You need to try two things: set BackColor to Transparent and convert the image to opacity.
From Change Image Opacity to C # :
public Image SetImageOpacity(Image image, float opacity) {
Bitmap bmp = new Bitmap(image.Width, image.Height);
using (Graphics g = Graphics.FromImage(bmp)) {
ColorMatrix matrix = new ColorMatrix();
matrix.Matrix33 = opacity;
ImageAttributes attributes = new ImageAttributes();
attributes.SetColorMatrix(matrix, ColorMatrixFlag.Default,
ColorAdjustType.Bitmap);
g.DrawImage(image, new Rectangle(0, 0, bmp.Width, bmp.Height),
0, 0, image.Width, image.Height,
GraphicsUnit.Pixel, attributes);
}
return bmp;
}
Then the panel properties will look like this:
panel1.BackColor = Color.Transparent;
panel1.BackgroundImage = SetImageOpacity(backImage, 0.25F);