DeFi
Bitcoin treasury firm DeFi Technologies applauds report that sent its shares tumbling
One of the hottest crypto stocks crashed to Earth this week after a report claimed it wasn’t rising “for the right reasons.” Today, the company has vigorously defended its operations.
In its Tuesday issue, the crypto newsletter CoinSnacks presented a extensive marketing campaign undertaken over the past few months to provide positive coverage to DeFi Technologies (DEFI), a Toronto-based crypto fund provider that is publicly traded on Canada’s Chicago Board Options Exchange (CBOE).
DEFI’s share price has risen sharply, as has that of other companies that have adopted Bitcoin as the Treasury’s primary reserve asset, following the massive success of MicroStrategy (MSTR), now the largest institutional holder of BTC. Amid the enthusiasm, some analysts have started more and more bullish on DEFI for fundamental reasons, saying it is extremely undervalued.
On the Monday before the report was released, DEFI was trading at C$3.30, up 202% since May 31. As of Tuesday’s close, the stock was down 35% to C$2.24 per share.
The company’s promotional efforts included a headline-grabbing paid and influencer email campaign, CoinSnacks reported to its 50,000 subscribers, as well as support from crypto investors Anthony Pompliano and Will Clemente popular companies whose market analysis company, Reflexivity Research, was acquired by DeFi Technologies in January.
“Between influencer pumps, CNBC mentions, email campaigns and pumps, there is now strong evidence that the stock is not rebounding for the right reasons,” wrote CoinSnacks.
DeFi Technologies responded to the CoinSnacks report in a Press release during Wednesday’s opening, calling it “defamatory, selective, inaccurate” and containing “misleading statements” about the company’s practices and financial condition.
In fact, the company speculated that the report may have been ordered by short sellers in hopes of driving down the stock price.
DeFi Technologies said it was approached on June 10 by a Canadian investment bank with an underwriting offer of US$15 million, which it said was an unusually low figure given the newfound cash strength. of the company. The same day, DeFi Technology reported that its treasury alone was worth US$60 million, of which US$7.9 million had been converted into Bitcoin.
“The Company believes that the coordinated efforts of short sellers and the publication of misleading reports about public companies constitute market manipulation,” DeFi Technologies wrote.
CoinSnacks later replied to DeFi Technologies, stating that he had “not currently, nor have we ever been paid by a short seller to cover a company,” and that his team did not hold any positions in DEFI.
As of Wednesday’s close, the company’s shares saw a modest 6% rebound, to C$2.30 each.
The CoinSnacks newsletter did not cover DeFi’s Techology’s recent financial performance in detail, instead referring to its days as a penny stock in 2023, when it generated a net loss of CA$18.9 million on the year.
The company cites its profits this year as proof that its shares are a profitable investment.
DeFi Technologies says its assets under management have grown significantly this year alongside the broader crypto market, which also increases the rewards earned from its crypto fund investments. These include exchange-traded funds for Solana, Bitcoin and dozens of other assets where the firm is allowed to stake its stakes and earn a yield, earning an average of 7-10% on the assets it invests in. ‘she holds.
“Our assets averaged about $400 million to $450 million in the first quarter, and in the second quarter they will average between $600 million and $650 million,” said Russell Starr, head of capital markets at DeFi Technologies, at Decrypt.
Those same assets under management (AUM) brought the company’s operating business $10 million in revenue in the first quarter, enough to cover all of its expenses for the entire year, Starr said. Given that its current assets under management are now 50% higher, he said DeFi Technologies expects to earn at least US$15 million for each of the next three quarters in pure profit.
Meanwhile, Starr said the company’s newly launched DeFi Alpha trading desk earned $85 million in the second quarter of 2024 alone. This brings the company’s net profit for the first six months to $100 million. dollars, or more than 20% of its current market capitalization of $477 million.
As a reminder, other crypto companies like Coinbase and Robinhood are currently trading at 30 and 40 times their annual earnings.
“If you look at the article they wrote, they didn’t say anything fundamental,” Starr said. “The reason is that if they took the time to talk about the fundamentals, they would very quickly realize that they had no story. »
Edited by Ryan Ozawa.