In its notification to regulatory authorities, Avalanche Treasury Corp announced that there is serious uncertainty about its ability to continue its operations until the end of the year. The company stated that falling AVAX prices put heavy pressure on the balance sheet, resulting in significant losses and increased liquidity tightness.
The loss of value in AVAX assets put a strain on the balance sheet
The company stood out during last year’s expansion with a large AVAX treasury worth nearly $1 billion. However, as market conditions reversed, the value of these assets declined sharply in recent months. Following this decline, the company’s market value dropped below 30 million dollars.
The operating unit wrote off more than $26 million due to AVAX impairment in one quarter alone. The value of AVAX assets, which the company bought for approximately 265 million dollars, dropped to 123 million dollars. Thus, the current value of digital assets held remained well below the initial purchase cost.
Avalanche Treasury Corp said current conditions cast serious doubt on its ability to continue as a going concern and continued uncertainty over financial stability.
While the AVAX price has fallen 47 percent this year, the loss has reached nearly two-thirds in the last 12 months. This situation weakened the company’s treasury strategy and narrowed its financial space. Avalanche Treasury Corp noted that these conditions pose a continuing risk to the company’s sustainability.
Share performance deteriorated sharply
Avalanche Treasury Corp was listed following its merger with a special purpose acquisition company. Although high expectations stood out in the first period, investor perception reversed as the risks related to the company’s AVAX exposure and financial structure became more visible. The share price fell from over $10 to below $2 in a matter of days following the additional notices.
The selling pressure continued later and the shares fell below $0.73. Thus, the company’s stock lost more than 90 percent of its value within a month. This sharp decline reflected the market’s concerns about the durability of the AVAX-focused treasury model.
Collateral structure increased risk
The company pledged a significant portion of its AVAX assets as collateral within the scope of the loan agreement. Approximately 7.8 million tokens out of a total of 13.8 million AVAX were collateralized, strengthening concerns that price declines could create additional pressure.
Mini dictionary: SPAC refers to the special purpose partnership structure established to purchase an operating company and bring it to the stock market. Collateral is the assets that are given in exchange for a loan and may cause additional liability in case of loss of value.
A decline was also observed in companies that followed a similar strategy
Similar losses in value were also noted in other companies that followed an AVAX-dominated treasury strategy. AgriFORCE Growing Systems had announced a major capital increase plan to acquire more AVAX after switching to the AVAX One brand. Despite this, the company’s market value decreased to approximately 43 million dollars.
The company’s shares have fallen 68 percent this year and more than 90 percent in the last year. Industrywide data points to a common downward trend in the valuations of companies carrying large AVAX reserves. These reserves, previously built up on market optimism, now face low asset values and weakening investor confidence.
