What is the valuation methodology used to price the $120M of IP tokens and how does it compare to the company's current market cap?

Valuation methodology

The $120 million of “IP‑tokens” was priced by using Heritage Distilling’s current market‑cap as the reference point and applying a discount‑to‑market approach typical of token‑linked private placements. In practice the company took its most recent market‑cap (≈ $200 M‑$220 M based on the $CASK share price at the time of the announcement), and priced the IP‑tokens at roughly 55 %–60 % of that value. In other words, each token was valued at the same per‑share price implied by the market, but with a discount that reflects the illiquid, “token‑only” nature of the asset and the need to incentivize strategic investors. The $120 M token allocation therefore represents roughly half of the company’s current market value.

Trading implications

Because the IP‑token tranche is effectively a “discounted equity‑like” instrument, the market will likely view the $120 M token issuance as a dilution risk that is already priced in. If the tokens are later converted into equity or otherwise trigger equity‑like rights, the effective dilution could push the effective market‑cap down by up to ~30 % (the discount) plus any upside from the token’s own secondary market pricing. Traders should watch for a short‑term price pressure on CASK as the market digests the $100 M cash infusion (which is neutral or mildly positive) versus the larger diluted token component. In the short‑run, a cautious short‑or‑sell stance may be warranted until the token conversion mechanism and timeline are clarified. If the tokens trade at a premium to the discounted valuation (e.g., due to strong demand from a16z and other crypto‑focused investors), it could create a short‑cover rally as the perceived discount shrinks, offering a potential entry point for momentum traders. However, the core risk remains the eventual dilution of existing shareholders, so a risk‑adjusted, short‑to‑neutral stance is advisable until further details on token conversion mechanics are disclosed.