ETHZilla Tanks 30% as Market Reacts to Dilution Risk, Ignoring Strong $349M ETH Treasury Position

Shares of ETHZilla (ETHZ) dropped almost 30% on Friday after the company disclosed that shareholders plan to offer 74.8 million convertible shares, raising concerns about significant dilution.

The offering, revealed in a recent filing, would boost ETHZilla’s outstanding share count by roughly 46%, from 164.4 million to 239.3 million. Importantly, the company itself will not receive proceeds from the sale, as the shares are being sold by current shareholders converting their holdings.

This comes on the heels of ETHZilla’s recent transformation from 180 Life Science into a crypto treasury firm. The company currently holds 82,186 ETH, valued at $349 million, along with $238 million in cash equivalents. The ether was acquired at an average price of $3,806.71 per token.

The firm’s pivot sparked a surge in its stock earlier this month, with shares up 80% year-to-date prior to Friday’s decline. ETHZilla has also drawn major backing, including a 7.5% stake from Peter Thiel’s Founders Fund, which is also invested in Bitmine Immersion Technologies—a firm that recently raised $250 million to build its own ether reserves.

Despite a strong crypto market backdrop—ether is up 38% year-to-date, outperforming bitcoin (24%) and the CoinDesk 20 Index (17%)—ETHZ shares reversed course. Broader markets rallied on Friday following Fed Chair Jerome Powell’s comments hinting at a possible rate cut in September. Ether gained 9% on the day.

Still, the sharp selloff in ETHZ underscores investor concern over near-term dilution, even as the company positions itself as one of the largest corporate holders of ether. The stock’s decline reflects a broader tension between ETHZilla’s bullish long-term crypto thesis and immediate shareholder dilution risk.