Ethereum treasury firm BTCS to pay ETH dividend and ‘loyalty payment’ in part to ward off short sellers

BTCS Inc. (ticker BTCS), the Ethereum validator and crypto treasury company, will pay out a one-time dividend in ETH.

The firm will offer stockholders a so-called “Bividend” of $0.05 per share as well as a one-time $0.35 per share “loyalty payment,” payable only in ETH, if holders move their shares to the company’s transfer agent, according to an announcement on Monday.

While the move marks one of the first times a public company has paid a dividend using crypto, rather than cash or additional equity, it appears the payments may be an attempt to mitigate short selling.

The company notes that the $0.35 loyalty payment is available only to those who keep their shares with the company’s transfer agent for at least 120 days, “which should reduce the ability of shares to be lent for short-selling purposes.” A transfer agent is a financial institution that manages the transfer of securities, such as stocks or bonds, between parties and maintains records of ownership on behalf of a company.

“We are paying the Bividend and loyalty payment to thank our long-term shareholders and empower them to take control of and protect their investment,” BTCS CEO Charles Allen said. “By moving to book entry, our shareholders receive a tangible benefit and prevent their shares from being lent to short sellers, protecting against market manipulation and forcing institutional short sellers to either cover or call in existing short positions.”

“Right now, short sellers are betting against BTCS because they expect us to sell a significant number of shares to raise capital,” Allen said. “As the largest shareholder of BTCS, let me be perfectly clear: my goal is to grow our market cap primarily through share price appreciation, not toxic dilution.”

BTCS is among a wave of Ethereum treasury companies that collectively have raised tens of billions of dollars via equity and debt to load up on the second-largest cryptocurrency in a relatively short period. Many of these ETH holding companies were previously low-float penny stocks and have seen their valuations spike after announcing crypto treasury strategies.

It now appears that the trend is beginning to correct. SharpLink, the second-largest ETH treasury firm, for instance, saw its SBET stock dip 10% last week after announcing its quarterly earnings. SBET is trading around $20, down from a yearly high of $79.39 set shortly after Consensys began managing its Ethereum strategy, according to The Block’s price page.

That said, BTCS has a 7.3% short interest as a percentage of float, according to Yahoo Finance, which indicates some bearish sentiment. For comparison, stocks with short interest above 20% are typically considered highly shorted.

Notably, BTCS is often considered to be the first U.S. company to have paid a dividend in crypto. In 2022, the firm’s shares rose more than 40% after announcing the first-ever dividend payable in bitcoin or cash.

Founded in 2014, BTCS is one of the oldest publicly traded blockchain companies. Its stock is up nearly 70% since the start of the year to 4.40, driven largely by interest in so-called crypto treasury companies. The firm also operates revenue-generating services, including the Builder+block-builder, NodeOps validator solution, and ChainQ analytics platform.

Last week, BTCS posted a net loss of $13.39 million for the past six-month period, reportedly due to its investments in the Builder+ service, $5.74 million in depreciation losses, and $4.16 million in realized losses from the sale of “non-Ethereum crypto assets.”

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