The US-listed company Profusa has launched a "100 million USD Bitcoin reserve plan," but its stock price has fallen by 17%. Why?

US-listed company Profusa has signed a $100 million equity credit line with Ascent Partners Fund, planning to invest all the funds in Bitcoin, yet the stock price has fallen instead of rising… Why? (Background: MicroStrategy increased its Bitcoin holdings by $740 million, with a total holding of nearly 610,000 BTC; MSTR has risen 50% this year.) (Background information: Is MicroStrategy selling Bitcoin? CryptoQuant warns: new accounting and tax regulations force Strategy to pay taxes.) US company Profusa, focused on developing integrated biological sensors, (NASDAQ: PFSA), announced on the 21st that it has signed a $100 million equity credit line (ELOC) agreement with Ascent Partners Fund LLC, planning to convert nearly all the funds raised into Bitcoin. Bitcoin on the balance sheet In a public statement, Profusa’s CEO pointed out, “In an era of accelerating currency depreciation, holding Bitcoin on the balance sheet represents a strategic move, not only to protect shareholder value but also to align with the digital future.” The company has decided to treat Bitcoin as a core reserve asset, highlighting management’s confidence in the anti-inflation characteristics of crypto assets. Profusa plans to start its first round of purchases this week and promises to disclose the holdings in each quarterly report, allowing external parties to grasp the impact of Bitcoin positions on the company’s profits and losses in real time. ELOC mechanism breakdown According to the agreement, Profusa can issue shares in batches to Ascent Partners at a discount of “97% of the 5-day trading volume weighted average price” over the next few years, with a maximum of $5 million per batch, totaling no more than $100 million. The agreement also specifies two safety valves: First, the number of issued shares may not exceed 19.9% of the existing circulating shares to avoid uncontrolled dilution for current shareholders. Second, the company must retain at least $5 million in cash to ensure that daily operations are not affected. This arrangement allows Profusa to flexibly switch between the capital market and the crypto market. Once the Bitcoin price dips, the company can quickly utilize ELOC to take on; if the price soars, the company can also delay issuance, reducing the risk of being forced to buy at high prices. However, if the stock price remains sluggish, shareholder equity will still be diluted, and any unrealized losses from Bitcoin fluctuations will be directly reflected in Profusa’s financial numbers. PFSA stock price drops 17% However, after the news was announced, Profusa’s stock price fell instead of rising, dropping 17.32% on the 21st, seemingly another typical case of a company struggling with its core business trying to rely on Bitcoin to turn the tide. According to data, Profusa’s stock price has evaporated 77% so far this year, partly due to extremely poor revenue projections for 2024 and ongoing cash burn, coupled with the fact that the company just landed on NASDAQ through SPAC (merging with NorthView) in mid-July. The market has clearly adjusted its valuation after reassessing its weak finances, with most investors choosing to cash out. Now, collaborating with Ascent Partners to launch a maximum $100 million stock credit line is seen as an experimental and disruptive layout, but it also comes with high volatility risks and seems to tell investors that our core business is not profitable and we need to seek alternative paths… The market’s comprehensive concerns about “unfulfilled innovation commitments” and “weak capital chains” have led to continued weakness in the stock price. To reverse this trend in the future, clear revenue growth, the stability verification of Bitcoin layout, and cash flow improvement are also important goals. Related reports US pharmaceutical company Windtree Therapeutics plans to establish a “$200 million BNB reserve”; CZ says: More BNB MicroStrategy is coming. Is there a DeFi version of MicroStrategy? A $2 million capital gamble and board battle. Aevo’s Degen launches “1000x US stock leverage,” with initial offerings on Coinbase, Robinhood, Circle, and MicroStrategy. This article titled “US-listed company Profusa launches $100 million Bitcoin reserve plan but stock price plummets 17%, why?” was first published in BlockTempo, the most influential blockchain news media.