YZi Labs criticizes CEA Industries’ poison pill in deepening boardroom conflict

Changpeng Zhao-backed investment firm YZi Labs condemned Nasdaq-listed CEA Industries for adopting “stockholder-unfriendly” measures designed to entrench current management.

In a Wednesday post on X, YZi Labs — a major investor in the BNB treasury firm — argued that CEA’s poison pill and bylaw changes are designed to block stockholders from acting by written consent. This marks a dramatic turn in what began as a seemingly harmonious partnership just five months ago.

Conflict erupted last month when YZi Labs made filings in an aggressive bid for board control at CEA, which included expanding the board, unwinding any recent bylaw changes, and installing its own slate of directors in CEA through a written-consent process. The firm later filed to form a coordinated stockholder group to increase its stake in the company.

YZi Labs claimed that CEA has been underperforming since the closing of the $500 million private placement in July, failing to reflect the firm’s core strategy even as its main treasury asset, BNB, saw significant gains.

The situation escalated as CEA Industries’ board recently adopted a limited-duration stockholder rights plan — commonly known as a “poison pill” — and amended its bylaws in response to YZi’s moves. A poison pill is a defensive tactic used by public companies to prevent or discourage hostile takeovers by making it significantly more expensive or dilutive for an outside group to rapidly accumulate a controlling stake.

Under the rights plan, the poison pill mechanism will trigger if any person or group acquires 15% or more of outstanding shares without board approval, allowing other shareholders to purchase additional shares at a 50% discount. That would create immediate dilution and make a takeover prohibitively expensive.

YZi’s response

In its Wednesday response, YZi Labs expressed “disappointment” with CEA Industries’ adoption of a poison pill and new bylaw provisions, describing them as “stockholder-unfriendly actions” designed to frustrate its consent solicitation and limit shareholders’ ability to act by written consent. 

YZi also said the BNB treasury firm’s CEO, David Namdar, made explicit comments that the company had considered switching to other crypto assets, such as Solana, triggering concern among stockholders who invested in BNB’s ongoing strategy. 

The investment firm further accused CEA of delaying the 2025 Annual Meeting past its Dec. 17 anniversary and warned the board against any “manipulative behavior” related to scheduling or director nominations.

In a message shared Wednesday with The Block, Ella Zhang, head of YZi Labs, said YZi will “remain committed to constructive dialogs, protecting the shareholders’ interest and promoting the integrity and value of the BNB ecosystem.”

The Block has reached out to CEA Industries for further comment.

This conflict between the two companies contrasts sharply with the initial optimism following CEA’s pivot from vape manufacturing and a 600% stock surge after 10X Capital and YZi Labs’ $500 million PIPE.

CEA Industries (BNC) closed up 1.56% at $6.51 on Tuesday. The stock has fallen 36.67% over the past six months, while the BNB token rose roughly 38% in the same period, according to The Block’s BNB price page.

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