Avalanche Treasury shares plunge 73% after Nasdaq debut
Shares of Avalanche Treasury Co. (AVAT), a digital asset treasury company focused on AVAX, have fallen 73% on Nasdaq since their June 11 debut. Pressure on the stock increased after the company disclosed operational problems in its first-quarter report.
According to The Block, AVAT went public last month after completing a $675 million merger with Mountain Lake Acquisition Corp., a crypto-focused SPAC. On Wednesday, AVAT shares were trading at $0.50, down from $1.85 at the time of their June 11 debut.
According to a report filed with the U.S. Securities and Exchange Commission on Monday, the operating company posted a net loss of $26.78 million in the first quarter. At the end of March, its net working capital deficit stood at $9.06 million.
The losses were mainly driven by unrealized losses tied to the company’s crypto assets. At the end of March, AVAT held 13.39 million AVAX tokens, purchased at a total cost basis of $265.3 million. However, the fair value of those assets had fallen to $122.8 million by the end of the quarter.
Avalanche Treasury acknowledges problems
Against the backdrop of its first-quarter financial results, the company’s management acknowledged “substantial doubt” about AVAT’s ability to continue operating over the next year. This risk looked especially serious at the time because completion of the SPAC deal was still uncertain.
However, the company said that after the merger was completed, it gained access to additional capital and resources. Management estimates that these funds should be enough to support operations and liquidity needs for at least the next 12 months.
“Based on the improved liquidity profile and the removal of the previously identified uncertainties, management has concluded that substantial doubt about the Company’s ability to continue as a going concern is alleviated for the twelve-month look-forward period from the date of the filing of this Form 10-Q,” the latest filing said.
What AVAX is used for
AVAX is the native token of the Avalanche blockchain. It is used to pay fees, for staking and to support applications within the network. Avalanche positions itself as a platform for fast and low-cost transactions, DeFi projects, real-world asset tokenization and enterprise blockchain solutions. According to the company, the ecosystem has already attracted more than $1 billion in institutional funds and supports hundreds of projects.
However, the price of AVAX remains under pressure due to weaker interest in risky crypto assets and the token’s own poor performance. Since the start of the year, AVAX has fallen by more than 50%, while the drop in the value of Avalanche Treasury’s reserves has added to the negative backdrop around the asset. At the time of publication, AVAX was trading around $6.60.
As a reminder, it was reported last month that Avalanche Treasury shares fell 40% after their Nasdaq debut.
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