A crypto fund with Wilbur Ross lined up to join its board was going public this year, until its own investors killed the deal.
The $1 billion plan to take ReserveOne public through a SPAC - a shell company built to take private firms public through a merger - fell through last week after two big backers asked to scrap it.
The reason was simple: the math no longer worked.
Inside the ReserveOne Collapse
ReserveOne manages crypto assets, with M3-Brigade as the blank-check company arranging the merger. Ross, the former Commerce Secretary, was lined up to join the board once the deal closed.
Bitcoin is down about half from its October high, which would have left ReserveOne shares listing at a discount to the crypto on its books. Investors would have paid less than $1 for every $1 of Bitcoin the firm held.
Add in fees owed to bankers and SPAC sponsors, and the deal stopped working for backers. It was officially scrapped in a June 12 filing.
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How the Crypto Treasury Playbook Works
The crypto treasury idea - or DAT, for digital-asset treasury - was invented by Michael Saylor in 2020, when he turned his software firm MicroStrategy into a Bitcoin buyer. Shares climbed above $500 by 2024.
The playbook only works in one direction. When Bitcoin rises, the company's shares trade above the value of its crypto, letting the firm issue new stock, buy more coins, and push the price higher.
When Bitcoin falls, the cycle reverses, with shares trading below the value of the crypto. Issuing new stock to buy more just dilutes existing shareholders.
Avalanche Treasury Corp shows the downside. The stock debuted through a SPAC on June 11 and has tumbled almost 90% since shareholders approved the deal, now trading below $1.
Other Crypto Treasury Deals Under Pressure
BSTR Holdings - short for Bitcoin Standard Treasury - is up next. A SPAC sponsored by Cantor Fitzgerald agreed to take it public last July in a deal worth as much as $1.5 billion, with shareholders set to vote June 26.
The board is backing the merger, but investors are pushing back. Meteora Capital, which had backed both BSTR and ReserveOne through private placements, has been pressuring both deals.
The pullback started earlier in the year. The Ether Machine walked away from a $1.5 billion SPAC merger with Dynamix Corp in April, paying $50 million in termination fees to exit.
The co-founder told investors that "current market conditions make it impractical to move forward." Those conditions have hit the whole sector - publicly traded crypto treasury firms have shed about $62 billion in market value since Bitcoin peaked last October.
What to Watch
The June 26 BSTR vote is the next test. If Cantor's SPAC can't push it through, the pipeline of crypto treasury SPAC deals gets a lot shorter.
Saylor's Strategy Inc. closed Tuesday at $122.81, down from above $500 in 2024. The original playbook still works for the company that wrote it.
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