According to Forbes, Bitcoin Magazine CEO David Bailey has embarked on a quixotic quest to transform KindlyMD, a small Utah healthcare clinic with $2.7 million in revenue, into what he calls “the Berkshire Hathaway of bitcoin” through a reverse merger with his Nakamoto Holdings. The combined entity, trading on Nasdaq as NAKA, holds approximately $653 million worth of bitcoin but has seen its stock price collapse from $35 in May to just 92 cents by October, representing a 98% discount to its bitcoin holdings. The dramatic decline resulted from $563 million in PIPE financing deals that massively diluted shareholders, compounded by Bailey’s controversial letter urging short-term traders to exit his stock. Bailey, who helped convert Donald Trump to bitcoin advocacy and now serves as an informal adviser, plans to fold his other profitable ventures including Bitcoin Magazine and UTXO Management into the struggling public company to increase his 3% ownership stake and acquire more bitcoin.
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Table of Contents
The PIPE Bomb That Backfired
The core issue with Bailey’s strategy lies in the financing mechanism itself. Private Investment in Public Equity (PIPE) deals, while common for raising capital quickly, create inherent conflicts between new investors seeking discounted entry and existing shareholders facing dilution. When Bailey’s company executed $563 million in PIPE financing, they essentially created a ticking time bomb where institutional investors could immediately sell their discounted shares once lock-up periods expired. This isn’t just poor execution—it reveals a fundamental misunderstanding of public market dynamics. Public companies typically manage dilution through carefully timed offerings and clear communication, whereas Bailey’s approach created a flood of supply that overwhelmed natural demand.
The Bitcoin Banking Vision vs. Reality
Bailey’s comparison to Berkshire Hathaway reveals both ambition and potential miscalculation. While Warren Buffett built his empire through careful acquisition of cash-flow positive businesses with durable competitive advantages, Bailey appears focused on accumulating bitcoin through any available corporate structure. The fundamental difference lies in the nature of the assets: Berkshire owns productive businesses that generate returns, while NAKA primarily holds bitcoin as a speculative asset. This distinction matters profoundly for valuation. Public markets have historically struggled to value companies whose primary asset is cryptocurrency, often applying significant discounts due to volatility concerns and the lack of productive business operations.
The Regulatory Tightrope
Bailey’s strategy of using reverse mergers to create publicly-traded bitcoin holding companies bypasses traditional SEC scrutiny that public offerings or ETFs would face. This regulatory arbitrage creates substantial long-term risks. While it provides faster market access, it also means these entities haven’t undergone the same level of due diligence that would reassure institutional investors. The recent political connections to Donald Trump add another layer of complexity—while potentially beneficial for regulatory clarity, they also tie the company’s fortunes to political outcomes, creating additional volatility risk beyond normal market forces.
The Healthcare Component Question
The choice of KindlyMD as the merger vehicle raises significant questions about strategic focus. A healthcare company operating clinics seems fundamentally disconnected from bitcoin banking ambitions. While Bailey mentions running “operating companies” as part of his strategy, there’s no clear synergy between medical services and digital asset management. This creates confusion for investors trying to understand the company’s core identity and raises concerns about management’s ability to operate disparate businesses effectively. Successful holding companies typically maintain some thematic or operational coherence across their subsidiaries.
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Realistic Path Forward
For Bailey’s vision to succeed, several critical changes are necessary. First, the company must establish clear, profitable operating businesses beyond bitcoin accumulation to justify its holding company structure. Second, they need to develop a coherent capital allocation strategy that doesn’t rely on shareholder-dilutive financing. Third, they must build credibility with institutional investors through transparent governance and professional financial management. The current approach of accumulating bitcoin while the stock trades at a massive discount creates a destructive cycle where the company’s primary asset grows while shareholder value evaporates—an unsustainable dynamic for any public company, regardless of its bitcoin ambitions.
