Bastion says SkyAI’s $201M buyback pays an insider-linked advisor first

Bastion Trading demanded on October 21 that SkyAI’s (Nasdaq: SKYA) executive chairman and three directors explain why they liquidated SkyAI’s entire Solana (SOL) treasury. 

The fund is also asking why they signed off on a $201 million buyback, considering that up to $11.9 million of it could go to one of their director’s brothers. 

Why is SkyAI’s executive chairman being questioned? 

Bastion Trading has published a statement in which it named SkyAI’s Executive Chairman Paul K. Danner III and directors Soren Bo Christiansen, Timothy J. Ruemler and Jason L. Monroe, and said each must account individually for the sale of the company’s entire SOL holding and the approval of a $201 million buyback offer.

SkyAI’s SEC filing describing the offer explains that the buyback covers common stock plus three classes of warrants, including 3,955,293 strategic warrants. 

Bastion says that those strategic advisor warrants were granted to an entity controlled by the brother of director and Chief Investment Officer Yuwen (Alice) Zhang, without any cash investment. By Bastion’s math, that holder could collect roughly $11.9 million through the tender offer.

Bastion’s earlier Schedule 13D pointed to payments made to Sol Edge Limited and Sol Markets, which the filers said are owned by Alice Zhang’s brother. 

A separate SEC filing from SkyAI’s time as Sharps Technology announced a lock-up with SOL Markets, listed as “Strategic Advisor.” James Zhang signed it as strategic advisor, and Paul Danner was quoted as executive chairman.

The fund has said that if the directors cannot show they exercised independent oversight, then they should resign. 

If they believe they still hold shareholder confidence, Bastion called on Danner to use his authority under SkyAI’s bylaws to convene a special meeting and let stockholders decide the board’s makeup.

At SkyAI’s September 18 annual meeting, all five directors got more withheld votes than votes in favor, with withheld shares between 66.6% and 75.0%. They only got to keep their seats because plurality voting only requires more votes than a challenger, and no one was running against them.

Did SkyAI empty its SOL treasury? 

SkyAI is paying for the buyback by getting out of Solana completely. According to its filing, the company had about $223.8 million in cash as of October 16 and had sold every bit of its SOL. It also dropped an earlier condition that the token stay above $100.

The company, formerly Sharps Technology, told shareholders on September 14 that it remained committed to its Solana digital asset treasury strategy. At the time, it still held more than two million SOL, which made it the fifth-largest publicly traded Solana treasury.

Cryptopolitan earlier reported that a 70% drop in the value of SkyAI’s SOL holdings led to Bastion’s first challenge on October 14. It also reported that the buyback serves as a defense against an all-stock takeover approach from rival treasury firm Forward Industries.

Bastion is once again pushing for the $3.00 offered for each share and warrant raised to at least $3.50. He pointed out the fact that its own estimate was about $3.30 in net asset value per share and argued that the price should sit above that. It’s also asking that holders of each class of pre-funded warrants be allowed to tender 100% instead of 95%, so they can cash out in full.

Finally, it’s asking for an independently supported valuation that shows how the cash will be shared among the different security classes.

The offer, launched October 16, expires one minute after 11:59 p.m. New York time on October 29 unless extended.