Summary I'm initiating a Strong Buy rating on Asset Entities due to its massive $750M PIPE funding and transformative merger with Strive Asset Management. The company is evolving from a social media tech play into a diversified entity targeting distressed Bitcoin assets and undervalued biotech firms. Institutional investors are buying in at a 121% premium, signaling strong confidence; I expect a short-term upside to $12-13 as momentum builds. Volatility will remain high, but with the new funding secured, I see a compelling short-term opportunity for investors at the current $8 level. Investment Thesis Asset Entities ( ASST ) is a very volatile stock, trading at less than $8 last week, hitting $12 just a few days ago, and now hovering around $8.10 per share. Equally important, however, is that it's a stock with a lot of good news. I'm here to explain the risk-reward profile of Asset Entities and Strive Asset Management, which merged earlier this month. From where I'm standing, I think there's a lot more upside to this stock in the mid-term. Asset Entities is, according to their bio, "a technology company [that] provides social media marketing and content delivery services across Discord, TikTok, and other social media platforms." This means their revenue is pretty diversified, and they are expanding into a new area that I expect will bring substantial growth after the merger with Strive Asset Management, which is a subsidiary of Strive Enterprises, Inc. The reason is that these two are becoming a single entity that aims to be the first public Bitcoin Treasury Company. Below is the post on X from Strive Asset Management's CFO, Ben Pham, emphasizing just how big a deal this is. X Before this merger deal, Asset Entities was recognized as the first publicly traded company centered around Discord communities. It has a flagship product called the "AE.360.DDM", which offers customers design, development, and management services for Discord servers. This kind of product caters to businesses, influencers, and educational communities, basically anyone looking to gain a heads-up on social media. Additionally, the company provides "Ternary", a Stripe-verified CRM and payment platform. They offer these services on other platforms like TikTok, Instagram, and X, not just Discord. Their financials, however, aren't the prettiest. Their Q1'25 revenue was $170,749, a 36.8% increase from $124,841 in Q1 2024. Operating Expenses were $1.83 million, up 20.9% year-over-year. Management states this is driven by higher advertising, marketing, payroll, and administrative costs, which makes sense for such a small company trying to grow. The market already reacted pretty well to the merger when it happened back around May 7th, with the stock up 1,240% since then, which you can see clearly in the chart below of the stock against the S&P 500 over the past month. YChart But, this Tuesday the stock dropped almost 22%, and investors, seeing the volatility, are all wondering: Is this the time to buy the pullback or stay on the sidelines? So, I'm here to give my take, especially in light of the latest transitions underway, the main of which is the following: [Strive Asset Management and Asset Entities] announced the signing of a $750 million private investment in public equity ((PIPE)), with an additional $750 million in potential financing available upon the exercise of warrants, which could increase total potential proceeds to $1.5 billion . To put that into context, we're talking about a massive merger deal with the money coming from a group of private institutional investors. What this tells me is that there are some big-money players who are very confident in the future of the stock. Since this merger has taken another step in the right direction, securing a great amount of funds and directing those funds for growth, I will initiate my coverage of Asset Entities with a buy. What's the new deal? In early May, Strive Asset Management and Asset Entities Inc. announced their merger, causing the stock to skyrocket 1,320% over the past month, and today, May 28th, they secured $750 million in new funding. To put this in context, Asset Entities only made $633,000 in revenue for the whole of 2024. So, where's all this money coming from? Well, there's a group of investors operating through something called a Private Investment in Public Equity ((PIPE)). Now, think of a PIPE as a quick way for public companies to raise money from their private investors, and keep in mind these private investors aren't like you and me; they have millions to invest. In this case, these investors are buying Asset Entities' shares at $1.35 per share. That's good news for people like us, as it's 121% higher than what the stock was trading at before the merger announcement. What this tells me is that these investors have huge confidence in this new deal. On top of this, there's also the potential for another $750 million to come in if investors choose to exercise warrants. Now, these warrants are like options to buy more shares later, which would bring the total investment to $1.5 billion. If that happens, you should buckle your seatbelts. So why the need to raise all these funds? Strive Asset Management is planning on merging with Asset Entities Inc. to create a new kind of public company: one focused on a few new money-making ideas. The $750 million is set to fund the merged entity's new strategic plan, to buy distressed Bitcoin assets as well as scoop up any undervalued biotech firms. Matt Cole, CEO of Strive Asset, seems bullish, saying traditional Bitcoin investors rely mainly on price ratios like price-to-NAV. But he's looking to head in a new direction when it comes to valuing Bitcoin investments. These new methods are said to be based on fundamentals and smart acquisitions, not just tracking Bitcoin's price. Since the PIPE is injecting all this cash, the new entity has no debt; if it stumbles across a struggling bitcoin company, it can move in quickly. What this means for investors is that Asset Entities is essentially expanding its revenue stream. It's no longer just a social/digital media tech business, but now has a financial engineering play in crypto and special situations investing. Expect Volatility Since these new PIPE shares come from institutional players, they sweep in and buy shares at a discounted price, in this case $1.35 a share. This is a 121% premium to Asset Entities' pre-merger price, but there's a catch. These shares will be restricted at first and can't be sold by the investors straight away, there's going to be some kind of lockup period on the shares, although we don't know exactly how long this is. In my opinion and historically, this lock-up period on the shares should be at least 3 months. So we can expect some stock volatility in that period but an overall upward trend. My reasoning for this is simple: the stock is up 1,335% over the past month, there's huge momentum here, and I expect it to keep going off the back of the new funds secured. On top of this, yesterday we saw a 21% drop in the stock price, which, I believe, is due to investors not fully understanding what this deal means for Asset Management. Also, I know what you're thinking: can those institutional investors sell off their shares immediately after that lock-up period is over? Well, the answer is, they can. However, they have at least a 3-month period in which they're bullish on the stock going up, so why can we jump on that train too? This also works as a short-term investment for me with a big upside. A Rollercoaster Ride This May So, a month ago, this was just a penny stock, trading at $0.63, and has since hit a high of $13 per share. The good news of the merger got well priced into the stock, and then between May 9th and May 14th, things calmed down with the stock dropping 40%. I think investors started reaping profits and selling off their shares. At this point, the stock started facing resistance around $5; investors knew there was something more here. At this point, only the news of the merger was out, and the funds for buying Bitcoin had not yet been secured. Despite the sell-off on May 9th, the stock pulled through, skyrocketing another 176%, hitting a high of $13 last Thursday. I'm bullish because the stock has fallen off 40% since that high, and you can pick up shares for $8. What makes me particularly bullish is this new bit of news I've just explained: they've secured the funding. I don't think investors fully understand what this PIPE investment does for Asset Entities. What it does is show huge confidence in their new entity to buy Bitcoin and make a huge upside. In the short term, I expect the stock to shoot up and recover to that $12-13 range it was before. Valuation The market cap is at $129 million, there's been a 52-week low of $0.34 and a high of $13, which goes to show you really how volatile this stock is right now. Because Asset Entities is expanding into Bitcoin and other revenue streams, it is hard to place them among competitors. Seeking Alpha compares them to peers such as Cardlytics Inc. ( CDLX ) and Marchex Inc. (MCHX), both advertising and analytics tech companies. These would be accurate peers before this merger, but now Asset Entities finds itself in a new ballgame. The RSI right now is at 53, and on its way down fast. This is the time to buy for investors, in my opinion. I think the $8 range is a good entry point for those looking to make a quick upside on the stock. What's Next Investors should be following the stock daily; we should see an upside this week from the news that funds have been raised for the new merger, and the stock is already showing signs, up 13% on Thursday so far. Those institutional investors are bullish, and so am I. Over the next few months, keep a lookout for any news on Asset Entities acquiring small biotech firms and any big Bitcoin investments. These will eventually be the new catalysts going forward.
