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This is a segment from The Breakdown newsletter. To read more editions,\u00a0<\/em>subscribe<\/em><\/a><\/p>\n \u00a0\u201cIt\u2019s unwise to pay too much, but it\u2019s worse to pay too little.\u201d<\/p>\n \u2014 John Ruskin<\/em><\/p>\n<\/blockquote>\n<\/figure>\n The half-life of a market opportunity is a function of the frictions involved in exploiting it.<\/p>\n A business opportunity like selling GPUs might last forever because GPUs and the proprietary software needed to run them are hard to make.<\/p>\n A financial<\/em> opportunity like arbitraging a stock across exchanges might last just a fraction of a second because trading on stock exchanges is easy.<\/p>\n Digital asset treasury companies (DATs) are somewhere in between.<\/p>\n There\u2019s currently a mad rush of new DATs seeking to arbitrage the premium that investors are willing to pay for crypto tokens held by an exchange-listed company.<\/p>\n But it takes months for a company to get listed on exchanges, so despite all the new entrants, the window of opportunity has not yet been closed.<\/p>\n Everyone expects it will be soon though, so only those fastest to market are likely to profit.<\/p>\n Getting there via an IPO is out of the question \u2014 wrangling all the lawyers and bankers, getting approved by the SEC, and marketing a deal to investors can take a year or more.<\/p>\n A SPAC listing is faster \u2014 it might compress the listing process down to six months or so, as several DATs are currently attempting.<\/p>\n They still might not make it in time.<\/p>\n The premium for exchange-listed crypto (as measured by mNAV<\/a>) is already shrinking \u2014 before<\/em> any of the proposed SPAC deals have even been finalized.\u00a0<\/p>\n So to get a new company listed on the stock exchange before the DAT opportunity is arbitraged away, the only option may be to acquire a company that\u2019s already on the stock exchange.<\/p>\n This is creating some strange exposures for investors.<\/p>\n Just recently, we\u2019ve had a biotech company become an ETH DAT, a toy maker a TRON DAT, a maker of cleaning products a DOGE DAT, and a wellness company a BONK DAT.<\/p>\n In most cases, the only redeeming feature of this odd assortment of businesses is that they\u2019re already listed on a US stock exchange.<\/p>\n A new Solana DAT, for example, has been created by a de facto takeover of a company that\u2019s developed a new kind of syringe, Sharps Technology.<\/p>\n It\u2019s not a good business.<\/p>\n For the first quarter of this year, Sharps Technology recorded $0 of revenue and an operating loss of $2 million. At the end of last year, the company told the SEC it had \u201csubstantial doubt\u201d about its ability to continue as a going concern. In 2023, Sharps\u2019 accounting firm resigned because the company \u201cdid not meet [its] internal risk tolerance metrics.\u201d<\/p>\n And yet, the newly crypto-focused company says it will remain in the business of selling syringes.\u00a0<\/p>\n This commitment to a failing enterprise \u2014 wholly unrelated to the company\u2019s new mission to accumulate crypto \u2014 seems to defy business logic.\u00a0<\/p>\n But it does have financial logic.<\/p>\n\n