Strategy (formerly MicroStrategy), along with the rest of the crypto treasury industry, got spooked last week after Nasdaq issued new rules about selling stock to buy digital assets.
Unlike traditional enterprises that aim to profit by selling goods or services, crypto treasury companies primarily buy crypto on leverage by selling corporate debt, equities, and derivatives.
Exchange officials are looking to tighten listing requirements for such companies.
Indeed, moments before the New York market opened on Thursday morning, TheInformation reported that the Nasdaq was considering forcing companies to obtain shareholder approval prior to selling stock to buy digital assets.
Stocks of treasury companies like Strategy immediately traded lower on the news due to uncertainty around whether they had been obtaining shareholder approval for their dilutive capital raises.
Although Nasdaq didn’t immediately confirm TheInformation’s report, many treasury company executives were convinced the guidance was real.
Within minutes of the news, SharpLink’s common stock tanked 4%. Its executives quickly assured investors that their operations were “fully compliant with Nasdaq rules.”
In their view, they already possessed shareholder approvals for past and future share offerings to fund crypto purchases.
Investors were unimpressed, however, and let its common stock slide 19% over the past week.
Strategy also said that the new policy would have no effect the company. To Strategy’s credit, MSTR traded flat for the week and dramatically outperformed SharpLink’s 19% loss for the week.
Read more: Why billions in bitcoin treasury purchases can’t pump the price
Crypto treasury companies respond to the Nasdaq guidance
Although some executives were quick to calm fears about the rule change, many companies failed to provide assurance that they had or would always obtain shareholder approval prior to diluting shareholders in order to buy digital assets.
For example, Tether’s Nasdaq-listed Twenty One slid 13% last week, Bullish lost 18% of its market capitalization, and David Bailey’s Nakamoto crashed 31%.
None of these companies’ CEOs reacted to Nasdaq’s decision.
