Bitcoin treasury firm Sequans Communications said it will reverse split its American Depositary Shares (ADSs) to remain listed on the New York Stock Exchange and appeal to larger institutional investors.
In a Sept. 4 statement, the company confirmed that each ADS will soon represent 100 ordinary shares instead of 10. The adjustment will take effect on Sept. 17, reducing the number of outstanding ADSs while lifting the per-share price.
By doing so, Sequans aims to meet NYSE compliance requirements and appeal to funds that only allocate capital to stocks trading above certain thresholds.
Sequans also linked the measure to its corporate strategy, noting that the company remains committed to its Bitcoin treasury holdings. According to Bitcoin Treasuries, Sequans controls 3,205 BTC, which is valued at roughly $355 million.
Despite the explanation, investors reacted cautiously to the reverse splits, with the company’s stock falling 5% to $0.80 as of press time.
According to Google Finance data, this continues a year-long trend that has seen the stock decline more than 75% since January.
Bitcoin community concerns
The move has raised concerns within the Bitcoin community, with Pledditor, a well-known commentator on X, arguing that Sequans’ stocks risked delisting without the measure.
The analyst stated:
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“[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?”
This development highlights the contrasting fortunes of firms holding Bitcoin on their balance sheet.
Strategy (formerly MicroStrategy) saw its stock’s value soar to record highs after Michael Saylor embraced the approach in August 2020.
That success has encouraged several smaller firms like Sequans to adopt similar treasury policies this year.
Yet analysts warn that these kinds of smaller companies face greater risks, especially if their core business underperforms.
A recent Franklin Templeton report highlighted these challenges by explaining that if the market-to-net-asset-value ratio of a Bitcoin treasury company falls below 1, new equity issuance becomes dilutive, restricting a company’s ability to raise capital.
It also added that falling crypto prices can trigger a self-reinforcing cycle in which companies sell assets to defend their share price, further depressing market sentiment.