Empery Digital is rapidly reducing its bitcoin holdings as debt obligations and potential data center costs compete for capital.
According to the latest quarterly report, between July 1 and August 6, the company sold 1,635 $BTC for $102.2 million. As a result, Empery now has 1,279 $BTC remaining. However, 954 $BTC have been pledged as collateral for a $35 million debt. Consequently, only 325 $BTC are freely available, a significant decrease from the 1,375 $BTC held as of June 30.
These sales are a continuation of a broader shift in Empery's treasury strategy. In the first half of the year, the company sold an additional 1,167 $BTC for $80.1 million, while allocating significant funds towards share buybacks and debt reduction.
Bitcoin Treasury Becomes a Liquidity Tool
In the first half of the year, Empery used cash generated from share issuance and bitcoin sales to meet a range of financial needs.
The company spent $54 million on share buybacks, repaid $50 million on a repo line, and made a separate $10 million loan repayment. The exact allocation of bitcoin sale proceeds among these purposes was not specified.
The company's loan structure also puts pressure on its remaining assets. Modified terms require collateral worth 174% of the loan balance. A margin call is triggered if this ratio falls below 153%, and liquidation may occur if it drops below 143%, unless the shortfall is remedied within 12 hours.
In February, Empery transferred 576 $BTC to the lender, and in June, a further 186 $BTC in response to margin calls. The report did not indicate any instances of forced liquidation.
After June 30, the company repaid $20 million of debt. The lender returned 585 $BTC, reducing the collateral pool from 1,539 $BTC to 954 $BTC.
Data Center Commitments Could Increase Pressure
Empery may face another significant cash requirement related to a planned data center real estate acquisition deal.
The company has already contributed $2.9 million to EMHU, a separate real estate entity managed by Texstack. If the acquisition closes, Empery may be required to contribute an additional $62.1 million.
This commitment is separate from Empery's existing $20 million investment in Cardinal Data Power, which gave it an approximately 8% equity stake.
As of June 30, Empery reported cash and cash equivalents of $3.7 million, including restricted cash, and a working capital deficit of $5.7 million. Management stated that existing cash, operating revenues, derivative instrument proceeds, borrowings, and potential bitcoin sales should be sufficient to cover planned needs for more than one year.
Nevertheless, with the unencumbered bitcoin balance reduced to 325 $BTC, any further margin calls or the completion of the real estate deal would significantly limit Empery's room for maneuver.
