Tobacco Company’s Announcement of Shift to Cryptocurrency Sends Stock Soaring Fivefold [Business & Issue]

Canadian E-cigarette Company Sees 548% Stock Surge...
"Switching Business to Cryptocurrency"
Agricultural Company Growing Tobacco and Cannabis Gains Popularity as Meme Stock
Increasing Number of Companies Shifting to Crypto After MicroStrategy...
Competitiveness Remains Uncertain

CEA Industries Homepage

CEA Industries, a Canadian tobacco company, drew global attention after its stock price surged by more than 500% following the announcement that it would shift its business focus to the cryptocurrency sector. The company's dramatic transition from primarily cultivating crops such as tobacco to entering the cryptocurrency industry made it a popular stock on social networking services (SNS), attracting a surge of buying interest. Experts warned that investors should exercise caution, noting that the stock's volatility has increased significantly after the short-term rally, and that the company has no competitive edge in the cryptocurrency sector, making this a reckless business shift.

Canadian E-cigarette Company Sees 548% Stock Surge... "Switching Business to Cryptocurrency"

On July 28 (local time), CEA, which is listed on the US Nasdaq exchange, saw its stock price soar by 548.85% to $57.59 compared to the previous session. Since the beginning of this year, CEA's stock price, as a tobacco company, had fluctuated between $7 and $8 with little volatility. However, after CEA suddenly announced its transition into the cryptocurrency sector, the stock price skyrocketed.

On July 27, CEA announced that it would secure $500 million (approximately 698.5 billion KRW) in investments to enter the cryptocurrency investment sector in partnership with 10X Capital and YZi Labs, both specialized in cryptocurrency. They stated that they would raise funds through the issuance of equity-linked warrants (ELW) and continuously accumulate Binance Coin (BNB), aiming to generate profits primarily from the gains in BNB.

BNB is a cryptocurrency issued by Binance, the world's largest cryptocurrency exchange, and is the fourth-largest coin by market capitalization, exceeding $100 billion. Based on the Binance exchange, it is used in over 180 countries by more than 280 million people worldwide. CEA reportedly plans to build a coin asset vault focused on BNB and to continuously increase its BNB holdings.

Immediately following the announcement, buying interest surged from both individual and institutional investors, pushing CEA's stock price up to $77 during intraday trading on the 28th. However, as investors moved to realize profits after the short-term rally, the stock price plunged by 27.02% on July 31.

Agricultural Company Growing Tobacco and Cannabis Gains Popularity as Meme Stock

AP Yonhap News

Emerging as a representative meme stock on both Nasdaq and SNS, CEA was originally a company with no connection to either the cryptocurrency or IT sectors. Founded in 2009, CEA specialized in producing tobacco raw materials for e-cigarettes and in indoor cultivation of cannabis, which is legal in Canada. In February of this year, CEA acquired Fat Panda, a Canadian e-cigarette company and one of its competitors, securing over 50% market share in the Canadian tobacco market.

Subsequently, as the partnership with 10X Capital strengthened, discussions on business transformation gained momentum, and the management team was largely replaced with investment professionals. David Namdar, who was a senior partner at 10X Capital, was recently appointed as the new CEO. CEO Namdar emphasized regarding CEA's business shift and BNB asset vault, "Institutional investors have had limited access to BNB until now, but the vault we have created has opened a transparent path for participation."

According to CoinDesk, a cryptocurrency-focused media outlet, CEA plans to expand its investment funds for BNB purchases up to $1.25 billion (approximately 1.7495 trillion KRW) in the future. In addition to profits from BNB price appreciation, the company reportedly plans to generate revenue through 'staking' investments, which involve depositing assets in cryptocurrency exchanges to earn interest, as well as through cryptocurrency lending.

Increasing Number of Companies Shifting to Crypto After MicroStrategy... Competitiveness Remains Uncertain

AP Yonhap News

However, some observers have expressed concerns that, as more companies transition to the cryptocurrency sector, it will be difficult for CEA to establish new competitive advantages. They warn that, instead, stock price volatility will increase further due to the fluctuations in the value of cryptocurrency assets, and investors should be cautious.

According to CNN, since MicroStrategy, a software company, began accumulating Bitcoin and shifted its business to the cryptocurrency sector in 2020, several companies such as Saphyrink Gaming and DeFi Development have pursued similar financial strategies. The number of companies raising investment funds to accumulate specific cryptocurrencies and using the gains as business revenue has increased rapidly.

With the Donald Trump administration emphasizing a pro-cryptocurrency government as a major policy pledge and the growing popularity of stablecoins, it is expected that more companies will follow this trend. However, there are also warnings to exercise caution. CNBC, citing market experts, reported, "The number of listed companies raising debt capital and selling existing stocks to purchase cryptocurrencies is increasing rapidly, leading to greater stock price volatility," and cautioned, "If companies without core businesses become dependent on the volatility of cryptocurrency assets, they will become highly vulnerable to external volatility and risks."