Jack Mallards is stepping down as CEO of TwentyOne Capital to focus on Strike, while TwentyOne and the Bitcoin payment company abandon a planned merger.
TwentyOne board member Rafael Zagli, who has experience in capital markets and Bitcoin infrastructure, will become CEO. The move puts him in charge of building a cash-generating business around one of the largest enterprise Bitcoin vaults, as falling prices and tight funding challenges the broader sector.
Mallards said he decided to step down after becoming clear about what he wanted to build. “My life’s work continues to be Bitcoin. My Bitcoin company is on strike. The work continues,” he wrote.
Tether, Twenty One’s controlling shareholder, confirmed that Zagley will succeed Mallards and that both companies are working towards an orderly transition.
Strike combinations are no longer on the table
The split ends a strategy Twenty One outlined less than three months ago.
On April 29, the company announced an operating plan centered around the potential acquisition of Zagri and related Bitcoin mining and energy infrastructure businesses Strike and Electron.
This plan was by no means a done deal. In its quarterly report filed in May, Twenty One said there were no binding commitments or agreements for either acquisition and that its board of directors had not approved the transactions.
Tether said in a statement that Twenty One and Strike are no longer considering a merger, as Strike is best positioned as an independent business. That makes this transition more significant than just a change at the top. While Mr. Mallards turns his attention back to Strike, TwentyOne will need to develop an operating model without the payment companies that were central to its proposed expansion.
Twenty One remains one of the largest corporate Bitcoin holders. A snapshot of the historical March 31 balance sheet quantifies the exposure Zagri assumes.
As of March 31, the company reported 43,514 BTC, a fair value of approximately $2.95 billion, and approximately $114.1 million in cash. These numbers are quarterly snapshots and are not current July balances.
The filing records a fair value loss of $847.8 million (rounded) on Bitcoin positions during the quarter. It also stated that approximately 16,116 BTC was pledged as collateral for the convertible bond. While this loss itself does not represent a comparable cash outflow, it did show how TwentyOne’s reported results are directly linked to Bitcoin.
The data shows the scale of the financial model Zagri is being asked to develop. Twenty One has said it wants to grow its Bitcoin per share value while building financial services, lending, capital markets products and other cash-generating businesses around its holdings.
Zagli said in Tether’s announcement that TwentyOne should be judged on the cash flow it generates and the discipline in its capital allocation. Tether CEO Paolo Ardoino also highlighted Zagli’s experience building businesses with cash flow and disciplined execution.
Due to this mandate, performance testing is conducted beyond the size of the Bitcoin stack.
Treasury loans increase risk
This emphasis comes amid a tough market for companies funding large Bitcoin holdings.
Companies that offered Bitcoin as a permanent reserve had to weigh debt payments, collateral requirements, dividends, buybacks and continued accumulation. As igcurrencynews reported in May, these obligations could transform Bitcoin from a passive reserve to a source of corporate liquidity when funding conditions tighten.
The pressure is also extending to the securities finance companies use to raise funds. Major government bond-linked preferred stocks traded below their stated prices during the June selloff, even though dividends continued and markets continued to function.
As new corporate Bitcoin credit efforts continue to advance this month, investors will need to assess whether their funding structure can withstand prolonged volatility.
This situation is not the reason for Twenty One’s stated leadership change. Mr. Mallards described his departure as a decision to focus on Strike, and Mr. Tether characterized his takeover as the end of a chapter in the company’s founding.
But they make Zagri’s cash flow and capital allocation obligations more urgent. If capital is readily available and Bitcoin is rising, the treasury could grow. Building a publicly traded company that is durable in a downturn requires an operating cash flow and financing structure that is not completely dependent on rising Bitcoin prices.
Now that Strike has maintained its independence, Twenty One will now have to prove that its Bitcoin balance sheet can support its broader business on its own.
(Tag Translation) Bitcoin
