Binance Founder Seeks Control of BNB Treasury Company Amid Stock Plunge

Key Takeaways

• YZi Labs aims to seize control of CEA Industries' board.
• YZi cites shareholder value destruction as the reason for the move.
• CEA Industries' stock has plummeted since its BNB investment.
• BNB is currently trading at a three-month low.

YZi Labs, an entity backed by Binance founder Changpeng Zhao, has initiated a move to gain control of the board of directors at CEA Industries (BNC), a company that made a significant investment in the BNB cryptocurrency. YZi Labs cites the “destruction” of stockholder value as the primary driver behind this action.

In a regulatory filing released on Monday, YZi Labs announced its intention to repeal all bylaw changes implemented by CEA since July, to expand the size of CEA's board, and to elect “highly-qualified” nominees put forth by YZi as directors. YZi communicated to shareholders that these measures “are necessary to address the continued destruction of stockholder value at BNC and to ensure that the Company is being run in a manner consistent with your best interest.”

If a majority of outstanding shareholders agree, YZi, which formerly presented itself as Zhao’s family office, would effectively gain control of what is currently the world’s largest publicly traded BNB treasury company. It's worth noting that BNB is closely affiliated with both Zhao and Binance, which reportedly owns the majority of the token's supply.

CEA Shares Tumble After YZi Backing

Shares of CEA Industries (BNC) have plummeted by approximately 89% since hitting a peak of $57.59 on July 28th. This peak coincided with a surge of 550% in the Canadian vape company’s stock, fueled by its plans to become the largest BNB treasury company. The stock closed trading on Monday at $6.47, reflecting a decline of over 10% for the day. Year-to-date, the stock is down over 20%, and it is currently trading below its price level before the pivot to crypto assets.

YZi played a role in funding CEA’s $500 million private investment in public equity (PIPE) deal, which closed in August. CEA pitched this deal as a means to “establish the largest publicly listed BNB Chain digital asset treasury strategy in the world.” CEA’s shift into crypto saw David Namdar, CEO of investment firm 10X Capital, appointed as CEO, with several 10X Capital executives also joining CEA’s board.

However, in its recent filing, YZi claimed that CEA’s management has been slow to provide investor updates and has made “little to no media or marketing efforts” to promote the company. YZi also accused Namdar of a “lack of devotion and loyalty” to CEA, alleging that he promoted other crypto treasury companies. They suggested that the new board “should explore the selection of a new CEO.”

CEA Industries has yet to respond to requests for comment.

BNB Trades Low, But Outperforms CEA

BNB, a token deeply intertwined with Binance that provides perks to BNB holders on the platform, is currently trading at a three-month low of $829. It has experienced a decline of almost 40% since reaching an all-time high of $1,367 in mid-October, but its fall has mirrored the broader crypto market due to wider macroeconomic concerns.

Despite the recent decline, BNB is up 17.8% year-to-date and has traded slightly down over the last 24 hours. CEA Industries reports holdings of 515,054 BNB, acquired at an average cost of $851.29, which has resulted in its mNAV (the ratio of the company’s value compared to the value of its crypto holdings) reaching 0.79x.