Solana Treasury Firm Posts $66.6M Profit Despite Revenue Slump

DeFi Development (DFDV) shares declined 8.95% to $2.95 on November 12 from a prior close of $3.24. The fall coincided with the Solana (SOL) treasury company reporting a $66.6 million profit for the third quarter.

Net asset value (NAV) per share rose more than fourfold between August 12 and September 30, the company stated. Morning trading saw shares above the previous close before slipping from midday onward.

Revenue Nearly Halved, So Where Did the $66.6 Million Come From?

Revenue dropped 47.4% year over year to $2.4 million, according to the firm's Q3 shareholder letter. Two gains accounted for the profit instead, as shown in its quarterly SEC filing.

• Digital asset net gains added $37.9 million. That amount was 49% below the $74.4 million recorded a year earlier.
• Derivative instrument gains contributed $33.4 million, up from $4.6 million in the prior year.

Revenue covered only a portion of $4.3 million in operating costs and $3.4 million in interest expenses. SOL holdings and equivalents increased 13% from August 12, reaching approximately 2.61 million by November 9.

Shares recovered slightly after the market closed, trading at $3.05, a 3.39% gain from the closing price. The decline compounded earlier losses. A BeInCrypto Q3 earnings preview showed DFDV stock down at least 37% from September 30 to November 6.

Why DFDV Stock Moves Faster Than SOL in Both Directions

The expanding treasury also accounts for the stock's larger swings compared with SOL itself. The company uses debt and preferred stock to acquire more SOL without issuing new common shares. The stock returned roughly 1.5 times SOL's price gain in Q3, the letter noted.

Management estimates the amplification exceeds 9 times. Roughly $221.8 million of gross SOL sits on about $23.9 million of net asset value for common holders. That figure uses the company's SOL reference price of $84.99 from November 11.

CEO Joseph Onorati acknowledged the downside.

“Amplification works in both directions, and shareholders felt its impact over the last year as SOL fell,” Onorati wrote in the shareholder letter.

The company now plans to fund additional SOL mainly through CHAD, its perpetual preferred stock. DeFi Development initially pitched it through a preferred offering of up to $20 million with a 13% dividend. The rate increased to 14% on November 2.

The firm also stress-tested CHAD against lower SOL prices. After a 50% SOL drop, assets remaining after convertible principal would cover CHAD notional 0.4 times. Modeled income would then trail CHAD dividends and convertible interest by about $3.3 million annually, before other costs. The model assumes a 5% yield on the SOL treasury.

CHAD follows the digital credit model of Strategy's STRC and Bitcoin treasury firm Strive's SATA. Demand for CHAD will determine how much SOL DeFi Development can add without issuing new common shares.