ETHZilla's Over $5 Million Debt Repayment: Crypto Treasury Strategy Changes

Public companies focused on managing crypto assets are recently reviewing their debt management and treasury strategies. ETHZilla (ETHZ), a firm listed on Nasdaq known for ether accumulation, recently demonstrated a concrete example of this change. This shift in the company’s approach has become a clear indicator of how the crypto treasury bubble period has reversed.

$74.5 Million Ether Sale for Debt Management

ETHZilla sold approximately 24,291 ETH for about $74.5 million to repay senior secured convertible bonds valued at over $5 million. This move was the second sale from the company’s treasury. The average sale price was recorded at $3,068.

Following this transaction, the firm established to hold ETH retained approximately 69,800 ETH. While the current ETH price hovers around $2.38K, the company’s remaining assets represent a value of over $200 million. However, the stock performance tells a very different story: ETHZ shares lost 4% on Monday and have dropped about 96% from their peaks recorded in August.

The New Reality of Digital Asset Treasury Companies

Digital asset treasury companies are under increasing pressure following sharp declines in stock prices. Many public companies that raised funds to accumulate crypto assets earlier this year are now trading at a net asset value (NAV) discount. This situation has made it difficult or impossible to raise capital for additional asset accumulation.

As a result, some firms have started to manage debt by touching their crypto reserves. This shift in ETHZilla’s strategy is part of a broader trend. The fact that companies focused on buying crypto assets last year are now turning to debt reduction and stock price support indicates a loss of confidence in the crypto treasury model.

Stock Prices vs. NAV Discount Issue

In early Q4, ETHZilla sold $40 million worth of ether and used this revenue for share buybacks. At that time, the stock was around $20, but now it is below $7. This decline raises questions about the effectiveness of the buyback strategy.

The stock’s performance significantly underperforming the asset value highlights investor confidence issues. The value of the crypto assets backing the company’s stock could not offset the increasing liabilities. ETHZilla’s management indicated they may continue to raise capital through ETH sales or additional share offerings to advance their business plans.

This situation is also common among similar firms. For example, companies like BitMine, which hold over 4 million ETH in treasury and have purchased ether worth $300 million, are examples. However, the overall trend shows a shift from crypto treasury accumulation to debt management. Companies like ETHZilla, which paid over $5 million, are characteristic of this new era.