What DeFi Development (DFDV) Said on Its Q3 Earnings Call

Key Points

• Q3 metrics improved: DeFi Development said Solana per share rose more than 20% and cash doubled from the prior quarter; net asset value per share increased more than fourfold. Management said SPS growth reached triple digits when Solana’s price gains were included.
• CHAD is central to its funding strategy: The perpetual preferred stock pays a 14% dividend, which management said is covered about five times by organic yield. The company has begun issuing additional shares at $10 and is using some proceeds to acquire more Solana.
• The company is focusing its on-chain strategy on staking and borrowing Solana to boost yield, while exploring CHADx trading on Solana platforms. Executives said expanding CHAD is the company’s biggest growth opportunity.

DeFi Development NASDAQ: DFDV reported growth in its Solana-per-share measure and a stronger cash position for the third quarter, while executives said the launch of its CHAD preferred stock is central to the company’s plans to acquire more Solana.

During the company’s October and third-quarter business recap, Chief Marketing Officer Pete Humiston said Solana per share, or SPS, grew more than 20%, net asset value per share rose more than fourfold, and cash doubled from the prior quarter. Executives attributed the quarter’s performance in part to a rise in the price of Solana and the launch of CHAD, a variable-rate perpetual preferred instrument.

CEO Joseph Onorati said Solana’s price rose from approximately $70 to $120 during the period. He said DeFi Development’s common stock outperformed Solana by about three times in August and by about 1.5 times for the third quarter overall, illustrating the leveraged exposure the company seeks to provide.

CHAD issuance and dividend coverage

Onorati described the CHAD offering as the quarter’s biggest highlight. Humiston said the instrument closed at its $10 par value 48 calendar days after trading began. Onorati said it has traded around that level since reaching par.

CFO and COO John Han said the company has begun issuing additional CHAD shares through its at-the-market program and intends to issue them only at $10. Some proceeds are being used to buy more Solana, he said. The company is not currently planning to disclose the amount raised through the program on a short-term basis.

Han said CHAD currently has a 14% dividend rate, with payments made daily. He said the company’s organic yield covers aggregate CHAD dividends by approximately five times. Management characterized preferred-stock issuance as non-dilutive to common shareholders.

Onorati said CHAD is intended for income investors, while the common stock is designed to offer amplified exposure to both increases and decreases in Solana’s price. He said the board has approved a CHAD buyback program that could cover the entire issuance if the company determined that was in shareholders’ interest, though he added that there was no short-term intention to do so.

The CEO said the company’s larger convertible debt matures in 2030 and that CHAD is perpetual. Both forms of financing are unsecured, he said, meaning they do not have a margin-call level at which the company would be forced to liquidate its position.

Staking strategy and SPS methodology

Onorati said DeFi Development simplified its on-chain activities earlier in the year and now primarily uses a staking and borrowing strategy known as stake looping. The company stakes Solana into dfdvSOL, uses that token as collateral on lending platforms including Kamino and Jup Lend, and borrows Solana against it to repeat the trade.

He said the strategy increases staking yield, while adding that accounting complexity contributed to the decision to scale back other activities. The company is seeking additional Solana lenders at rates that support the strategy, he said.

Dan Kang, chief strategy officer and head of investor relations, said the company used a 5% income assumption in its shareholder-letter sensitivity analyses for CHAD coverage, below its historical yield. He said the company has historically earned roughly 200 to 300 basis points above base Solana staking rates.

Addressing a question about the SPS calculation, Kang said the company’s convertible debt was not in the money and therefore was excluded from the share-count denominator, although it was treated as debt in net asset value. He said SPS grew more than 20% from Aug. 12 to Sept. 30 when holding Solana’s price constant; including the price effect, growth was in the triple digits.

On-chain trading and expansion plans

Onorati identified expanding CHAD as the company’s biggest growth opportunity. He said DeFi Development could consider swapping convertible debt for CHAD in the future, although its present focus is on organic growth.

He also pointed to CHADx, a tokenized version of the preferred stock created by xStocks, a Kraken company. Onorati said CHADx traded more than $1 million in volume on Solana decentralized exchange Orca on the preceding day, approximately three times CHAD’s volume in the traditional market that day.

Exponent, an interest-rate trading platform on Solana, has also listed a CHADx market, Onorati said. He characterized the initial on-chain activity as encouraging while emphasizing that CHAD remains in its early stages.

About DeFi Development (NASDAQ:DFDV)

DeFi Development Corp. NASDAQ: DFDV is a digital-asset company focused on building a Solana-based treasury and decentralized finance ecosystem. The company's strategy centers on acquiring and holding Solana (SOL) as a core treasury asset while seeking to generate additional value through staking, validator operations and participation in the Solana network. In addition to managing its digital-asset treasury, DeFi Development Corp. is developing infrastructure and applications intended to support decentralized finance on Solana.

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