Shares in GD Culture Group experienced a significant decline of 28% on Tuesday, following the company’s announcement of a deal to acquire all assets from Pallas Capital Holding, which notably includes 7,500 Bitcoin. Under this agreement, GD Culture will issue approximately 39.2 million shares of its common stock in exchange for Pallas Capital’s assets, collectively valued at $875.4 million in Bitcoin.
Xiaojian Wang, CEO and chairman of GD Culture, emphasized that this acquisition will “directly support” the company’s strategy to establish a robust and diversified crypto asset reserve. Wang noted the growing institutional acceptance of Bitcoin both as a reserve asset and a store of value, suggesting that this move positions GD Culture favorably in a rapidly evolving market.
The firm, which utilizes artificial intelligence to create virtual personas while operating a livestreaming and e-commerce platform, is set to become the 14th largest publicly listed holder of Bitcoin, joining a growing number of companies that are accumulating cryptocurrency. This trend has seen over 190 publicly traded firms now holding Bitcoin, an increase from fewer than 100 early in the year, pushing the market to a sizable $112.8 billion, with Michael Saylor’s firm claiming a dominant 68% share.
However, investor enthusiasm appears to be waning, driven by concerns regarding the long-term sustainability of a strategy that involves raising capital to convert into Bitcoin in hopes of future appreciation. GD Culture’s stock, which dropped to $6.99 on Tuesday, saw its largest decline in over a year, bringing the company’s market capitalization to approximately $117.4 million. This decline is starkly contrasted by the company’s all-time high of $235.80 reached on February 19, 2021, representing a staggering 97% decrease.
In the world of stock trading, the issuance of new shares often prompts negative reactions, as it dilutes the ownership stake of existing shareholders. Financial advisory firm VanEck issued warnings earlier in the year regarding potential capital erosion for companies utilizing stock issuance or debt to finance Bitcoin purchases, highlighting the risks posed by stock prices that might not adequately support new investments without adversely affecting current shareholders.
In May, GD Culture announced its crypto treasury strategy, announcing intentions to sell up to $300 million in common stock to invest in cryptocurrencies, including Bitcoin and President Donald Trump’s Official Trump (TRUMP) token. This announcement came just after the company received a noncompliance warning from Nasdaq, indicating its stockholder equity had fallen below the minimum requirement of $2.5 million.
