Finance-focused NFT crypto group FloorDAO “split” into two separate entities this week in an effort to shake off activist investors who had amassed an influential stake in the project’s governance tokens.
FloorDAO, which aims to build products for “NFT-Fi,” recently sent more than $2.5 million of its treasury — in crypto tokens and NFTs — to a splinter group called FloorkDAO that was controlled by the activist investors. The investors quickly divided that amount among themselves in a redemption that valued each FLOOR token at nearly $5, up from $1.89 at the start of the year. The remaining FLOOR tokens are currently trading around $3.88, which is indicative of the value for investors who have not chosen to leave FloorDAO and instead retain their holdings.
The episode marks the latest example of activist crypto investors mounting campaigns to target so-called decentralized autonomous organizations, or DAOs, which have begun to take control of what could be a primitive form of blockchain-based businesses. The cost is that these DAOs often have significant coffers filled with proceeds from token sales and other sources; the activist investors try to obtain governance tokens whose price is lower than the estimated value of the DAO’s assets and then push the target project to effectively buy them out at a better price.
This is possible because many DAOs treat their issued tokens as governance chips; the more chips someone has, the more say they have in the DAO’s decision-making. Because many long-time owners do not participate in project management, activists can more easily acquire an influential stake.
In FloorDAO, their stake had become so large that the project’s most devoted believers felt it was becoming impossible to get anything substantive done.
“FloorDAO has now successfully ensured that members who are not aligned with the long-term vision of the DAO can leave,” according to a blog post from earlier this week.