Summary FG Nexus has dipped to now trade at a discount to its NAV per share of around 20% and holds 40,095 ETH in its treasury. This has limited the ability of the company to tap its equity to expand its ETH holdings, with management forced to sell nearly 11,000 ETH to fund share buybacks. The buy-backs have since lost value, total debt has gone up, as payments on the preferreds and cash burn look set to further slim a cash profile in flux. FG Nexus' ( FGNX ) 20% discount to NAV per share inverts the traditional cryptocurrency-as-a-treasury model championed by Strategy's ( MSTR ) Michael Saylor by depriving the company of the ability to aggressively tap its common shares to buy Ether, the native cryptocurrency of the Ethereum blockchain ( ETH-USD ). FGNX, based in Charlotte, North Carolina, operates across two business lines. Digital Assets sees FGNX exclusively adopt Ether ("ETH") for use as a long-term treasury asset. The company currently owns 40,095 ETH , with these valued at $3,005 per ETH, or $120.5 million. Merchant Banking forms the second division, which provides administrative and regulatory support services to newly formed SPACs. The company currently has 36 million shares outstanding at $2.92 per share, around 0.80x its net asset value ("NAV") of $3.66 per share. FG Nexus Website ETH as treasury strategy mirrors MSTR's and will see FGNX issue new common shares and preferred equity to buy ETH for storage. This strategy hinges on continued access to the capital markets and a constrained operating cost base. The company's 8.00% Series A Cumulative Preferreds ( FGNXP ) are its only other outstanding security. Critically, the coupon payments on these carry an elevated level of risk and FGNX does not currently generate any operational-level cash flows. ETH is the second-largest crypto by market cap after Bitcoin, and it's used as the base settlement layer for the majority of stablecoins, tokenized assets, and Decentralized Finance applications. Seeking Alpha The company has moved to expand its share authorization to 1 trillion , with 900 billion of this total formed from common shares and the remainder in preferred stock. The intent is clearly to issue shares at an aggressive pace to buy ETH, leading to stock price growth that allows for the issuance of more shares to buy more ETH. This intent as a strategy falls apart with FGNX trading at a discount to its ETH holdings. In theory, this discount represents an opportunity, and FGNX announced share buybacks for its common shares of up to $200 million in October. To fund this buyback, the company offloaded nearly 10,922 ETH in October and borrowed around $10 million . FGNX, as of November 20, had repurchased 3.4 million common shares. This was completed at $3.45 per share, with the stock down 15.4% since then. The Series A Preferreds And ETH-As-A-Treasury Model FG Nexus Fiscal 2025 Third Quarter Form 10-Q FGNX stakes its ETH holdings, a yield-seeking strategy that sees FGNX lock up its holdings to take part in the proof-of-stake consensus mechanism required for the Ethereum blockchain. This represents FGNX's largest source of revenue, with $641,000 earned by the company during its fiscal 2025 third quarter. Total revenue for the quarter was just under $900,000 , with a net loss of $3.84 million recorded. FGNX had cash and cash equiavelnts of $7.5 million at the end of the third quarter, but this balance is in flux. The company has been buying back shares, with its common shares outstanding dropping by 4.1 million shares since the 20th of November. FGNX's total debt outstanding has also expanded to $11.9 million. Seeking Alpha ETH has traded down over the last 1-year by 13% and has dipped by roughly 40% from its 52-week high. The company now faces dual wealth-destructive effects of ETH prices that are dropping and common shares trading at a discount to NAV that continues to broaden. This ramps up the importance of the Series A preferreds as a possible hedge to common share volatility. These pay a $2 per share annual coupon for a 9.3% current yield as they're currently trading for $21.50 per share. This means they're swapping hands for a 14% discount to their $25 per share liquidation value, or for 86 cents on the dollar. QuantumOnline FGNX spends $447,000 per quarter on the coupons and recorded a cash burn from operations of $600,000 during the third quarter, annualized at $2.4 million. The ongoing discount to NAV prevents the company from issuing new shares to buy ETH, placing future returns in a state of volatile uncertainty. The current stock reflects a declining cryptocurrency and a stock price that has inverted to trade at a discount to this new zeitgeist. Hence, the bull case is limited until either ETH recovers or the stock price moves up to trade at a premium. Conclusion FGNX intends to pause equity issuances as long as its shares trade at a discount to NAV. This has come with its ETH portfolio being sold down to buy back stock that has declined from the weighted average of its most recent buybacks. While it could seem like arbitrage to buy FGNX to get ETH at a discount, FGNX comes with company-level operational costs and what could be an expanded discount to ETH from current levels that keep the commons as a avoid. The preferreds could also lose some value if the company is forced to continue to sell ETH and buy shares that decline further from the buy price. I am rating both tickers as a sell.
