Twenty One Capital takes $414 million Q2 loss as new CEO plots path to become ‘more than a Bitcoin treasury’

Twenty One Capital posted a $413.5 million net loss in the second quarter, mostly driven by the falling value of its massive bitcoin holdings, as newly appointed CEO Raphael Zagury laid out plans to turn the Tether-backed firm into a bigger-picture bitcoin operating company.

The NYSE-listed company (XXI) recorded a $401.5 million loss from changes in the value of its digital asset holdings, accounting for more than 97% of its overall loss.

Twenty One holds 43,514 bitcoin (BTC) worth roughly $2.78 billion at current prices. It ranks as the second-largest publicly traded bitcoin treasury, though Japan-based Metaplanet is closing the gap with 43,000 BTC.

The company also ended the quarter with $106.1 million in cash and roughly $484.5 million of convertible notes outstanding.

Twenty One shares rose about 1% during the first hour of trading Tuesday to $4.62, though the stock remains down nearly 50% year-to-date.

New CEO shares plans

The results come roughly three weeks after Zagury replaced founder Jack Mallers as CEO, with Mallers stepping down to return his focus to his bitcoin payments company Strike.

The leadership shakeup also saw Strike drop out of a proposed merger with Twenty One, while a potential acquisition of the Zagury-led bitcoin miner Elektron Energy was under consideration.

In his first shareholder letter since taking the reins, Zagury acknowledged concerns over Twenty One's performance and said the company needs to prove it can create value beyond just holding bitcoin.

"Twenty One owns one of the largest Bitcoin balance sheets in the public markets," Zagury wrote. "That is a real advantage, but if Twenty One is going to be worth owning, it must become more than a Bitcoin treasury.

He outlines five priorities for the year ahead: strengthening governance, building or acquiring operating businesses, developing capital-market capabilities, establishing an M&A operations, and eventually launching a bitcoin lending and credit business.

He pointed to Berkshire Hathaway as a blueprint for what he envisions for Twenty One — a strong balance sheet surrounded by independently operated businesses that generate cash flow, while still acknowledging that Twenty One has "earned nothing yet."

Zagury also addressed Twenty One's depressed valuation, saying investors had pointed out its stock trades at a "material discount" to the bitcoin it holds.  That discount is reflected in Twenty One's enterprise mNAV, a measure that compares its valuation with the value of its bitcoin holdings, which currently stands at 0.7x according to Bitcoin Treasuries.

"That gap could be viewed as a misallocation of capital; we share that view," he wrote.