The new meme stocks? Bitcoin treasury rush sees small UK company shares rocket by as much as 6,011%

Shares of small UK stock market-listed companies stockpiling bitcoin have soared in recent weeks, a trend analysts warn is reminiscent of the rush to buy ‘meme stocks’ like GameStop back in 2021.

Ten London-listed companies have unveiled a strategy involving the purchase of bitcoin in the past month, according to analysis from AJ Bell. 

The strategy sees companies buy and build a treasury pot of the cryptocurrency, with the aim of asset appreciation. 

It means investors can build exposure to the price of bitcoin without buying the crypto asset directly.  

Among the 10 new launches is IT service management provider Smarter Web Company, whose shares have rocketed more than 6,000 per cent since it adopted a ‘Digital Assets Treasury Policy’ in April that includes bitcoin.

Investment group VaultZ Capital’s shares have climbed 643 per cent in the four weeks since it announced plans to build a bitcoin treasury and change its name to Helium Ventures.

Another is metals explorer Bluebird Mining Ventures, which revealed on 5 June that it was holding bitcoin on its balance sheet as a treasury reserve asset. Its shares have enjoyed a 507 per cent jump.

Meanwhile, shares in software firm Pri0r1ty Intelligence (PR1) have surged 147 per cent since 29 May, when it started allowing customers to pay in bitcoin.

PR1 then declared on the Friday before last that it would utilise bitcoin for ‘treasury management purposes’.

Other firms to undertake a ‘bitcoin treasury strategy’ include Vinanz, Vault Ventures, TruSpine Technologies, and Panther Metals. 

Dan Coatsworth, an investment analyst at AJ Bell, said acquiring bitcoin can help firms diversify their cash reserves and counteract inflation and geopolitical risks.

Bitcoin can also help smaller public businesses with limited cash reserves avoid the need to continually raise new funds on the market.

All 10 groups to launch a bitcoin strategy over the past month are small-cap stocks, with several listed on the Aquis Exchange.

Coatsworth said the astonishing share price spike of companies ‘deviating from their day job and loading up on bitcoin has the hallmarks of the meme craze’.

At the peak of the Covid-19 pandemic, many retail investors on social media forums like Reddit drove up the price of some stocks like GameStop, a struggling video game retailer.

GameStop shares skyrocketed by nearly 10,700 per cent between April 2020 and January 2021, leading to many hedge funds and short sellers losing massive sums before quickly diving in early February.

Other stocks that soared in value but experienced a major downturn after attracting a large following on social media included rental store chain Blockbuster, cinema owner AMC Entertainment, and headphones maker Koss Corporation.

‘Investors need to take care in these situations,’ cautioned Coatsworth. ‘Prices can often move fast – both up and down – and valuations have moved out of kilter with the underlying fundamentals of the company.’

He pointed to Smarter Web Company, which is currently valued at £623million but would only receive £42million from selling its entire bitcoin supply at current market prices.

Coatsworth said: ‘It’s important to judge a potential investment on specific factors, including an understanding of what the company does, the value of its underlying assets, and its future prospects.

‘It can be a mistake to choose an investment simply because its share price is racing ahead or there is a lot of hype on social media.’