Chinese electric vehicle firm Jiuzi Holdings (JZXN) shook the markets this September 24th by announcing an ambitious investment plan of up to one billion dollars in cryptocurrencies. The news triggered an explosive initial reaction in its stock price, which, however, quickly reversed, reflecting investor skepticism.
The announcement details that the company’s board of directors approved the creation of a strategic treasury composed of Bitcoin (BTC), Ethereum (ETH), and BNB. Immediately following the news, JZXN shares skyrocketed by 47%, reaching $2.38 per unit. However, the enthusiasm was short-lived; the initial euphoria gave way to a sell-off that not only erased the gains but also pushed the stock down nearly 10% by the end of the day, trading at $1.46. This movement underscores the market’s distrust of the plan’s magnitude.
This move represents an attempt by Jiuzi Holdings to diversify its treasury management and, according to its CEO, Tao Li, is “a proactive step in our treasury management to safeguard and enhance long-term shareholder value.” Despite these intentions, the news confronts a harsh financial reality. According to its latest SEC filing, the company had just $943,000 in cash and cash equivalents as of October 31, 2024, in addition to reporting an annual net loss of approximately $55 million.
Implications for the Market and the Asset
The discrepancy between the plan’s figure and the company’s actual liquidity raises serious doubts about its feasibility. For the asset (JZXN), the direct implication was extreme volatility, driven by speculation. Investors reacted with skepticism as no details were provided on how Jiuzi Holdings plans to finance such a large purchase, as no fundraising strategy was mentioned. For the crypto sector, while the news adds to the corporate adoption narrative, its impact is limited due to the lack of clear financial backing.
In conclusion, the announcement from Jiuzi Holdings appears to be more a statement of intent than a short-term executable strategy. While the adoption of crypto assets in corporate treasuries is a growing trend, this case highlights the importance of financial capacity to support such plans. The crucial next step will be to see if the company presents a credible financing plan to carry out its ambitious vision or if, instead, the announcement remains a failed attempt to revive interest in an asset that has lost over 99% of its value in the last five years.
