Small-Cap Firms Use In-Kind Crypto for Digital-Asset Treasuries
Small-cap companies are increasingly funding digital-asset treasuries (DATs) through in-kind crypto contributions. Instead of raising cash, they contribute their own crypto tokens. This trend poses risks to retail investors.
These in-kind DATs often include unlisted or hard-to-value tokens. This lack of clear pricing makes it difficult for investors to assess true value. Many of these DAT stocks now trade below the value of their underlying crypto. Some have lost more than 65% since their launch.
Why In-Kind Contributions Increase Risks
Earlier DAT deals raised cash to buy crypto tokens on open markets. This created transparent price checks. In contrast, in-kind contributions rely on insiders to set token prices before public trading. This increases pricing and trading risks for retail shareholders.
In 2025, many small firms in biotech and mining became digital-asset proxies. Sponsors either provide tokens or raise funds to acquire them. The company’s stock effectively becomes a bet on the underlying crypto’s performance. Insiders gain liquidity, but investors face high uncertainty.
Recent Risky Cases Highlight Investor Concerns
- Tharimmune Inc., a biotech firm turned crypto proxy, raised $545 million for Canton Coins. About 80% was in unlisted tokens priced at 20 cents. The token began trading on November 10 and has dropped to around 11 cents.
- Alt5 Sigma Corp. raised $1.5 billion, with half in unlisted WLFI tokens.
- Flora Growth Corp. raised $401 million, mostly in-kind 0G tokens priced at $3. These now trade near $1.20.
Both Alt5 Sigma and Flora Growth shares have declined over 65% since announcing their DAT plans.
Akshat Vaidya, co-founder of Maelstrom, said in a Bloomberg report, “An 80% in-kind DAT is effectively a thin equity wrapper around one single volatile token. If the token drops 50%, the share price falls 80%-100% because the premium evaporates as forced sellers hit the bid.”
Chris Holland, partner at Singapore-based HM, added, “If market sentiment shifts, retail investors in the fund may be left exposed when underlying illiquidity is tested.”
Large, liquid contributions, like Blockstream’s 25,000 Bitcoin into a treasury company, present less risk. But smaller, illiquid tokens held mostly by insiders pose significant dangers. Retail investors face the most risk if markets decline sharply.
