Summary Empery Digital trades at a 20% NAV discount in its bitcoin treasury model. Recent buybacks weren't opportune; they were executed above the current NAV and financed by higher-rate debt. EMPD's value case is unremarkable, as its discount matches typical holding company levels and is not compelling. I maintain a Hold rating, given potential risk-on relief but unimpressed by both Bitcoin fundamentals and the company's execution. Empery Digital ( EMPD ) is a bitcoin ( BTC-USD ) treasury company that used to be a power sports company called Volcon. Other than the fact that it's not a great thing when a company pivots to becoming a bitcoin treasury when their other ventures don't work out, the company had been buying back its own shares as prices declined enough to create some NAV discount now present, but also into a BTC sell-off, which started on account of the Iran war. We are looking to see some relief in Bitcoin markets as maybe the possibility of a ceasefire and easing Hormuz activity restore a risk-on environment. But otherwise, Bitcoin fundamentals such as blockchain activity don't look particularly good, as the yield curve still shows the USD and other fiat as an attractive alternative on reinflation considerations around the supply issues to oil as a consequence of the war. A 20% NAV discount makes Empery a little more attractive, but the buybacks were at prices on average above the current NAV post BTC declines. They were not carried out well, either with respect to the company's own NAV discount, as we discussed in previous coverage , or with respect to Bitcoin market dynamics. We don't much like Bitcoin, but we really don't see any reason to pay special attention to this company on a discount that matches a typical holding company discount. But with possible risk-on relief, we'll give it a hold for now. Latest Data Let's just run through the important data. The main thing might be the current NAV discount, which at current prices and given the cash balances on Bitcoin sold (capitulation at the bottom, by the way, so not very impressive at all) is around 20% . Right away, 20% is not an impressive value case, as holding company discounts in general tend to be that. More importantly, there are some aspects of the strategy that haven't impressed us. Capitulating BTC at $68k means they sold at the bottom $24 million. They did so again in the final stages of the buyback, apparently at $67k in April. This financed the buyback at prices that ended up averaging almost 10% above the current NAV. They had also been buying back previously at a point where we were under the impression that they were not trading below NAV, financed by debt that has now become a higher rate. The buyback was $200 million, which is way more than the current $134 million market cap of the company. Interest rates and loan terms are rising for the company. So far, the company-specific considerations leave quite a bit to be desired. They didn't use to trade at a NAV discount based on the data we had in previous coverage, but we don't think the discount is undeserved either. At any rate, it doesn't spur interest for us. Discussing BTC more generally, where Empery, discounted or not from NAV, still depends almost entirely on Bitcoin's fortunes, we see near-term supporting forces. Bitcoin is not a hedge; in practice, it's a highly risk-on and market-correlated asset. The possibility of a ceasefire , details still pending, apparently conditional on the opening of the Strait of Hormuz, will likely be supportive to markets. On the other hand, underlying BTC activity has been down. Also, the US yield curve has been shifting upwards as a consequence of the war. While a possible reopening and already a 15% drop in the Brent may mean some relief in the bond markets too and therefore lower yields, the USD and fiat currencies are yielding attractively right now and are a practical utility in a market where speculators are playing with a lot of USD-denominated commodities like oil. The US projection of force could have also been a positive vector for the USD on a reversal of isolationism. But a market relief will bring Bitcoin with it in all likelihood. Bottom Line At any rate, we aren't that impressed by Bitcoin fundamentals. We think fiat offers a lot of yield now and still a modicum of security. While headlines may favour BTC for the moment, peace is not terribly likely to be robust. But most importantly, regardless of the underlying, we aren't keen on Empery despite the relatively recent presence of a NAV discount. As of now, they did not make the right move in accumulating their own stock and might as well have just held onto some of the Bitcoin that financed the latter part of the buyback.
