Avalanche Treasury plunges 73% as AVAX holdings trigger going concern warning

Avalanche Treasury Co. shares dropped 73% to $0.50 since listing on the Nasdaq on June 11, after the company disclosed a $26.78 million first-quarter net loss driven by the declining value of its AVAX holdings.

"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," the company said in a Monday filing with the Securities and Exchange Commission.

The operating entity held 13.39 million AVAX tokens at the end of March, acquired at a cost basis of $265.3 million. Their fair value had fallen to $122.8 million by quarter-end. AVAX traded at $6.70 as of Wednesday, down 50.8% year-to-date. The company also pledged about 7.8 million of its total 13.8 million AVAX tokens as collateral for loans, according to its filings.

The stock's collapse and going concern warning highlight the risks of the listed-company model that concentrates digital assets in corporate treasuries. Token price declines are reflected simultaneously in asset values, earnings and share prices, and using collateralized borrowing can amplify financial strain in a downturn. The company's market capitalization has fallen below $30 million.

AVAT went public last month after completing a $675 million merger with Mountain Lake Acquisition Corp., a crypto-aligned special purpose acquisition company. The stock was above $10 in early June before the merger closed, and its closing price on debut day was $1.85. By the end of June, it had slid below $0.73.

The company reported a net working capital deficit of $9.06 million at the end of March. Management initially raised "substantial doubt about the company's ability to continue as a going concern within one year" while the SPAC merger remained uncertain. The company said the merger has since provided access to additional capital and resources to support operations for at least the next 12 months.

Avalanche Treasury is not alone in facing market pressure. Agriforce Growing Systems, which rebranded as AVAX One and announced plans to buy up to $700 million worth of AVAX, has seen its market cap shrink to about $43 million, with shares down about 68% year-to-date.

The Avalanche network has attracted more than $1.02 billion in institutional funds and facilitated the tokenization of over $1.65 billion in real-world assets, while supporting more than 550 projects across its ecosystem, according to a company statement released last month.

This article is for informational purposes only and does not constitute investment advice.