Bitcoin treasury Nakamoto aims for reverse stock split. Is it a good idea?

Bitcoin treasury Nakamoto’s stock has collapsed 99%. And to avoid getting kicked off the Nasdaq, it’s now turning to a bit of financial engineering.

But not everyone is convinced it will work.

“The reverse split buys time,” Satish Patel, investment analyst at CoinShares, told DL News. “It’s not a fix to their business strategy.”

The beleaguered Bitcoin treasury has been facing gale force headwinds after it raised hundreds of millions to create the “Bitcoin treasury for Bitcoin treasuries.”

Shares today trade at $0.21; last year they topped $34.

In December, Nakamoto received a delisting notice from the Nasdaq after its stock fell below the exchange’s $1 minimum requirement.

So now it wants to change gears — and is counting on a reverse stock split.

A reverse stock split is an artificial form of boosting a company’s stock price without actually addressing any of the underlying issues that have caused the price to drop.

In a reverse stock split, a company consolidates existing shares; with fewer shares, those that remain trade at a higher price. Think of it as swapping five $1 bills for one $5 bill. Meanwhile, the overall value of the company remains unchanged.

Nakamoto wouldn’t be the first Bitcoin treasury to attempt a reverse stock split. French-based chipmaker Sequans Communications also managed to pull it off in September 2025 after the Nasdaq threatened to delist it. Shares are worth $2.70 today.

‘Theater of the Absurd’

What renowned short seller Jim Chanos recently called the “Theater of the Absurd” went a bit like this.

In February, Nakamoto completed all-stock acquisitions of BTC Inc., which owns Bitcoin Magazine, and UTXO Management, a Bitcoin-focused hedge fund. Both companies were founded by Nakamoto founder David Bailey.

The deal doubled Nakamoto’s outstanding shares to 690 million, massively diluting existing shareholders.

One month later, Nakamoto disclosed it had sold 284 Bitcoin for $20 million at an average price of $70,000 per coin. That’s a 40% realised loss against its average purchase price of around $118,000.

That sale raised a critical question, however. If the recently acquired businesses — BTC Inc. and UTXO Management — were generating sufficient cash flow, why sell Bitcoin at such a steep loss?

“The reverse split signals that the company cannot self-fund operations from its acquired businesses and remains dependent on capital markets access,” said Patel.

As long as Nakamoto is on the exchange, the company can sell new shares to raise cash whenever it needs to, up to $4.99 billion worth.

Lose the listing, lose that ability.

Bailey fires back

CEO David Bailey strongly disputed Patel’s analysis.

“Not only is the analysis nonsense — how does a reverse split have any relevance to our operating business? — but the basic facts are incorrect,” Bailey told DL News.

“If the reverse split isn't approved we have another six months to get the votes, but we talk to our investors daily and it’s widely viewed as the right decision.”

Bailey is correct that if the initial vote fails, the Nasdaq could grant an additional 180-day extension.

But Patel argues that the issue isn’t about split mechanics. Instead, it’s about whether the business can function without constant capital raises.

'Negative connotation'

Not everyone is bearish on the strategy, however.

André Dragosch, head of research at Bitwise, thinks the reverse stock split makes sense for Nakamoto.

“It’s true that their stock price has fallen quite significantly due to the crypto winter and the gradual distributions of early PIPE investors,” Dragosch told DL News referring to someone who buys shares of a publicly traded company at a fixed price before those shares become available to regular investors.

“A reverse stock split is usually done in order to avoid the impression of a ‘penny stock’ that bears a negative connotation.”

Track record

Patel also pointed out that the empirical evidence on the success of reverse splits is pretty poor.

Most companies post negative returns over the following six to 12 months, mostly because firms that execute them are typically in distress, “and split signals distress to the market without resolving it.”

Examples of unsuccessful splits abound. Citigroup executed a 1-for-10 reverse split in 2011 at around $4.50, only to see shares fall to $3 by November. AIG’s 1-for-20 split in 2009 didn’t stop its decline. RadioShack did a 1-for-10 split in 2013 and filed for bankruptcy two years later.

Moreover, institutional investors often have minimum price thresholds, so a reverse split could widen the buyer pool. But that’s only if there’s a fundamental reason to buy, Patel added.

And therein lies the problem.

Nakamoto investors pay just 59 cents for every dollar of Bitcoin the company holds. That deep discount reflects “structural concerns,” Patel said. That includes “dilution risk, ongoing operational burn, and weakened investor confidence following the forced Bitcoin sale.”

Even after the split, Nakamoto plans to keep its authorised share count at 10 billion — leaving billions of shares available for future issuance.

"That creates a substantial forward dilution overhang that is increasingly reflected in the share price," Patel said.

Broken flywheel

Nakamoto’s troubles reflect acute stress across the entire Bitcoin treasury sector.

The model has been built on what's called mNAV, or market-to-net-asset value. The idea is reasonably straightforward. Companies issue shares at, say, $110 to buy $100 worth of Bitcoin. That $10 premium is pure profit for existing shareholders. Then the company can buy more Bitcoin, issue more shares at a premium, repeat.

But when Bitcoin’s price falls, the flywheel reverses. Equity valuations compress, premiums evaporate, and access to low-cost capital tightens precisely when it’s needed most. Already last year, one in three Bitcoin treasuries slipped below their mNAV value in what one analyst called a “spiral of doom.”

Nakamoto was one of them — and its problems seem to have gotten even worse.

“It’s not a capitulation in the sense of abandoning the Bitcoin thesis but it is an admission that the equity structure is broken and they’re running out of runway that is beneficial to the shareholder,” said Patel.

Pedro Solimano is a markets correspondent with DL News. Got a tip? Email him at [email protected].