The rise of encryption financial strategy companies: what are the advantages and risks? Franklin names several benchmark stocks.

Franklin issued a report on encryption financial strategy companies, noting that the trend of public companies adopting encryption financial models is increasingly on the rise. They are raising funds through tools such as equity, convertible notes, and preferred shares to acquire and hold cryptocurrency assets like Bitcoin, Ethereum, and Solana on their balance sheets. The report analyzes the operating models and risks of these companies and names several benchmark stocks, including MicroStrategy, Metaplanet, Twenty One, SharpLink Gaming, Upexi, and Sol Strategies.

The volatility of crypto assets has become a key driver of crypto financial strategies.

Corporate encryption financial strategies offer compelling advantages, particularly the ability to raise funds at a price higher than net asset value, allowing them to issue shares at a price above the underlying crypto asset value.

Franklin stated:

Interestingly, the volatility of crypto assets, which is often regarded as a risk, is becoming a key driving factor for this strategy. Volatility increases the value of embedded options in financial instruments such as convertible notes.

The rise in cryptocurrency prices can also enhance the company's market value, creating a positive feedback loop that attracts more investors. Analysts added that for companies holding proof of stake (PoS) assets, such as Ethereum (ETH) and Solana, staking provides an additional source of income that can increase asset value.

The death spiral of encryption financial strategies

However, Franklin warned that this model also carries significant risks. If the NAV Premium ('s current stock price and the value of its Bitcoin holdings is less than one relative to ), new stock issuance would dilute company equity, making it difficult for the company to raise additional capital without harming the interests of existing shareholders, thereby hindering capital formation and breaking the virtuous cycle.

Analysts say that worse, the drop in cryptocurrency prices could trigger a negative cycle, forcing companies to sell assets to defend their stock prices, further depressing the value of cryptocurrencies and investor confidence, creating a death spiral.

The medical technology company Semler Scientific, which previously held Bitcoin, has a market value close to the value of the Bitcoin it holds, prompting warnings from several analysts. However, with the company's new hire of a Bitcoin strategic director and the announcement to acquire a total of 105,000 Bitcoins within three years, the stock price has rebounded.

(Semler Scientific aims to acquire 105,000 Bitcoins within three years. The market value of SMLR is close to the value of Bitcoin. Is this an undervaluation or a warning signal?)

Several key stocks named by Franklin

Franklin also mentioned several key stocks, including MicroStrategy, Metaplanet, Twenty One, SharpLink Gaming, Upexi, and Sol Strategies, but specifically stated that they are not holdings of Franklin, and are only for the purpose of research description in the report. Chain News has previously written multiple reports on each stock, compiling the information in the table below for readers' reference.

Company Name Stock Code Held Cryptocurrency MicroStrategy (Strategy) MSTR BTC Metaplanet 3350 BTC Twenty One CEP ( will be changed to XXI) BTC SharpLinkg Gaming SBET ETH Upexi UPXI SOL Sol Strategies CYFRF SOL

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