DATs and Crypto-Pivot Companies: Understanding and Mitigating Shareholder Activism Risks

The emergence of digital asset treasury companies (“DATs”) and crypto-pivot companies — public companies that have repositioned all or a substantial portion of their corporate strategy around the acquisition, accumulation, and management of digital assets — has introduced a new and rapidly evolving sector of public companies to the market. Since the beginning of 2025, a growing number of public companies have adopted some version of the playbook: reposition legacy businesses around digital asset treasury strategies; accumulate digital assets on the balance sheet; and, in some cases, deploy digital assets to generate returns through staking,¹ lending, protocol participation, and related activities. Early DATs and crypto-pivot companies attracted substantial institutional and retail capital because their stocks traded at a significant premium to the market values of their accumulated digital assets (i.e., their net asset value or “NAV”).

As the sector has developed, however, new pressures are emerging. A substantial number of DATs and crypto-pivot companies trade at or below NAV. As a result, the premiums that once powered the digital asset accumulation “flywheel” — i.e., the cycle in which a DAT or crypto-pivot company sells stock at a premium to NAV, uses the proceeds to buy more digital assets, grows per-share value, and thereby sustains or increases the premium that enables further stock sales — have compressed and, in some cases, become discounts to NAV across much of the sector. Many market participants expect significant differentiation across the DAT sector as investors are likely to focus less on simple digital asset accumulation and more on factors such as access to capital, capital allocation decisions, leverage, treasury management, governance, and the economics of the underlying digital assets, including yield generation from deployment of the digital assets. Companies that demonstrate sustainable value creation may increasingly separate themselves from those with business models that depend primarily on continued access to premium-priced equity and debt capital.

Those pressures create a landscape that shareholder activists may find increasingly attractive. DATs and crypto-pivot companies exhibit characteristics that have historically been targets of shareholder activism campaigns: trading discounts to NAV following periods of premium valuations that invite demands for the return of capital, inquiries into capital allocation, concerns about shareholder dilution, questions about the refinancing of complex financing structures, and disclosure practices that still are developing for a relatively new business model. Additionally, some DATs employ related-party or externally managed treasury arrangements and/or maintain boards that activists may allege lack an appropriate mix of public company, capital markets, risk oversight, and digital asset expertise. Against the backdrop of a record number of shareholder activist campaigns globally in recent years, with first-time activists increasingly targeting small-cap issuers, the conditions are in place for meaningful shareholder activism in this sector of public companies.² Below, we discuss the conditions that may make DATs attractive targets for shareholder activists and suggest strategies for DAT issuers and their boards of directors to prepare for and mitigate the risks of activist engagement and potential campaigns.

CONTENTS

1. Understanding DATs and Crypto-Pivot Companies
2. DATs and Crypto-Pivot Companies as Targets of Shareholder Activism
3. Shareholder Activist Pressure for Asset Sales, M&A, or Other Strategic Alternatives
4. Mitigating Shareholder Activism Risks

1. Understanding DATs and Crypto-Pivot Companies

For purposes of this article, we use the term “DAT” to refer to a public company the principal business strategy of which centers on the acquisition, holding, staking, lending, or management of digital assets. The digital asset treasury strategy itself is central to the investor thesis and the company’s valuation. DATs typically acquire digital assets through a combination of capital-raising transactions, including private investment in public equity (“PIPE”) financings, at-the-market (“ATM”) programs, convertible securities issuances, preferred stock issuances, and warrant issuances. A number of DATs also have entered the public markets through special purpose acquisition company (“SPAC”) transactions or other non-traditional pathways. In some transactions, investors contribute cash proceeds that are subsequently deployed to purchase digital assets, while in others, investors contribute digital assets directly to the company in exchange for newly issued equity securities, warrants, or other instruments.

Investors often view the value proposition of DATs as tied more closely to the management of a digital asset treasury than to the operation of a conventional business and frequently evaluate DATs based on metrics that measure the trading price’s premium or discount to NAV, digital assets per share, treasury growth, capital allocation discipline, and management of the digital asset treasury. That structural dynamic can create unique governance, oversight, and capital allocation challenges that differ in certain respects from the challenges associated with traditional operating companies as boards and management teams seek to balance the management of increasingly significant digital asset treasuries with traditional public company responsibilities.

For purposes of this article, we use the term “crypto-pivot company” to refer to a public company that materially repositions its business strategy toward a digital asset treasury strategy while continuing to operate its legacy business. Some crypto-pivot companies continue to generate meaningful revenue from established operating businesses and view their digital asset treasury strategies as complementary to those operations. Others — particularly low-market-cap operating companies or companies with waning legacy operations — adopt digital asset treasury strategies as part of a broader effort to reposition the company, improve access to capital, broaden their investor base, or pursue a valuation re-rating. Over time, certain crypto-pivot companies may evolve into DATs as the digital asset treasury strategy becomes the company’s principal business and primary driver of valuation. Others may continue to operate hybrid business models that combine legacy operating businesses with significant digital asset treasury activities. Maintaining an active operating business may have implications under applicable exchange listing standards and the federal securities laws, including with respect to Form S-3 eligibility and shell company considerations.

Both DATs and crypto-pivot companies may face shareholder activism threats, although the issues raised by activists are likely to differ depending on the company’s business model and stage of development. Shareholder activists targeting DATs are more likely to focus on issues such as discount to NAV, capital allocation, treasury management, financing strategies, governance, and oversight. Shareholder activists targeting crypto-pivot companies also may question the company’s strategic rationale for adopting a digital asset treasury strategy, the continued viability of its legacy operating business, or whether the pivot is likely to create long-term shareholder value. As NAV premiums compress and investors become increasingly selective, boards and management teams of both DATs and crypto-pivot companies may expect heightened scrutiny of their strategic decisions, governance practices, and capital allocation decisions.

2. DATs and Crypto-Pivot Companies as Targets of Shareholder Activism

DATs and crypto-pivot companies present capital structure, governance, related-party, strategic, and operational characteristics that may attract shareholder scrutiny. Those characteristics, individually or in combination, may make DATs and crypto-pivot companies attractive targets for shareholder activism.

Capital Structure Risks

The capital structure dynamics at many DATs and crypto-pivot companies, and in particular the premium-to-discount cycle, may become a catalyst for shareholder activism. When the stock of such companies trades at a premium to NAV, selling securities to buy additional digital assets can be accretive to per-share value. When the premium becomes a discount, however, the opposite is true: Selling securities to buy additional digital assets may become dilutive to existing shareholders on a per-share basis, and the company’s digital asset accumulation stalls. Publicly traded securities of many DATs and crypto-pivot companies currently trade at a discount to NAV. For those companies, shareholder activists may argue that the company should prioritize repurchases or redemptions over further digital asset acquisitions because repurchasing shares or redeeming debt effectively allows the company to acquire exposure to its underlying digital assets at a discount to NAV. Shareholder activists also may advocate broader strategic alternatives, including liquidation of digital asset treasures, mergers, or other transactions designed to eliminate or narrow the discount to NAV.

In addition, the frequent use of capital markets by many DATs and crypto-pivot companies to fund their digital asset treasury strategies may lead shareholder activists to challenge whether repeated capital raises are creating long-term per-share value or instead disproportionately benefiting insiders, related parties, or external managers. To the extent companies tie compensation to digital asset treasury size rather than per-share value metrics, such compensation structures may create an incentive to grow the treasury through dilutive stock sales even when doing so does not benefit public shareholders, which is often an area of particular focus for shareholder activists.

Further, the complexity of the capital structure of DATs and crypto-pivot companies may prompt shareholder activism. Convertible note maturities concentrated in near-term windows create refinancing risk, particularly if the company’s stock price has declined below conversion prices. And perpetual preferred securities with fixed dividend obligations may constrain financial flexibility depending on their terms. Extensive warrant overhangs or complex conversion features may likewise become focal points for shareholder activists who argue that the capital structure has become overly dilutive or unnecessarily complicated. Shareholder activists may point to these structural pressures as evidence that the company has prioritized digital asset treasury growth over prudent capital allocation, balance sheet resilience, and long-term shareholder value.

Governance Risks

Many DATs and crypto-pivot companies have undergone rapid strategic transformations, frequently accompanied by changes to their boards and senior management. In some cases, companies have added founders, operators, promoters, digital asset investors, or other individuals with substantial experience in digital asset markets but comparatively limited experience serving on the boards of public companies. Other DATs and crypto-pivot companies have retained legacy directors with public company experience but more limited familiarity with digital asset treasury strategies. As a result, boards may face questions regarding whether they collectively possess the appropriate mix of expertise in public company governance, capital markets, digital assets, treasury management, financial oversight, enterprise risk management, cybersecurity, and regulatory compliance.

Shareholder activists may scrutinize whether the board possesses the independence, governance experience, and skill sets necessary to oversee a rapidly evolving digital asset treasury strategy. Shareholder activists also may question whether the board has sufficient collective expertise in evaluating complex financing transactions, managing digital asset treasury exposures, overseeing disclosure obligations, and navigating an evolving regulatory environment. Rather than focusing on any single area of expertise, shareholder activists are likely to assess whether the board, taken as a whole, is appropriately constituted to oversee both a public company and a sophisticated digital asset treasury strategy.

Shareholder activists may challenge director independence particularly where founders, sponsors, PIPE investors, external managers, or other significant stakeholders exercise substantial influence over board composition. Shareholder activists may argue that such relationships create actual or perceived conflicts of interest that impair the board’s ability to objectively evaluate capital allocation decisions, financing transactions, related-party arrangements, executive compensation, or strategic alternatives. Shareholder activists then may advocate for additional independent directors with relevant public company governance and digital asset experience to strengthen board oversight and increase investor confidence and realign NAV and trading prices.

Related-Party Risks

DATs and crypto-pivot companies may face scrutiny from shareholder activists concerning related-party relationships and transactions. Companies may have treasury management arrangements, staking agreements, advisory relationships, and/or compensation structures that involve insiders, affiliates, or individuals with family or personal relationships with directors or management. Even where such transactions are lawful, they may attract the attention of shareholder activists who perceive insufficient independence, inadequate oversight, and/or misalignment of insiders and public shareholders.

Such concerns may be amplified where shareholder activists view the compensation structures as excessive. For example, some DATs and crypto-pivot companies may rely on external treasury managers, staking operators, consultants, and/or advisors that receive substantial equity compensation or fees linked to the size of the digital asset treasury. Such arrangements have been a frequent catalyst for shareholder activist campaigns seeking internalization or fee renegotiation (e.g., in certain REIT structures and business development companies) and may be a catalyst in this sector as well.

In addition, DATs and crypto-pivot companies may face challenges determining the appropriate scope and timing of disclosure concerning evolving related-party arrangements and compensation structures. Those challenges may become particularly acute when investors subsequently question whether the company’s disclosures adequately described, or whether the board exercised appropriate oversight of, the relationships and compensation — including governance conflicts and compensation linked to the digital asset treasury.

Strategic and Operational Risks

DATs and crypto-pivot companies face significant strategic and operational risks arising from digital asset treasury concentration, liquidity constraints, custody failures, cybersecurity threats, dependence on digital asset markets, evolving accounting treatment, and potential regulatory uncertainty. For companies pursuing yield-generation strategies such as staking and lending, those risks expand to include counterparty risk, smart contract risk, and protocol-level governance risk. For such companies, shareholder activists may scrutinize whether the board has implemented appropriate governance, oversight, and risk management processes to evaluate and monitor these risks, including counterparty exposures, protocol governance, cybersecurity, liquidity, and evolving regulatory requirements, to preserve company assets and long-term value.

Crypto-pivot companies also may be subject to scrutiny if investors perceive that the company has neglected or abandoned its existing operating businesses without articulating a coherent long-term strategy. Shareholder activists may question whether the company’s digital asset treasury strategy is supported by a coherent long-term business plan or instead reflects an effort to improve access to capital, increase trading liquidity, or pursue a valuation re-rating without a sustainable long-term strategy for shareholder value creation.

3. Shareholder Activist Pressure for Asset Sales, M&A, or Other Strategic Alternatives

The dynamics of DATs and crypto-pivot companies create a natural opening for shareholder activists to press for asset sales, M&A, or other strategic alternatives, consistent with the broader increase in shareholder activism focused on strategic alternatives in recent years.

When the securities of a DAT or crypto-pivot company trade at a persistent discount to NAV, shareholder activists may argue that liquidating the digital asset treasury and returning the proceeds to shareholders — or pursuing a merger with another company that trades at a premium to NAV — would unlock shareholder value.

In addition, crypto-pivot companies with meaningful operations and infrastructure may become the focus of shareholder activists who see more value in the existing businesses and assets than in the digital asset treasury strategy. An early example is a recent shareholder activist campaign involving a prominent bitcoin mining company that was based on the argument that the company’s data center and energy infrastructure was more valuable if repositioned toward AI workloads. The campaign illustrates how shareholder activists may challenge not only a company’s digital asset treasury strategy but also its strategic direction and broader allocation of assets. Shareholder activists may make similar arguments where they believe that a company’s existing businesses or infrastructure could generate greater value through alternative strategies.

Further, the large number of DATs and crypto-pivot companies now competing for investor capital creates pressure for consolidation. Many market participants expect that the sector may be entering a period of consolidation in which companies without durable strategies, access to yield generation through onchain returns, or meaningful operating businesses may face increasing pressure to pursue strategic alternatives rather than continue as standalone public companies. Some DATs and crypto-pivot companies may lack sufficient scale — whether measured by market capitalization, digital asset treasury, or operating businesses — to remain attractive as standalone public companies.

In all of these scenarios, shareholder activists may press for strategic alternatives to achieve greater scale, reduce overhead, simplify corporate structures, and/or unlock shareholder value — drawing on activism strategies that historically have driven consolidation in fragmented industries such as community banking, oil and gas, and SPACs.

4. Mitigating Shareholder Activism Risks

Understanding the risks and pressures described above, DATs and crypto-pivot companies can take steps to strengthen governance, improve transparency, and reduce their vulnerability.

Strengthen Board Composition and Oversight

DATs and crypto-pivot companies should consider whether their boards possess the appropriate combination of expertise in public company governance, capital markets, digital assets, treasury management, financial oversight, enterprise risk management, cybersecurity, and regulatory compliance. To that end, companies may benefit from appointing additional independent directors and ensuring that the board or an appropriate committee has clearly defined responsibility for oversight of the company’s digital asset treasury strategy, treasury governance, and related enterprise risks. Regular board and committee evaluations, together with periodic assessments of director skill sets and independence, also may help identify governance gaps before they become focal points for shareholder activists.

Where a director raises concerns regarding strategic direction, governance practices, related-party transactions, internal controls, or other significant matters — and particularly where a director resigns citing such concerns — the company should treat those concerns as a potentially significant governance and shareholder activism risk. Companies facing this situation should consider engaging independent outside counsel or another qualified third-party advisor to conduct a prompt review of the concerns raised, assess whether remedial action is warranted, and create an appropriate record demonstrating the board’s deliberative process and response. Taking these steps may strengthen the board’s oversight process while reducing the likelihood that a departing director’s concerns become the foundation of a future shareholder activist campaign.

Enhance Governance of Related-Party Transactions

A number of DATs and crypto-pivot companies have entered into treasury management, staking, consulting, or advisory agreements with related parties or external managers that may become the subject of shareholder activist scrutiny because of their structure, economics, or governance. As a company evolves, the board should periodically evaluate whether such arrangements continue to reflect the company’s current business strategy and governance practices.

Companies with existing related-party or externally managed arrangements should evaluate their options to renegotiate, modify, restructure or, where appropriate, internalize the arrangements and implement any revised terms through a properly documented process overseen by an independent committee with the benefit of independent legal and financial advisors. While renegotiating or modifying existing arrangements may involve cost and complexity, doing so through an independent process may strengthen the company’s position with respect to shareholder activist campaigns. More generally, companies should adopt robust, independent processes for reviewing and approving related-party transactions, including treasury management, staking, consulting, or advisory agreements involving insiders or affiliates. Independent committee review, formal benchmarking, enhanced disclosure controls, and periodic evaluation of existing arrangements may reduce perceptions of conflicts of interest or misalignment between insiders and public shareholders.

Focus on Per-Share Value Creation

DATs and crypto-pivot companies should clearly articulate how financings, digital asset treasury strategies, staking, and compensation structures enhance long-term per-share value. Shareholder activists are likely to focus on per-share value creation relative to digital asset treasury growth, capital allocation, and dilution. Two dynamics make this particularly important for DATs and crypto-pivot companies.

First, the premium-to-discount cycle creates a clear inflection point. When a DAT or crypto-pivot company trades at a premium to NAV, selling stock to acquire additional digital assets can be accretive to per-share value. When that premium becomes a discount, however, shareholder activists may argue that the company should prioritize share repurchases or other forms of capital return over additional digital asset accumulation. Since investor expectations in the digital asset sector can change rapidly, selling digital assets or pursuing significant capital returns may affect market confidence significantly and impair the company’s ability to execute its long-term business plan. Rather than committing to a predetermined course of action, companies should consider establishing and communicating a clear capital allocation framework that explains how the board evaluates competing uses of capital — including digital asset acquisitions, share repurchases, debt reduction, and other strategic investments — and the factors that inform decisions under different market conditions.

Second, compensation structures deserve particular attention. Companies should consider whether compensation arrangements appropriately align management incentives with long-term value-creation objectives. Many DATs evaluate performance using digital assets per share, NAV accretion, total shareholder return, or other per-share metrics. To the extent that compensation focuses on other metrics — such as absolute treasury growth — without appropriate consideration of per-share performance, shareholder activists may argue that management incentives are misaligned with public shareholders’ interests.

Improve Disclosure Practices

Given the complexity of the capital structures and digital asset treasury strategies employed by many DATs and crypto-pivot companies, companies should consider whether their public disclosures clearly communicate the board’s strategic rationale, governance framework, and approach to risk oversight. Investors are likely to expect meaningful disclosure regarding the company’s digital asset treasury strategy, capital allocation framework, staking and other yield-generation activities, liquidity management, material counterparties, related-party relationships, compensation arrangements, and governance processes. Clear, consistent, and transparent disclosure may help investors better understand the company’s strategy and reduce the likelihood that shareholder activists later argue that the company’s disclosures failed to explain adequately the company’s operations, relationships, governance, or material risks.

Engage Proactively With Investors

DATs and crypto-pivot companies should engage proactively with institutional investors and other key stakeholders regarding their digital asset treasury strategies, capital allocation priorities, governance, and long-term strategic objectives. The risk of shareholder activism often increases when investors perceive a lack of strategic clarity, insufficient transparency, or limited engagement.

Proactive engagement provides companies with an opportunity to explain the rationale underlying their treasury management strategy, capital allocation decisions, financing activities, and governance framework before those issues become central themes in a shareholder activist campaign. Proactive engagement also enables boards and management teams to identify potential disclosure or governance issues at an early stage and to understand and address investor concerns before they develop into broader shareholder activism campaigns.

In addition, proactive engagement provides boards with an opportunity to explain strategic decisions that may not be intuitive to investors, including decisions to continue accumulating digital assets during periods when the company trades at or below NAV or to maintain a long-term digital asset treasury strategy notwithstanding short-term market volatility. By communicating the board’s strategic framework and long-term objectives before shareholder concerns materialize, companies may strengthen investor confidence and reduce the likelihood that shareholder activists define the narrative.

Conclusion

The shareholder activism risks and pressures described in this article are not unique to DATs and crypto-pivot companies. Rather, they reflect the evolution of a rapidly developing sector in which changing market conditions have challenged the investment thesis for some DATs and crypto-pivot companies and increased investor scrutiny of strategic direction, disclosure, and governance. These pressures do not depend on a changing shareholder base. Even where early investors continue to hold significant positions, changed market conditions and evolving expectations regarding capital allocation and governance may create shareholder dissatisfaction and increase the likelihood of shareholder activist engagement.

At the same time, the economic characteristics of DATs and crypto-pivot companies may complicate, and in some cases forestall, traditional shareholder activist strategies. Selling digital assets, pursuing significant capital returns, or changing the treasury strategy may adversely affect investor confidence, impair access to capital, adversely affect the price of the underlying digital asset, thereby exacerbating the value misalignment and/or weakening the long-term investment thesis that attracted investors in the first place.

Against this complex backdrop, the steps that DATs and crypto-pivot companies can take to mitigate shareholder activism risks remain well understood: strengthening board composition and oversight, enhancing governance of related-party transactions, focusing on per-share value creation, improving disclosure practices, and engaging proactively with investors. Those measures need not fundamentally alter a company’s digital asset treasury strategy. Rather, they can help the board defend and explain that strategy through a transparent governance process, which will increase investor confidence and help the company to respond to an activist shareholder from a position of strength.