Reverse Stock Splits: The Distressed Treasury's Compliance Tool

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Treasury Investors Expect Record Accumulation in 2026

BitcoinTreasuries.net 2026 Audience Survey reveals investors are expecting aggressive accumulation, broader adoption of "digital credit" instruments, and rising stock prices across the sector in the coming year.

Our findings, shaped with the input of treasury investors, analysts, and corporate decision-makers, shows overwhelming confidence in the sector among our web and social audience — with external factors viewed as the primary risk factor rather than the treasury model itself.

Download the findings here:

Reverse Stock Splits: The Distressed Treasury's Compliance Tool

Strive shareholders approved the company's acquisition of Semler Scientific this week, a deal that will create a combined Bitcoin treasury of 12,798 BTC ranking 11th globally among corporate holders. The all-stock transaction includes a one-to-20 reverse stock split intended to align the combined company's share price with institutional participation standards.

Both stocks declined following the announcement — Strive falling as low as $0.90 (down 12%) while Semler shed nearly 10% — a reaction that raised questions about investor sentiment.

"The acquisition involves changes to our share counts, so it's a natural time to also complete the plumbing of the reverse split,” Strive Chairman and CEO Matt Cole told BitcoinTreasuries.net. “Given that the Semler acquisition increases our Bitcoin holdings significantly to over $1 billion, which we believe is an important milestone for institutions, it's the right time to also align our share price with institutional participation standards.”

Cole emphasized that "a reverse split doesn't close a single door to any investor, nor does it change the economic ownership or fundamentals of an investment." But the reverse split announcement overshadowed the strategic rationale

But the reverse split announcement overshadowed the strategic rationale, reigniting long-standing investor concerns about what these corporate actions actually signal.

What Reverse Splits Actually Do

A reverse stock split consolidates existing shares into fewer shares at a proportionally higher price.

In Strive's 1-for-20 split, shareholders who owned 100 shares at $1 each ($100 total value) will now own 5 shares at $20 each — still $100 in total value. The split changes the share count and price, but theoretically leaves the company’s market capitalization and shareholder ownership percentages unchanged.

The company’s shares had traded below $1 for much of the past three months, approaching Nasdaq’s minimum bid price requirement. Ahead of the reverse split taking effect, the stock continues to trade at $0.98.

The mechanics behind a stock split are reasonably straightforward. Exchanges like the Nasdaq require listed companies to maintain a $1 bid price. Companies that fall below this threshold receive deficiency notices and typically have 180 days to regain compliance.

Reverse splits offer the fastest path to do so — they automatically boost share prices above $1 without requiring operational improvements or stock price appreciation.

Reverse splits are not unique to Bitcoin treasuries — they’re a common compliance and signaling tool used by banks, industrial giants, and distressed corporates alike when share prices fall into uncomfortable territory.

In 2011, Citigroup executed a 1-for-10 reverse stock split after its share price languished below $5 in the aftermath of the financial crisis. The move helped the bank shed its “penny stock” stigma and regain eligibility for institutional mandates that prohibit low-priced shares.

While the split restored technical credibility, it also crystallized losses for long-term shareholders and underscored how far the stock had fallen from its pre-crisis highs. Citigroup remained a cautionary tale of how reverse splits can stabilize optics without restoring former valuations.

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Another historical example is when General Electric carried out a 1-for-8 reverse split in 2021 as part of a broader restructuring following years of operational missteps and balance-sheet stress.

Management framed the move as a simplification effort aligned with its breakup into separate businesses. While the split helped reset the share price and reduced volatility, it did not mark a sudden improvement in fundamentals — GE’s recovery depended on asset sales, debt reduction, and operational execution, not the mechanical change in share count.

Understanding Investor Concerns

This week’s market immediate negative reaction to Strive’s reverse split reflects broader patterns in how these mechanisms tend to play out.

Historically, reverse splits often precede further stock declines rather than making turnaround inflection points. This happens for several reasons, although none are guaranteed to apply in any specific case.

First, reverse splits address symptoms rather than underlying business challenges. A company trading at $0.50 typically has fundamental issues — whether operational losses, failed strategies, or lost investor confidence — that a 1-for-10 split making it a $5 stock doesn’t resolve. If those fundamentals don’t improve, the stock often drifts back toward previous levels, just with fewer shares outstanding.

Second, retail investors sometimes perceive higher nominal prices as “expensive” even though they own proportionally fewer shares. A shareholder who owned 1,000 shares at $1 and now owns 50 shares at $20 has identical economic value, but may feel they have less and become more likely to sell. This psychological effect can create selling pressure independent of fundamental value.

Third, the announcement itself can signal that management is pessimistic about near-term company prospects. If, for instance, leadership believed the stock would naturally recover above $1 through operational improvements or market conditions, they might wait rather than pursue a reverse split. The decision to split suggests management reckons that compliance risk is more pressing than potential organic recovery.

For Strive specifically, the company’s stock fell despite the merger creating meaningful scale — 12,798 BTC places it ahead of Tesla and Trump Media in Bitcoin reserves. This suggests investors are weighing governance and capital structure concerns against the strategic benefits of consolidation.

The Broader Treasury Context

Strive isn't alone in facing share price pressures.

Nakamoto Holdings (NAKA) already received Nasdaq delisting notices after its stock collapsed over 95% to $0.49 from $34.77 despite holding 5,398 BTC. Several other treasuries trade in the $1 to $3 range, putting them within striking distance of compliance issues during any moments of market volatility.

Treasury stocks that are trading below $5 face challenges that go beyond simple exchange requirements. Many institutional investors have internal policies prohibiting purchases of stocks below certain price thresholds — commonly $5 or $10 per share — regardless of market cap or fundamentals. These policies exist to filter out potential “penny stocks” and reduce administrative overhead from volatile low-priced securities.

Strive's stated goal of attracting institutional participation through higher nominal prices addresses this real constraint. The company is also differentiating its capital structure approach.

“We've publicly stated that we intend to issue substantially more SATA over the next 12 months and intend to maintain amplification exclusively through preferred equity," Cole told BitcoinTreasuries.net.

But whether institutions that wouldn't buy at $0.80 will suddenly invest at $16 post-split depends on whether the price threshold was their primary concern or simply a convenient filter for deeper fundamental worries about business models, capital structures, or management execution.

What This Signals About Sector Consolidation

The Strive-Semler merger and accompanying reverse split underscore mounting pressure for consolidation across the treasury sector. As nearly 40% of Bitcoin treasuries now trade below 1.0x mNAV and many face sub-$5 share prices, companies are exploring combinations that provide scale, eliminate duplicate overhead, and attempt to restore market credibility.

Strive plans to monetize Semler’s medical diagnostics business and retire roughly $120 million in outstanding debt, including a $100 million convertible note and $20 million Coinbase loan. The company stated it will maintain a lean structure focused on Bitcoin operations and yield generation.

Whether this model proves more sustainable than standalone micro-cap treasuries struggling with capital access will likely influence whether other distressed companies pursue similar consolidation strategies.

Indeed, Cole emphasized execution over just scale. "Operating on a Bitcoin standard, our primary and most important mandate is to increase Bitcoin yield,” he said. “Both our SATA IPO and the Semler Scientific acquisition generated large positive Bitcoin yields for shareholders.”

For investors evaluating treasury companies, reverse splits serve as one signal — though not definitive proof — of underlying stress. Companies pursuing splits to maintain exchange compliance face questions about why their stocks fell below $1 in the first place, whether the split addresses root causes, and what prevents share prices to subsequently drift back toward delisting thresholds.

Moreover, the Strive and Semler deal raises another question. Does combining two mid-sized treasuries with a reverse split create enough scale and institutional appeal to escape the sub-1.0x mNAV trap, or does it simply delay inevitable challenges facing companies dependent on continuous capital raising in an environment where investor enthusiasm has cooled significantly?

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