ETHZilla Stock Decline and Reverse Split Announcement
Shares of ETHZilla (ETHZ), a firm focused on Ethereum treasury management, experienced a decline of nearly 5% on Wednesday, following the company’s announcement of a 1-for-10 reverse stock split. Based in Palm Beach, Florida, ETHZilla, which recently rebranded from its former name, 180 Life Sciences, plans to implement this stock split effective October 20, coinciding with the market opening. The reverse split will mean that shareholders will see every ten shares they own consolidated into a single share.
Rationale Behind the Reverse Split
The rationale behind this strategic move is to engage more effectively with institutional investors by raising the minimum stock price above $10.00, which is essential for collateral and margin trading practices. In an official statement shared through the social media platform X, ETHZilla expressed that this realignment aligns with institutional standards and aims to attract more sophisticated capital into their operations, paving the way for sustainable growth in the long run.
Impact on Shares Outstanding
Following the reverse split, the company’s total shares outstanding will decrease significantly from around 160 million to roughly 16 million. This adjustment comes as ETHZilla faces restrictions related to minimum share prices typical of mutual funds.
Recent Developments and Market Performance
Since adopting its Ethereum treasury strategy in late July, which included an investment of $425 million obtained through a private investment in public equity (PIPE) offering, ETHZilla has aimed to become one of the leading holders of Ethereum globally. The excitement surrounding its new strategy initially drove share prices up, especially after prominent investor Peter Thiel and his associates acquired a roughly 7.5% stake in the company. However, the euphoria was short-lived as share prices saw a notable drop, prompting a $250 million share buyback deal shortly thereafter.
Despite witnessing fluctuations, including a peak above $10.00 per share, ETHZilla’s stock ended the last trading session at $1.83. Over the past six months, the company’s shares have appreciated significantly, rising over 105%. Currently, ETHZilla’s treasury consists of 102,246 ETH, valued at approximately $407 million based on current Ethereum market rates, solidifying its position as the sixth-largest publicly traded Ethereum treasury.
Future Plans and Business Model
John Kristoff, the Senior Vice President of Corporate Communications and Investor Relations at ETHZilla, clarified that the reverse split would not alter their plans for accumulating Ethereum. He also highlighted that their business model extends beyond traditional asset trading, mentioning ongoing projects involving tokenization, integration of decentralized finance (DeFi) protocols, blockchain analytics, and the conversion of traditional assets into digital formats. Kristoff assured that more updates would be communicated as these initiatives progress.
