CZ’s YZi Labs Initiates Boardroom Challenge for the Largest BNB Treasury

After months of governance disputes, Changpeng “CZ” Zhao’s YZi Labs has filed a significant solicitation with the U.S. Securities and Exchange Commission aimed at transforming the board of CEA Industries Inc. (NASDAQ: BNC), which previously was touted as the largest publicly traded BNB treasury in the U.S. The current governance battle is rooted in dissatisfaction with BNC’s board performance and has led to a drastic decline in the company's share price.

Key Takeaways

YZi Labs Proposal: YZi Labs filed a consent solicitation to change the board of directors at CEA Industries Inc.
Shareholder Concerns: The current board is criticized for failing to communicate effectively and manage company operations.
Recent Stock Performance: BNC shares saw a drastic drop of over 92% since a significant rise following a new corporate strategy announcement, despite a rise in BNB prices.
Operational Issues: The filing highlights operational failings and potential conflicts of interest among CEA Industries' leadership.

CZ’s YZi Labs in Boardroom Coup Bid for World’s Largest BNB Treasury

Governance Turmoil at CEA Industries Inc.

The battle for control at CEA Industries Inc., known for holding one of the largest BNB treasuries, has intensified as YZi Labs, led by Changpeng Zhao, has launched a proposal to overhaul the company’s board. This move was announced through a consent solicitation submitted to the U.S. Securities and Exchange Commission, seeking to reshape the firm’s governance.

The preliminary Schedule 14A, filed on Monday, invites BNC shareholders to approve an expanded board, reverse bylaw changes made since July, and elect new directors nominated by YZi Labs.

The submitted filing includes a white consent card, enabling shareholders to formally express their support or dissent regarding the proposals. If a majority of shares are in favor, YZi Labs would be able to reorganize the board via written consent without needing a shareholder meeting.

YZi Labs presently holds about 5% of BNC’s shares and contends that the company's current leadership has not provided timely updates, failed in executing corporate actions, and neglected essential communication with investors. The organization argues that BNC shareholders deserve more effective governance and warns of further risks to shareholder value if changes do not occur.

The conflict between YZi Labs and BNC has escalated following CEA Industries’ $500 million PIPE financing in August, which transitioned the company into a BNB-focused treasury. Although shares surged more than 600% in July when the treasury strategy was announced, BNC’s stock has since plummeted over 92%, recently closing around $6.47 despite BNB achieving heights above $1,300 in October before settling around $820.

BNC's reported net asset value stands at $8.09 per share, causing its stock's market NAV multiple to drop to approximately 0.8×.

Allegations of Operational Shortcomings and Leadership Discrepancies

YZi Labs’ filing outlines various operational shortcomings, including delays in submitting registration documents for an at-the-market offering, a lack of investor communications, and an incomplete investor relations website long after the PIPE funding.

The filing stresses that there has been no regular reporting regarding net asset value, BNB yield, or accumulation rates. There are also concerns about branding inconsistency, as the company has alternated between names like "CEA Industries" and "BNB Network Company" without adequate communication to investors.

Additionally, the filing raises potential conflicts of interest involving the company's leadership. CEO David Namdar, director Hans Thomas, and Russell Read, a former executive at 10X Capital, have ties to 10X Capital, the entity overseeing BNC's digital asset treasury. YZi Labs asserts that Namdar and Thomas engaged in discussions about other crypto treasury initiatives while in charge of BNC, raising questions about their dedication and objectivity.

The company stated that it consistently sought clarity on executive employment terms and management fees but received no replies.

This leadership shake-up occurs at a time when CEA Industries possesses one of the most significant BNB treasuries worldwide, accumulating between 480,000 to 515,000 BNB at an average purchase price of around $851 per token. At current market rates, this treasury is valued at approximately $412 million, additionally holding $77.5 million in cash.

Furthermore, the company has previously indicated its ambition to gather 1% of BNB's total supply by the close of 2025. The identities of YZi Labs' proposed director nominees are still undisclosed in the initial filing, and CEA Industries has yet to respond publicly to the consent solicitation.