ETHZilla, a company that transitioned from biotechnology to cryptocurrency, has authorized a $250 million share buyback program, indicating that some businesses might leverage digital-asset profits for liquidity.
The board of ETHZilla approved the repurchase of up to $250 million in its outstanding common shares, as the company announced on Monday. Currently, it has 165.4 million shares outstanding.
This decision comes less than a month after the firm rebranded from 180 Life Sciences, making Ether (ETH) its primary focus—a strategy that has revitalized its previously struggling stock.
ETHZilla’s stock price appears to benefit from its emphasis on an ETH treasury. Source: Google Finance
Since then, ETHZilla has purchased 102,237 ETH at an average price of $3,948.72, totaling just over $403 million. At current market values, these holdings are estimated at approximately $489 million. The company stated that its latest ETH acquisitions will be staked with Electric Capital.
The management’s tone concerning the buyback reflects typical indicators, referencing “market conditions,” “management discretion,” and “alternative uses of capital.”
ETHZilla’s new strategy is set against a backdrop of challenging fundamentals. As a public entity, it faces ongoing issues with limited revenue, consistent losses, and shareholder dilution, reporting an accumulated deficit of over $141.5 million last year.
ETHZilla isn’t the only firm adopting crypto as a balance-sheet asset. Various companies, both within and outside the digital asset sector—including BitMine Immersion Technologies, The Ether Machine, SharpLink Gaming, Bit Digital, and Ether Capital Corp.—have also made significant Ether investments.
Source: Tom Lee Tracker
Related: Ether treasuries climb to $13B as price breaks $4,300
Leverage and concentration risks
Analysts draw comparisons between today’s “crypto treasury” strategies and previous corporate gold adoption phases, cautioning that balance sheet builds supported by leverage present significant risks. Companies that accrue crypto through substantial borrowing could endure deteriorating financial conditions if another bear market occurs.
Mike Foy, CFO at Amina Bank, informed Cointelegraph that it’s still premature to assess the long-term viability of crypto-treasury strategies. He emphasized the need to determine whether companies are pursuing such strategies for speculative gains, signaling, or as part of a broader strategic vision.
“If any of these [purchases] appear unusual or out of character, this might indicate that it isn’t a long-term strategy but a short-term stock price tactic,” Foy remarked.
Kadan Stadelmann, CTO at Komodo Platform, noted similarities between ETH-treasury firms and spot exchange-traded funds (ETFs), highlighting that treasuries can provide advantages that ETFs cannot. “Spot ETFs cannot legally offer staking and DeFi,” he explained. “Ethereum treasury firms provide higher yields.”
Source: Fabdarice
Nonetheless, Stadelmann warned that such models carry significant risks. “ETH treasury firms face dangers, including overleveraging,” he cautioned. In a bear market, this could result in forced liquidations that might adversely affect Ether’s price.
Falling ETH values could undermine debt-based strategies in companies that acquired their holdings via loans, convertible notes, or equity dilution.
Currently, Ether is the most exposed among digital asset treasury strategies, with approximately 3.4% of its total supply held by these entities, according to Anthony DeMartino, CEO of Sentora Research.
Magazine: How Ethereum treasury companies could spark ‘DeFi Summer 2.0’
