GD Culture Stock Plummets 28% on Bitcoin Acquisition News
Investors react to significant shareholder dilution concerns as the company plans to issue over 39 million new shares to acquire 7,500 Bitcoin.
Shares of GD Culture Group (GDC) plunged more than 28% after the live-streaming and digital media company announced a massive deal to acquire 7,500 Bitcoin. The negative market reaction was triggered by concerns over the substantial shareholder dilution required to fund the transaction.
The company revealed it had entered into a share exchange agreement to acquire Pallas Capital Holding Ltd., a firm whose primary assets consist of 7,500 Bitcoin. To finance the deal, GD Culture Group will issue 39,189,344 new shares of its common stock. , was presented by the company as a strategic step to bolster its crypto asset treasury and expand its footprint in the decentralized finance (DeFi) ecosystem.
Despite the company's optimistic framing, investors focused on the immediate consequences of nearly doubling the company's outstanding shares, leading to a significant sell-off. The deal effectively values the 7,500 Bitcoin at approximately $502.5 million, a substantial addition to the company's balance sheet but one that comes at a high cost to existing shareholders. , with the stock price falling 28.16% on elevated trading volume following the news.
Xiaojian Wang, Chairman and CEO of GD Culture Group, stated the acquisition “marks a significant advancement in GDC’s digital asset treasury strategy.” He positioned the move as a way to capitalize on Bitcoin's growing acceptance as an institutional reserve asset. However, the market’s response indicates that shareholders are more concerned with the immediate dilution of their equity than the long-term potential of the company's new crypto holdings. The transaction, which has already received majority shareholder approval, highlights a growing divergence between corporate crypto strategies and investor appetite for the associated risks, particularly when financed through dilutive measures. This acquisition will make , fundamentally altering its asset base and tying its future valuation closely to the volatile cryptocurrency market.