Tether invests $134 million in USDS stablecoin via reverse merger with NovaBay

Tether transforms NovaBay into stablecoin firm with $134 million investment

Tether, the company behind the world’s largest stablecoin (a type of cryptocurrency designed to keep a steady value), has invested $134 million in NovaBay, a struggling biopharmaceutical company. This move turned NovaBay into a publicly traded stablecoin holding company called Stablecoin Development Corporation. The company now owns a significant stake in USDS, a decentralized stablecoin previously linked to MakerDAO.

The reverse merger allowed Tether to gain public market access and expand into new financial areas, including mortgage and prime brokerage lending. Stablecoin Development Corporation also began staking USDS, a process where the stablecoin is locked to support the network and earn rewards.

Unlike Tether’s own stablecoin or USDC (another major stablecoin), USDS is decentralized. This means it is not controlled by a single company and maintains its value through overcollateralized vaults and automated liquidations rather than relying on traditional assets like Treasury bills or bank reserves.

Key details of the deal

• Tether invested $134 million in NovaBay in March 2026, converting it into Stablecoin Development Corporation.
• The company now holds a stake of over 9% in USDS, a decentralized stablecoin.
• Stablecoin Development Corporation is listed on the New York Stock Exchange under its new name.
• The stock price briefly rose after the announcement but has since fallen to around $1.00.
• The company’s website predicted 81% annual revenue growth for USDS, but this has not materialized.

Stock struggles and market reaction

After the reverse merger was announced, Stablecoin Development Corporation’s stock price jumped from $1.30 to nearly $2.00. However, it quickly dropped back to $1.00. The stock has repeatedly fallen below $1.00, a critical threshold—if it stays below this level for 30 days, the company could be delisted from the New York Stock Exchange.

Each time the stock dips below $1.00, an unknown buyer purchases enough shares to push the price back up. For example, on August 17, 2026, the stock fell to $0.94 but recovered to over $1.00 within 24 hours.

Unusual leadership and board raise questions

The company’s leadership and board of directors include individuals with little to no experience in cryptocurrency or stablecoins. CEO Michael Kazley, who led the investment fund R01 Fund LP, became the head of Stablecoin Development Corporation after his fund invested over $4 million in the reverse merger. Kazley has described USDS as "undervalued" and the company as "wildly bullish" on its future.

The company’s CFO, Tommy Law, was previously interim CFO of NovaBay and has no formal certifications for the role. COO Henry Blynn, a 32-year-old consultant, was brought on in October 2025.

The board of directors includes:

• Yenyou Zheng: Chairs the audit and governance committees. Previously linked to China Vitup Healthcare Holdings, a company involved in the Panama Papers leak.
• Swan Sit: A marketing executive with no clear qualifications for audit or compensation roles.
• Paul E. Freiman: A pharmaceutical industry veteran with no apparent connection to stablecoins or crypto.

What is confirmed

• Tether invested $134 million in NovaBay, transforming it into Stablecoin Development Corporation.
• The company now holds a stake in USDS and is listed on the New York Stock Exchange.
• The stock price has struggled to stay above $1.00, risking delisting.
• The company’s leadership and board include individuals with limited crypto experience.

What remains unclear

• Who is buying shares to keep the stock price above $1.00.
• Whether the company’s revenue growth predictions for USDS will come true.
• How the company’s leadership and board will navigate the challenges of the stablecoin market.
• If Stablecoin Development Corporation can avoid delisting from the NYSE.

Why this matters for stablecoin investors

This move marks Tether’s first major public investment in a decentralized stablecoin. Unlike centralized stablecoins, USDS operates without traditional audits or bank reserves, relying instead on overcollateralization. If successful, this could set a new model for stablecoin adoption. However, the company’s struggling stock price and unusual leadership raise questions about its long-term stability.

Sources

• Protos
• Stablecoin Development Corporation
• GlobeNewswire (official announcement)