Author: Steven Ehrlich
Translation: Shenchao TechFlow
Las Vegas-based Bitcoin mining company BitMine Immersion Technologies (BMNR) had a market capitalization of less than $30 million in June, ranking in the middle of a competitive industry. But everything changed on June 25 when the company announced a shift to focus on cryptocurrency funding strategies centered around Ethereum. As part of the transition, the company raised $250 million through private equity investment (PIPE) and appointed cryptocurrency bull Tom Lee as chairman of the board.
The stock immediately soared over 1300%. Currently, the stock has a market capitalization of $4.6 billion, trading at 17.23 times its book value.
(Annual chart)
But this success story comes with some important terms. Because Bitmine chose to raise funds through PIPE (Private Investment in Public Equity), a wave of selling pressure will emerge in the near future. Historically, the stock is expected to drop at least 60%. When shares sold to wealthy institutional clients in a $250 million financing can be sold to the public, this may happen, and it is likely to occur sometime this summer.
How significant is the oversupply we are talking about? Before financing, Bitmine's circulating supply was only 4.3 million shares. To raise $250 million, it had to sell an additional 55.56 million shares. This corresponds to an increase in the number of shares by 12.92 times.
Bitmine is not the only one facing this challenge.
Dallas-based social media marketing company Asset Entities (ASST) is also facing similar challenges. At the beginning of May, the company's market capitalization was less than $10 million, with a supply of only 15.77 million shares. On May 27, the situation changed when the company raised $750 million through PIPE financing and merged with Vivek Ramaswamy's Strive Asset Management, a former presidential candidate. Its stock price also rose by over 1300%.
(Annual chart)
But like Bitmine, the company is also under immense selling pressure. The PIPE transaction increased Asset Entity's outstanding shares from 15.77 million to 361.81 million shares, an increase of 21.94 times.
Sun Yuchen's SRM Entertainment is also facing similar challenges. After an agreement was reached to transform this souvenir design company into a Tron financial company, its stock price soared by 902.5%. As part of this $100 million PIPE financing deal, SRM Entertainment's original 17.24 million share base was expanded by 11.6 times to accommodate 200 million newly issued shares.
(Annual chart)
Finally, as an example of David Bailey from (Bitcoin Magazine), who raised $563 million through private equity investment (PIPE) to merge Nakamoto Holdings with KindlyMD (NAKA), which is part of a $763 million investment round, including debt financing. On May 12, 2025, the company announced the merger, increasing the number of shares by 18.7 times, from 6.02 million to 112.6 million shares. After the news was announced, the stock surged over 1200%, but later retraced half of the gains, possibly because the deal had not yet been completed, and the company had not started to actually increase its Bitcoin holdings. Nevertheless, since the announcement of the merger, its stock price has still risen by 586.2%.
(Annual chart)
These companies are typical examples of the risks brought by the latest trends in cryptocurrency, as these funding companies are essentially leveraged hedge funds trading in the public market. If investors are not cautious, they may find themselves trapped in the dilemma of providing exit liquidity for institutions that participated in these trades at reasonable prices before the cryptocurrency surged significantly.
In fact, an investor who has participated in multiple such transactions anonymously stated in an interview with (Unchained): "This is a tricky game that most retail investors should not participate in. It’s a game between institutional investors and hedge funds."
The Dream of PIPE Financing
Not all such transactions will trigger the same warnings as BitMine, Asset Entities, Nakamoto, and SRM. Several factors need to be taken into account in the transaction. For example, companies participating in the transaction typically must be low-priced stocks with a similar low number of circulating shares (the number of shares available for sale on the open market) and total supply. The four companies mentioned above all meet this criterion.
Then, PIPE transactions need to occur and significantly increase both figures. As shown below, not all financings meet the standard. For example, Trump Media Group (DJT) raised $1.5 billion through PIPE on May 27 (as part of a $2.5 billion deal, including $1 billion of non-convertible debt), but its stock price was hardly affected. In fact, it even declined. Compared to the previous three companies, the newly issued 55.86 million shares only increased the existing 220.62 million shares by 25.32%.
(Annual chart)
(Company press releases and SEC filings)
When these stocks reach sell conditions, igniting the fuse becomes key. Unlike stocks sold through a typical IPO, stocks sold through PIPE do not have immediate liquidity since they do not need to be registered with the SEC. The registration process involves the company submitting a registration form, typically an S-1 or S-3 document, containing all the information investors need to make informed purchasing decisions, such as the company's prospects, use of proceeds, risk factors, etc.
For PIPE companies, especially those headquartered in the U.S. (the requirements and forms for foreign companies are slightly different), the typical approach is to submit the S-3 form, as these companies are already public and the workload for filling out the form is smaller.
In most cases, companies that raise funds through PIPE will promise investors to submit a registration statement as soon as possible. After all, which investor wants their assets to be locked up? Take the company presentation from Nakamoto/KindlyMD as an example. In the slide below, the company promises potential investors that it will submit the S-3 document as soon as possible and indicates that PIPE investors do not have a lock-up period. The company cannot submit a registration statement until the merger is completed, which is expected to finish this quarter.
(Nakamoto/KindlyMD)
Unfortunate Encounters in PIPE History
Two important cautionary cases investors need to understand are Solana Fund Management company Upexi (UPXI) and Ethereum-focused Sharplink (SBET). Both companies raised substantial funds through PIPE, and their stock prices plummeted significantly after listing.
(Annual chart)
Sharplink raised $425 million and issued an additional 58.7 million shares on top of the existing 659,680 shares, an increase of 8,893%. On June 12, the company filed a form called S-ASR, which caused the stock price to plummet. S-ASR is a type of S-3 registration form but with slight differences—since the company is a well-known seasoned issuer (WKSI), these shares can be sold immediately, essentially allowing the company to conduct private investment sales, such as PIPE.
A similar story occurred with Upexi, a company that had previously been engaged in real estate technology but repositioned itself as a financial company for Solana this spring. The company raised $100 million through PIPE financing, subsequently increasing its outstanding shares from 1.34 million to 35.97 million shares, an increase of 25.69 times. The company's S-1 filing became effective on June 23, and the decline in stock price shown in the above chart clearly reflects this.
Sharplink executives did not respond to interview requests regarding the drop in stock price, but Upexi arranged for new Chief Strategy Officer Brian Rudick to be interviewed. When asked whether such a drop was expected after the effective notice was issued, he replied that the possibility always exists. Rudick stated, "For us, when we go out to raise PIPE, it is not clear whether everyone will hold their shares for appreciation, or if the market is just worried about potential sell-offs (from nearly all 15 cryptocurrency venture capital firms involved in PIPE). We know (the sell-off) is always a possibility. But to get into the market as soon as possible, I think for us, the possibility of selling off is a trade-off we obviously want to make."
In fact, such sell-offs may be necessary to inject sufficient liquidity into the market for actual price discovery of stocks.
What can financial companies and investors do?
Given the precedents of Sharplink and Upexi, Bitmine, Asset Entities, and SRM seem inevitably required to undergo similar transitional periods. Moreover, they appear powerless to prevent this from happening.
A lawyer familiar with such transactions anonymously stated in an interview with (Unchained): "You can [make an agreement to prevent people from selling]. I think the reason you do this is to avoid this surface phenomenon. Some might say, 'We don't want to sell anyway, agree to be locked in for a while,' and perhaps on the surface, this can give people a sense of reassurance. Managing such a large group can be difficult. In reality, will anyone do that? I have my doubts, but if it can reassure the market, maybe you can."
Therefore, perhaps the next best hope is for investors to hold these stocks to avoid paying income tax and instead opt for more favorable capital gains tax. An investor from Upexi and Sharplink, who also wished to remain anonymous and claimed not to have sold shares in either company, articulated their thoughts: "From a tax perspective, constantly buying and selling is inefficient. You only incur short-term capital gains, so you bear a 40% tax. If you are directionally bullish and believe the net asset value premium will roughly stay at current levels, you might only save 20% in taxes."
However, this theory also has two issues. First, if investors believe that others may start selling shares, they may panic sell. In other words, they may not want to be the first to sell their shares, but they wouldn't mind being the second. Secondly, if a company has built up a large position based on a previously small number of circulating shares, it does not require everyone to sell their shares to push down the stock price.
Perhaps the best solution is to diversify funding sources when the company issues these bonds. Each option has its pros and cons. PIPE offers a straightforward way to raise large amounts of capital in a short time. This helps to initiate an accumulation strategy. However, it can also create significant selling barriers. Issuers can try different methods of stock sale, such as pre-registering shares with the SEC, but this may take longer to raise the necessary funds. Nowadays, more and more companies are adopting a hybrid approach, raising one-third of the funds through PIPE, with the rest coming from convertible bonds or credit arrangements. These methods can delay selling pressure but also increase the leverage on the balance sheet, which could pose problems if the stock price plummets.
But in this world where scale is paramount, companies always feel the pressure to raise capital quickly, which may mean going all-in on PIPE. The market will continue to exhibit a 'Wild West' scenario, so investors should heed the advice of institutional investors. "Wait until liquidity is sufficient before buying in. People should not speculate on how much the premium will rise relative to net asset value. They should wait for ample liquidity and market pricing efficiency."
Representatives from Sharplink, Bitmine, Asset Industries, Nakamoto/KindlyMD, and SRM Entertainment either did not respond to questions or declined to be interviewed.
