After transitioning from biotechnology to cryptocurrency, ETHZilla has approved a $250 million stock buyback program, indicating that some companies are increasingly leveraging digital asset yields to obtain liquidity.
The board of ETHZilla has authorized the repurchase of up to $250 million of common stock, with the company currently having 165.4 million shares outstanding. This move came less than a month after the company rebranded to ETHZilla and made Ethereum its core strategy, a shift that helped revive its sluggish stock price.
ETHZilla has purchased 102,237 ETH at an average price of $3,948.72, spending just over $400 million, with a current market value of approximately $489 million. The company stated that its latest ETH purchase will be staked with Electric Capital.
However, the company's new strategy is being implemented against a backdrop of weak fundamentals. As a public company, ETHZilla faces issues of limited revenue, ongoing losses, and shareholder dilution. Last year, its cumulative losses exceeded $141.5 million.
Analysts believe there are similarities between the strategies of cryptocurrency finance and the early adoption of gold by companies, but they caution that leverage-driven asset accumulation poses significant risks. If the market declines again, companies relying on borrowing to obtain cryptocurrencies may face financial deterioration.
Nevertheless, Kadan Stadelmann pointed out that the ETH Finance Company can offer yields that spot ETFs cannot provide, as spot ETFs cannot legally offer staking and DeFi services.
However, Stadelmann warned that this model carries significant risks. In a bear market, excessive leverage could lead to forced liquidations and have a cascading effect on Ethereum prices.
