In a strategic move to enhance shareholder value, ETHZilla executed the sale of $40 million worth of Ethereum (ETH) on October 24. The company aimed to fund a share buyback program, responding to a period where its shares were trading approximately 30% below their net asset value (NAV).
Since the announcement, ETHZilla has successfully repurchased around 600,000 shares at a cost of $12 million as part of a broader $250 million buyback initiative authorized by its board in August. This action reflects the company’s commitment to utilizing its treasury effectively amidst fluctuating market conditions.
A significant catalyst for the buyback was meme stock investor Dimitri “Capybara Stocks” Semenikhin, who acquired over 2% of ETHZilla’s shares. Semenikhin made headlines following his involvement in the recent stock rally of Beyond Meat. His engagement included encouraging the company to accelerate the buyback strategy, as he believed that the shares were undervalued.
Just an hour after Semenikhin’s public letter urging active share repurchases, ETHZilla promptly announced its plans. According to Chairman and CEO McAndrew Rudisill, the company is strategically leveraging its balance sheet to execute these repurchases and improve shareholder equity.
Seeking Fair Value
Prior to the buyback announcement, ETHZilla’s shares had significantly underperformed, trading as much as 90% below their August highs. This presented a unique opportunity for investors to purchase shares below the inherent asset value represented by the company’s Ethereum holdings.
Rudisill noted that repurchasing these shares while they trade below NAV would not only reduce the total shares available for lending but would also increase the NAV available to remaining shareholders, thus optimizing the overall investment landscape for existing stakeholders.
ETHZilla completed a 1-for-10 reverse stock split shortly before the buyback announcement, a maneuver aimed at enhancing the stock price to attract institutional investors, thereby broadening its investor base.
Market Response and Future Strategy
Following the buyback news, ETHZ shares reacted positively, climbing 14.5% during regular trading on Monday and surging an additional 12% in after-hours sessions. The stock, which dipped to $12.78 pre-announcement, ended Monday at $20.65, further rallying to $23.00 during after-hours trading.
Although the timing of the Ethereum sale could have potentially been better—given that ETH prices surged from approximately $3,900 to a peak of $4,250 over the weekend—the immediate buyback initiative has undeniably restored investor confidence.
ETHZilla maintains a robust holding of around $400 million in ETH even after the sale, positioning itself among the top players in the Ethereum treasury space with continued plans to liquidate portions of its cryptocurrency for further buybacks.
The company’s strategy includes ongoing ETH sales to fund future share repurchases, emphasizing its goal to harmonize the disparity between current stock prices and the true value of its crypto assets.
Among its notable shareholders is billionaire investor Peter Thiel, who acquired a 7.5% stake in ETHZilla during the previous August, signaling strong institutional interest in the company at a time when crypto assets are garnering renewed attention.
In summary, ETHZilla’s proactive measures in the wake of investor advocacy and significant market maneuvers highlight the evolving landscape of cryptocurrency-related enterprises as they navigate asset management and shareholder engagement in the dynamic crypto market.
