XXI Stock Rises Pre-Market Even As Company Clears Path For Share Resale

• Twenty One Capital (XXI) shares rose more than 2% in Tuesday's pre-market trading despite the company filing to register up to 35.07 million Class A shares for resale.
• The Form S-1 with the SEC covers shares linked to $486.5 million of convertible notes due in 2030.
• Other crypto-linked stocks, including Strategy, have previously seen pressure following share sales and insider transactions, as investors have viewed them as a cautionary signal.

Twenty One Capital (XXI) shares rose in pre-market trading on Tuesday as investors appeared to shrug off dilution concerns following a filing that allows holders of convertible notes to resell more than 35 million Class A shares.

In the pre-market session, Twenty One Capital (XXI) was trading at $10.13, up over 2% after it closed 6.45% higher on Monday at $9.90. This comes after Twenty One Capital filed a Form S-1 to register up to 35.07 million shares of Class A common stock.

According to the filing, the shares are linked to $486.5 million of convertible notes issued earlier by Twenty One Capital. These notes carry a 1.00% interest rate, will mature in 2030, and can be converted into Class A shares. The filing also states that Twenty One will not receive any money from those share sales. It also notes that the company’s Class A common stock does not carry voting rights. Class A common stock refers to the basic ownership unit of a public company. Stockholders typically benefit if the company grows and the share price rises.

On Stocktwits, retail sentiment around Twenty One Capital remained in ‘bearish’ territory, with chatter at ‘high’ levels. 

Previous Insider Selling

While Twenty One Capital has not disclosed any recent insider selling, similar filings and insider transactions in other crypto-linked stocks have previously unsettled investors.

Insiders often have better visibility into a company’s fundamentals, near-term risks, and valuation ceilings, which is why insider selling can be interpreted by market watchers as a cautionary tale.

Previously, insider trades caught attention when Strategy (MSTR) CFO Andrew Kang and EVP Wei-Ming Shao sold thousands of shares. Soon after, Strategy ended up in a Class-Action lawsuit. According to the filing, the plaintiff alleged that Strategy misrepresented fundamental aspects of its Bitcoin investment strategy, violating federal securities laws. 

Critics of debt-funded crypto strategies have also flagged balance-sheet stress across the sector. Gold bull and Global Strategist Peter Schiff pointed out that Michael Saylor, Strategy’s executive chairman, was forced to sell stock not to buy Bitcoin (BTC), but to buy “U.S. dollars merely to fund MSTR's interest and dividend obligations.” 

Read also: Why Coinbase CEO Brian Armstrong Cannot Buy COIN On His Own Platform App

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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