the company’s management continues to raise money via at-the-market (ATM) offerings, benefiting more than the shareholders.

To mitigate these risks, Sigel advised companies pursuing a Bitcoin treasury strategy to adopt safeguards while premiums still exist. He suggested pausing ATM issuance if the stock trades below 0.95 times NAV for 10 or more trading days. Additionally, he recommended prioritizing buybacks when Bitcoin appreciates but the equity fails to reflect that value. Sigel also mentioned the possibility of launching a strategic review if the NAV discount persists, which might include a merger, spinoff, or sunset of the Bitcoin strategy. He stressed that executive compensation should be aligned with NAV per share growth, rather than the size of the Bitcoin position or total share count.

Sigel’s warning comes as concerns mount over the potential for shareholder dilution and value erosion in firms that aggressively raise capital to acquire Bitcoin. He highlighted that this issue has occurred before with Bitcoin miners, where persistent issuance and outsized executive pay were prevalent. Sigel urged boards and shareholders to act with discipline now, while they still have the benefit of optionality, to avoid similar pitfalls in the future.

Bitcoin’s price swings add complexity to treasury management. When firms issue equity near NAV, they risk losing the premium that justifies holding Bitcoin on their balance sheets. By applying VanEck’s strategies, companies can build stronger capital structures, especially during market downturns. Implementing strict NAV-based issuance policies, along with thoughtful buybacks and capital reviews, can safeguard long-term shareholder value—even in volatile markets.