How treasury companies fund their buys: shares, notes, and dilution

Two companies can hold the same number of coins and be worlds apart in risk, because how they paid for the coins changes everything. Money raised by selling shares dilutes existing owners. Money raised by borrowing adds obligations that must be repaid no matter where the coin trades. Understanding the funding source tells you what a treasury position is really costing the people who already own the stock.

The most common way treasury companies buy more coin is to sell new stock and spend the proceeds on coin. Many run an at-the-market program — a standing arrangement to dribble new shares into the market a little at a time and convert the cash to coin as it comes in.

The catch is that every new share is a thinner slice of the same pie. Whether that helps or hurts existing owners comes down to one thing: the price at which the shares are sold versus the coins-per-share the company already has. We’ll work that out below.

The other big lever is the convertible note — a loan that can later turn into stock. The company borrows money cheaply now (convertibles often carry low interest), buys coin with it, and the lender gets the option to convert the debt into shares if the stock climbs past a set price.

• Upside for the company: cheap money today, and if the stock does well the debt converts to equity instead of needing to be repaid in cash.
• The hidden cost:if the notes convert, that’s future dilution waiting in the wings. If they don’t, the cash has to be found to repay them — potentially at an awkward moment, if the coin is down when the note comes due.

“Coins per share” is the number that cuts through the noise: take the total coins held and divide by the shares outstanding. A funding move is good for you only if it raises that figure. Here’s a worked example.

Say the stock trades at a premium and the company sells 100,000 new shares, raising enough cash to buy 1,500 more coins. Now it holds 11,500 coins across 1,100,000 shares:

Coins per share rose from 0.0100 to about 0.01045 — a roughly 4.5% gain for every existing share, even though the company issued 10% more stock. That’s dilution working for shareholders. Now run it the other way: if those same 100,000 shares had bought only 900 coins, the company would hold 10,900 across 1,100,000 shares, or about 0.00991 coins per share — a drop. Same number of new shares, opposite outcome.

• Coins per share over time, not total coins. A rising total coin count means nothing if the share count rose faster.
• The premium when shares are issued. Issuing into a fat premium builds coin per share; issuing at a discount burns it.
• The debt-maturity calendar. When do convertible notes come due or convert, and what does the balance sheet look like if the coin is down at that moment?

For how these same funding choices show up across the market, see how corporate Bitcoin treasuries work.