How do publicly listed companies follow the trend of buying coins, and what are the potential returns and risks?

The premium frenzy of top tokens and the value trap of tail assets.

Written by: kushagra

Compiled by: Luffy, Foresight News

Every day we can see new cryptocurrency treasury strategy tools being born. This article will analyze the performance of Bitcoin as a corporate treasury strategy and the key trends of cryptocurrency strategies based on Private Investment in Public Equity (PIPE).

Each region will launch its own "Bitcoin" strategy, but my concern is about the Right Tail Assets that may adopt a similar strategy. Bitcoin is great as a reserve asset, but what if it's your beloved L1 or L2? It makes no sense. After all, who will be the marginal buyer of the 50th zkEVM L2? Not to mention, tail assets have a low liquidity problem, and the paper gains seen by market participants may not really be realized. So, friends, be cautious.

Operating Mechanism

There are three main paths to build such treasury tools:

• Business Transformation: Near-bankrupt companies are turning to crypto financial services firms, implementing crypto strategies (such as Solana staking);
• Mergers and Acquisitions: Merging private enterprises into small and medium-sized companies listed on NASDAQ/NYSE;
• SPAC Merger: Restructuring business and treasury strategies through a merger with a Special Purpose Acquisition Company (SPAC).

Regardless of the path taken, all strategies must be financed through Private Investment in Public Equity (PIPE) and convertible bond financing. Here are the typical operations of PIPE:

1. Target shell companies: typically SPAC tools or failed small and medium-sized companies publicly traded on NASDAQ or the New York Stock Exchange.
2. Collaborate with the company to create reserves for Bitcoin or any other cryptocurrency asset.
3. Require investment banks to issue / construct two types of instruments: i) traditional PIPE and ii) convertible bonds
4. Traditional PIPE: Selling common or preferred stock directly to qualified investors at a fixed price (usually at a discount).
5. Convertible Bonds: Issuing convertible bonds or convertible preferred shares, which allow investors to convert them into ordinary shares of the issuing company within a certain period or upon meeting specific conditions. These typically provide downside protection and partially reduce upside potential.

For example, the Trump Media and Technology Group (DJT) adopted the following structure:

• Financing $1.44 billion by selling nearly 56 million shares (at $25.72 per share);
• Issued $1 billion of 0% convertible senior secured bonds due 2028 (conversion price of $34.72 per share).
• This is a hybrid structure of stock dilution and senior convertible debt, combining characteristics of PIPE and convertible bonds.

Note: Compared to other issuance methods, PIPE is subject to less SEC regulation, but it may lead to the dilution of existing shareholders' equity. These shares come with registration rights, meaning the company must submit a registration statement to the SEC, allowing PIPE investors to resell their shares to the public after the lock-up period.

Investor Framework

You may wonder why investors are willing to participate in such issuances. The reasons can be summarized in three points:

• Team Intellectual Property: The industry influence of the chairman or core team is crucial. For example, the ETH strategy launched by Joe Lubin (co-founder of Ethereum) can easily be likened to "the Microstrategy of Ethereum." After witnessing the success of MSTR (Microstrategy), investors eagerly participated in the ETH strategy due to Joe's industry status, after all, ConsenSys has always been vital to the development of the Ethereum ecosystem.
• Asset Quality: The selection of reserve assets is crucial. A wave of tail assets (such as tokens in the top 50 by market capitalization) is expected to be included in the treasury of small enterprises. However, these tail asset strategies carry higher risks, as their volatility is typically greater than that of Bitcoin.
• Crypto Premium: The reason why such PIPE tools can raise funds on a large scale is not because Bitcoin or Ethereum has seen a "100-300% overnight surge" in their value within corporate strategies, but rather because traditional hedge funds and crypto-native institutions are flooding in due to fear of missing out (FOMO) on the current arbitrage opportunities in the primary/secondary markets. Indeed, these strategies may achieve returns or leverage effects through staking and lending, but can this support a premium of three times the net asset value? Probably not.

Overview of Corporate Crypto Treasury Transactions in the Last Two Months

So far, the most controversial treasury transaction is the case of Trump Media Company. This has raised questions about "strategic Bitcoin (or digital asset) reserves" - how to manage potential conflicts of interest? At least in the short term, inspired by Microstrategy (MSTR) and Metaplanet (3350.T), both private and public investors expect such financing to yield high returns in the medium to short term.

MSTR initially viewed Bitcoin as a store of value and an anti-inflation tool; today's crypto PIPE achieves more active management and yield generation through staking and lending. The demand from private investors for crypto PIPE is almost frenzied, as the stock price often rises 2-10 times upon the announcement of such transactions.

Performance of the Enterprise's Crypto Treasury Strategy

Although history cannot predict the future, there is a wealth of data available for analyzing Bitcoin strategies. Below is a performance study of corporate pure Bitcoin treasury strategies, in which I examined 17 publicly traded companies:

The list includes 17 listed companies that have a Bitcoin holding ratio exceeding 30% of their market value and hold more than 300 BTC.

So far, the most successful company adopting this strategy is Microstrategy, which was one of the first to enter the corporate Bitcoin strategy. However, with the introduction of Bitcoin ETFs and new treasury strategies, its "Bitcoin / Market Cap" premium may gradually fade. In the short term, announcements of Bitcoin funding strategies often increase the likelihood of short-term or even long-term returns. The rate of return varies greatly, even across different time frames. However, over time, performance tends to decline:

• 1 Year Average Return Rate: 526% (59% of companies are profitable);
• 3 Year Average Return: 119% (only 13.64% of companies are profitable);
• Historical average return rate: 515% (59% of companies are profitable).

Note: The median return is significantly lower than the mean, indicating that extreme values have inflated the overall average. From 2020 to 2025, Bitcoin outperformed most asset classes, which is a core driver of high returns for these companies.

Bitcoin Strategy Performance Heatmap

• Success Cases: Companies with strong community consensus, capable of increasing the "Bitcoin per Share Holding" and creating financial engineering opportunities perform excellently.
• Failure cases: For example, SOS Limited (formerly a cryptocurrency mining company that transitioned to commodity trading) faced difficulties in its main business and poor execution of Bitcoin strategies, resulting in underperformance. It is evident that companies with a "pure Bitcoin strategy" are more recognized by the market than those with "small allocations."
• Risk Warning: Bitcoin-related companies may face extreme volatility and drawdowns, but when the company's net asset value (NAV) exceeds its market value, there may be opportunities for a turnaround. It is important to note that for companies on the brink of bankruptcy, holding only a small amount of Bitcoin on the balance sheet cannot reverse the decline.

Conclusion

With the successful IPO of Circle as a pure stablecoin company, the stock market and the crypto market are accelerating their integration. It is expected that more high-quality crypto companies will go public in the future, along with more crypto strategy tools emerging. In light of the recent market enthusiasm for crypto strategies, investors can capture opportunities through the following framework: team influence, asset quality, sustainability of crypto premiums, and in-depth analysis of specific projects.

However, it is important to be highly cautious when the strategy involves tokens outside of the top 20 by market capitalization. Not only do these tokens lack Bitcoin-like hard asset attributes, but they often lack consistent net buying demand. From a structural point of view, investors must be clear: 1) what the underlying business strategy is being implemented by the company; 2) the capital structure of the transaction (debt, convertible bonds, PIPE); and 3) net asset value per share.