Jim Chanos Calls It a "Farcical Deal Theater": Nakamoto Acquisition Stirs Shareholder Dilution Controversy

Famous short seller Jim Chanos openly criticized Nakamoto Inc.'s latest move, calling it a “farce.” The criticism targets a major acquisition announced by David Bailey through his publicly listed company Nakamoto, which involves the purchase of BTC Inc., owner of Bitcoin Magazine, and the Bitcoin-focused hedge fund UTXO Management. On the surface, it appears to be a reasonable business integration, but the details behind the deal and the issues pointed out by critics like Jim Chanos reveal potential harm to existing shareholders.

Bailey’s “Inventory Dynasty” Faces Trouble

Looking back, David Bailey previously raised $710 million during the Bitcoin inventory trading boom, claiming to build a “Bitcoin inventory dynasty.” Nine months later, this ambitious plan faced difficulties—his controlled company experienced a severe decline. Now, Bailey is using this shell company to acquire two other firms he owns, a move that has already raised market skepticism.

360 Million New Shares Trigger Shareholder Dilution Crisis

The most controversial aspect is the deal structure. Nakamoto plans to issue 363.6 million new shares to acquire BTC Inc. and UTXO Management, nearly doubling the number of outstanding shares. According to an agreement approved by shareholders in 2025, these new shares are priced at $1.12 each, which was relevant at the time. Based on this, the deal’s nominal value is $407 million.

However, the gap between the nominal and actual value is shocking. Nakamoto’s stock price immediately dropped after the announcement, closing at $0.29 on Wednesday, meaning the 363.6 million shares are worth only about $107 million in actual trading—less than a quarter of the nominal value. The stock continued to fall, reaching $0.24 on Friday. Existing shareholders face significant dilution of their equity.

This isn’t Bailey’s first time destroying shareholder value. Last year, during the PIPE (Private Investment in Public Equity) lock-up release, Nakamoto’s stock plummeted 96%. At that time, Bailey even advised shareholders seeking a deal to exit their holdings. Now, five months later, he’s using these heavily diluted shares to acquire his own company, creating a cycle that unsettles investors.

Revenue Discrepancies Raise Concerns of Overstatement

Even more troubling is the inconsistency in revenue figures. The day after the announcement, Bailey told investors in a Twitter Space hosted by Bitcoin Magazine that BTC Inc. and UTXO Management would generate “over $100 million in revenue in 2025.” Yet, just a day later, Nakamoto filed an 8-K with the U.S. SEC revealing revenue of only $78 million—an $22 million discrepancy.

This inconsistency has sparked market doubts about whether Bailey is exaggerating. Misreporting data in investor communications, regardless of the amount, can mislead investors.

Short Seller’s Warning: A Repeating Pattern

Jim Chanos has long been wary of such deals. The renowned short seller has criticized inventory trading strategies and actively shorted options related to them. After Nakamoto announced this acquisition, Chanos bluntly called it a “farce,” reflecting his deep skepticism about the deal’s logic.

His caution stems from recognizing a recurring pattern: issuing new shares to fund acquisitions, stock prices falling, shareholder dilution, and then using the watered-down stock for the next deal. This cycle is a nightmare for retail investors, and Chanos’s criticism aims to alert the market.

Nakamoto and David Bailey have yet to respond to requests for comment. Regardless of their response, this deal has already become a key case study in shareholder protection and market oversight.