From Biotech to ETH Treasury: Inside ATNF’s 500% Stock Rally

• 180 Life Sciences (ATNF) has rebranded to ETHZilla and acquired $350 million worth of Ethereum

• ATNF’s share price is up over 1,500% since they began buying ETH

• ATNF is the latest company to join the trend of failing companies shifting their business model to a crypto treasury

From Biotech to Blockchain: ATNF’s Bold Identity Shift

180 Life Sciences (ATNF) recently announced that they will be rebranding and conducting business under a new name moving forward: ETHZilla. This rebrand aligns with a broader strategic shift for the company, from biotech to an Ethereum treasury. 

The company raised $425 million through a Private Investment in Public Equity (PIPE) funding round, and an additional $156 million via convertible notes. $350 million of those funds were deployed to acquire 82,186 Ether, and the company still holds an additional $238 million in cash, which they have indicated will be used for further crypto dip buying in the future.

This strategy shift to being an Ethereum treasury, along with a glowing endorsement and backing from Peter Thiel - PayPal co-founder and noted crypto treasury enthusiast - has sent ATNF on a moonshot to the upside. The stock was trading at around $0.90 per share in mid-July, the definition of a penny stock, and has since rallied to over $15.

A 1,500%+ run up in under a month is nothing short of parabolic, but the craziest part is that it’s not so uncommon anymore, especially as it pertains to becoming a crypto treasury. 

From GameStop to ETHZilla: The Proxy Crypto Boom

MicroStrategy (MSTR) famously started the crypto treasury trend, deploying all of their available capital and even going into debt to buy Bitcoin. They enjoyed massive share price gains as a result, with their stock price increase significantly outweighing the price increase in Bitcoin itself. 

The model was quickly adopted by other companies in similar troubled financial situations, such as GameStop (GME), Mara Blockchain (MARA subsidiary), BitMine Immersion Technologies (BMNR), and now ATNF; all often categorized as “Digital Asset Treasuries.”

The hope for all of these companies is to largely tie their valuation to crypto prices and ride the rallies as they come. So far, that dream has manifested itself nicely; the share prices of these companies often rise more than the underlying crypto due to leverage and narrative. 

A Billion-Dollar Valuation Built on Volatility

For all of these crypto treasuries, valuations now depend heavily on crypto prices, and any crash in their respective currencies could devastate their share prices. In the case of ATNF, financing via PIPE and convertible notes also introduces dilution risk and increased debt obligations.

Furthermore, in the case of most of these businesses, and especially in ATNF’s case, the reason for the pivot to crypto is due to a failing core business model. With ATNF, their biotech operations remain underdeveloped, and their current valuation is driven almost entirely by ETH holdings. 

While it has proven to be greatly effective so far, this trend of turning to crypto to save crumbling share prices is quickly becoming a fad, and as more and more companies jump in, newcomers will have a harder and harder time standing out. 

Why Not Just Buy the Crypto or an ETF?

So far, every time a company has shifted their business model to a crypto treasury, they see an immediate and often parabolic increase in share price. This has left many investors - myself included - asking the most glaring question: why would anyone choose to buy shares of a crypto treasury company with a dying core business for their crypto exposure? Why would anyone not just buy the crypto directly, or use a cryptocurrency ETF like IBIT (Bitcoin) or ETHA (Ethereum)?

The answer is… there really is no great reason. In some regions outside of the U.S., crypto or crypto ETF ownership is heavily restricted or taxed, making these treasuries an appealing choice, which is the only truly good reason.

Other crypto treasury bulls cite the annoyance of setting up a crypto wallet as their reason, or state that ETFs may not capture staking or yield-generating strategies the way that treasury companies do. 

In actuality, the main draw for investors is the momentum and hype; these firms offer a way to “be in the game” without dealing with crypto exchanges, even though, logically, investors get better and more direct exposure through crypto ETFs. 

Market Psychology Takeaway

ATNF’s pivot to ETH exemplifies the growing and evolving trend of companies leveraging crypto treasuries to spark spikes in their stock prices. While this model has garnered investor excitement, the long-term sustainability remains highly questionable, especially when considering direct, regulated crypto investment alternatives. 

Gus Downingis host of the tastylive Network show Risk and Reward. @GainsByGus

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