NEW YORK – Semler Scientific’s financial metrics spark concern for Bitcoin treasury firms, reflecting broader industry challenges.
Immediate Impact
On Tuesday, Nasdaq-listed healthcare technology firm Semler Scientific was valued at a razor-thin premium over its Bitcoin holdings. The firm’s mNAV, or multiple-to-net asset value, was recorded at 1.07, according to the company’s website. This valuation indicates that Semler’s $498.5 million enterprise value—comprising its market cap, debt, and cash balance—was only slightly above the value of its 4,449 Bitcoins, worth $466 million.
Key Details Emerge
Matthew Sigel, head of digital assets research at VanEck, highlighted the precarious position of Semler, noting that many Bitcoin treasury companies may soon face similar challenges. “Semler is now in a position where many Bitcoin treasury companies may find themselves in the coming quarters: trading close to NAV and facing pressure to demonstrate capital discipline,” Sigel told Decrypt.
“Semler is now in a position where many Bitcoin treasury companies may find themselves in the coming quarters: trading close to NAV and facing pressure to demonstrate capital discipline.” — Matthew Sigel, VanEck
Industry Response
Bitcoin treasury companies like Semler aim to maximize shareholder value by increasing the amount of Bitcoin they own per share. However, when a company’s mNAV falls below one, it becomes challenging to grow Bitcoin per share by selling stock and using the proceeds to purchase more Bitcoin.
Recently, Semler disclosed a purchase of 185 Bitcoins for $20 million, as per a regulatory filing. The company also signaled potential plans to sell $364 million worth of common stock through an at-the-market (ATM) offering program.
Expert Analysis
Ben Werkman, chief investment officer at financial services firm Swan Bitcoin, explained that a discount could alarm investors if they begin to suspect that the firm can no longer raise funds beneficially for shareholders. Sigel mentioned, “The company has several strategic levers it can pull to stabilize value. If management prioritizes shareholders, I believe the risk/reward at current levels is favorable.”
“The company has several strategic levers it can pull to stabilize value.” — Matthew Sigel, VanEck
Background Context
Semler’s journey into Bitcoin investments began last May, and the firm has since become a significant player, boasting the 10th largest Bitcoin treasury by dollar value, just behind GameStop. However, Semler has faced challenges beyond Bitcoin investments. In April, the company reached a tentative $30 million settlement with the U.S. Department of Justice over allegations related to its QuantaFlo product marketing.
On Tuesday, Rosen Law Firm announced an investigation into potential securities claims on behalf of shareholders, coinciding with a 6.5% drop in Semler’s stock price, closing at $28.30, according to Yahoo Finance.
What Comes Next
The future remains uncertain for Semler and similar firms, as some analysts warn that a significant drop in Bitcoin prices could force companies to liquidate their holdings, reversing this year’s buying pressure. Sigel advised that Bitcoin treasury firms could adopt safeguards, such as pausing ATM issuance if the stock trades below 0.95 times NAV for an extended period and prioritizing share buybacks when Bitcoin appreciates.
Semler’s stock price closed down 6.5% on Tuesday, dropping to $28.30.
The announcement comes as industry experts continue to monitor the evolving landscape of Bitcoin treasury strategies, with many companies reassessing their approaches in light of market volatility and regulatory scrutiny.