GDC Stock Plummets After $879M Bitcoin Buy

GD Culture Group Acquires $879M in Bitcoin, Stock Dips

GD Culture Group Limited (GDC), a holding company specializing in AI and e-commerce, has entered a share exchange agreement to acquire Pallas Capital Holding’s assets, giving them ownership of 7,500 Bitcoin (BTC). The firm’s stock (GDC) slumped 28% after the announcement, signaling investor apprehension.

The acquisition, approved by a majority of shareholders, will see GDC issue approximately 39.2 million shares in exchange for Pallas Capital’s assets, including the Bitcoin holdings valued at $879 million at current market prices. This could position GDC as the 14th largest corporate Bitcoin holder, surpassing entities like Galaxy Digital Holdings Ltd.

Xiaojian Wang, Chairman and CEO of GD Culture, stated the move aims to capitalize on Bitcoin's growing role as a store of value and institutional reserve asset. He emphasized the deal strengthens GDC’s digital asset treasury strategy and builds reserves for stable growth.

“The acquisition of Pallas Capital marks a significant advancement in GDC’s digital asset treasury strategy...When we integrate these assets, we are building the reserves necessary to execute on our digital asset strategy with both stability and growth potential,” Wang stated.

According to GDC, the deal is projected to boost shareholder value and enhance its position in the digital asset market. This follows a prior announcement to sell $300 million in common stock to support its crypto treasury strategy, including Bitcoin and Official Trump (TRUMP) token purchases.

Investor Skepticism Amidst Market Volatility

Despite the bold move, the market reacted negatively. GDC stock closed at $6.99, a 28% decrease, with a slight recovery of 3.72% in pre-market trading.

This mirrors broader market pressures on Bitcoin treasury companies. Recent reports indicate that firms like Next Technology Holding (NXTT) and KindlyMD (NAKA) have also experienced significant stock declines. Digital asset treasuries (DATs) are facing challenges maintaining purchasing power.

Alexander Blume, Founder and CEO of Two Prime, suggests upcoming macroeconomic factors could influence Bitcoin treasury companies. He anticipates that a potential Federal Reserve rate cut could positively impact corporate BTC vehicles by increasing BTC prices and attracting investment.

“The Fed’s decision this week will surely have an impact on risk assets, Bitcoin included...If that remains the base case, I suspect a 25bp cut over the next several quarters will be largely constructive for risk assets, including Bitcoin...

Blume added that lower rates benefit firms relying on PIPEs (Private Investments in Public Equity) and convertible debt, incentivizing continued participation in the market.

GDC’s Bitcoin acquisition underscores a growing trend of companies increasing their Bitcoin reserves. The market’s initial reaction reveals investor caution, but long-term macroeconomic conditions and Bitcoin's intrinsic value may ultimately justify GDC’s strategy. Companies considering similar moves might benefit from partnering with blockchain security experts such as Codeum to secure their digital assets and ensure the integrity of their smart contracts.