A reverse split is being undertaken by Sequans to satisfy NYSE regulations amid corporate strategy adjustments and concerns from the Bitcoin community.
Bitcoin treasury firm Sequans Communications announced that its American Depositary Shares (ADSs) will be reverse split to retain a listing on the New York Stock Exchange and attract major institutional investors.
In a Sept. 4 statement, it was confirmed by the company that each ADS will soon equate to 100 common shares instead of 10. The adjustment, which will become effective on Sept. 17, will diminish the number of outstanding ADSs while lifting the per-share price.
Through this action, Sequans aims for NYSE compliance, and a target is being sought to attract funds that only invest in stocks priced above specific thresholds.
The measure was also connected by Sequans to its corporate strategy, with the company noting its steadfast commitment to its Bitcoin treasury holdings. According to Bitcoin Treasuries, Sequans controls 3,205 BTC, which is valued at roughly $355 million.
Despite the company’s explanation, investors’ reaction to the reverse split was cautious, as the firm’s stock fell 5% to $0.80 as of press time.
Based on Google Finance data, a year-long trend in which the stock has depreciated by over 75% since January is being continued.
Bitcoin Community Expresses Concerns Over Corporate Strategy
Concerns have been prompted by the move within the Bitcoin community, with Pledditor, a well-known commentator on X, contending that Sequans’ stocks risked delisting in the absence of the measure.
“[Sequans is] the very first Bitcoin Treasury company forced to perform a reverse split due to poor price performance…Will they also become the first company to dump their coins?”
The analyst stated:
The divergent outcomes for firms holding Bitcoin on their balance sheets are underscored by this development.
A record-high valuation for its stock was attained by Strategy (formerly MicroStrategy) after Michael Saylor embraced the approach in August 2020.
Several smaller firms like Sequans have been prompted by that triumph to embrace comparable treasury policies this year.
Market experts caution that smaller enterprises encounter amplified vulnerabilities, particularly when their primary operational strategy is compromised by performance challenges that were not initially anticipated.
These challenges were underscored in a recent Franklin Templeton report, which explained that if the market-to-net-asset-value ratio of a Bitcoin treasury company drops below one, new equity issuance becomes dilutive, limiting the firm’s ability to raise capital.
It was also noted that declining crypto prices can initiate a self-perpetuating cycle where companies liquidate assets to defend their share price, further compounding the decline in market sentiment.
