- Robert Leshner said his drinks firm takeover play was "partially successful."
- He bought a controlling share in LQR House on Monday.
- The firm's management didn't like what was going on.
When Robert Leshner announced on Monday he had bought a controlling stake in a tiny liquor advertising company, nobody knew what he was up to.
The decentralised finance guru, who has 129,000 followers on X, said he planned to replace the firm’s board and help it “explore new strategies.”
But doing so turned out to be easier said than done.
What followed was a four-day foray into the wild world of corporate takeovers that saw a 266% stock surge, an even more violent crash, and the decimation of thousands of dollars of investor capital.
On Thursday, Leshner returned to social media for a post-mortem.
He said his plan all along had been to buy the company and put it on track to build a crypto treasury, an increasingly popular scheme pioneered by Michael Saylor’s Bitcoin treasury company Strategy, and aped by dozens more firms in recent months.
“I was partially successful,” Leshner said.
Leshner did not immediately respond to a request for comment.
A majority stake
The episode began on July 14 when Leshner posted a Securities and Exchange Commission filing on X.
It disclosed that he had bought 56.9% of the stock of LQR House, a Florida company with a $2.8 million market capitalisation that sells wine and other alcoholic drinks through a website.
“I have not done extensive diligence; there are signs the company is up to no good,” Leshner said on X. “I will sort them out, but please be extremely careful with any low market cap companies. I may lose all my investment and you might too.”
The warning was a sign of things to come.
The way Leshner went about acquiring his majority stake in LQR House was unusual, said Matt Levine, an opinion columnist at Bloomberg News, who weighed in on the situation on Wednesday.
Activist investors tend to engage with company management after buying a stake in the open market.
Yet it appears Leshner plunged ahead with his plan without talking to LQR House’s executive team or board. So he had no idea how they might react to his aggressive stock buying move.
Still, Leshner’s followers on X saw the situation as an opportunity.
Leshner is a veritable hero in DeFi circles. He created Compound, an early DeFi lending protocol that at one point held more than $20 billion in user deposits.
And crypto treasury companies are all the rage and have in recent months produced handsome returns for those who bet on them early.
Despite Leshner’s warnings, his followers piled into LQR House’s stock, which trades under the ticker YHC.
Within two days, its shares soared 266%.
Burnt investors
Even so, the firm’s management didn’t like what was going on.
They seized the opportunity to issue more shares and profit from the situation.
It wasn’t just a small number of new shares, either. The firm filed to issue $46 million worth — over nine times the market capitalisation of the company at the time.
The offering diluted Leshner’s stake and simultaneously the firm’s stock plunged 46% as shares flooded the market.
“The numbers reported in brokerage apps became increasingly out of date as these shares entered the market and diluted shareholders, to the point where my stake no longer has meaningful control,” Leshner said in the aftermath.
‘Not productive’
Flooding the market with new shares is typically regarded as poor corporate governance and bad for investors. Leshner rather diplomatically characterised LQR House’s decision as “not productive.”
LQR House’s CEO is Sean Dollinger, a self-styled serial entrepreneur who has been involved in the initial purchase offerings of numerous firms.
In an October 2024 civil suit, Dollinger and his companies, including LQR house, were accused of racketeering by investors, who demanded almost $2 million in restitution. Dollinger and his co-defendants’ request to dismiss the suit was denied on June 30.
To add to the madness, an activist investor unconnected to Leshner, Kingbird Ventures, sued LQR House on July 15, citing a breach of fiduciary duties. Kingbird’s suit seeks to take control of the firm and freeze assets held by Dollinger.
As more and more new shares of LQR House hit the market, the stock fell further.
By Friday morning, shares had tumbled another 18%, below the level where they were trading when Leshner announced his controlling stake.
‘Silver lining’
Yet in a sudden turn of events, Leshner’s dream of turning LQR House into a crypto treasury firm suddenly started to materialise.
In a Thursday press release, the firm announced it planned to pursue a crypto treasury strategy, similar to what Leshner had envisioned.
The company said it has already approved allocating part of its treasury to Bitcoin and is exploring potential mining infrastructure investments through partnerships with Bitmain and Polaris Capital.
“This forward-looking shift has been spurred by Leshner, a significant voice in decentralised finance and the open market buyer of a stake in LQR House,” the release said. “Leshner no longer intends on pursuing a controlling interest in the Company.”
As for the investors who followed Leshner on his corporate takeover journey, they’re probably out of luck. Yet the Compound founder said there was a silver lining to the saga.
“LQR has $20 million more capital to follow through on its plans and actually create a crypto treasury,” Leshner said, adding that he plans to recommend crypto community members to help LQR House develop its treasury strategy.
“Thank you for being a part of this unique and crazy ride with me,” he said.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.