On April 10, 2018, Long Blockchain Corp (OTCMKTS:LBCC) announced that it had received notification from NASDAQ that it would be delisted from the exchange.
Perhaps unsurprisingly, the company spent the week subsequent to this announcement falling in valuation and currently trades in and around $0.70 a share – a close to 90% discount on the nearly 7 dollars a share at which the company peaked in December at the end of last year.
Of course, nobody wants to see a company in which they have a stake decline 90% and when you add a delisting into the equation, things become even more attractive. Right now, however, and subsequent to all this taking place, there’s some credence to the suggestion that this stock may well be worth a look at current prices.
Sure, a steep drop and a delisting aren’t ideal, but if it translates to an oversell on the back of some overzealous sentiment-based selling, it can be a nice opportunity to pick up some cheap shares ahead of an overarching recovery for the stock in question.
So, the question right now becomes, is that the case here?
We think it might be.
First up, then, a bit of background.
This is a company that hit headlines towards the end of last year when it changed its name from Long Island Iced Tea to the above mentioned Long Blockchain Corp and, in doing so, jumped close to 200% during the 24 hours subsequent to the news hitting the press.
Why the jump?
Well, at that time, the blockchain space was grabbing headlines everywhere against a backdrop of increased prices across the space. Bitcoin, for example, was trading in and around $15000 a piece when Long Blockchain changed its name, while Ethereum was up close to 2000 percentage points on its price just a few months earlier.
Blockchain technology, which is a sort of distributed ledger technology that many feel has the potential to revolutionize pretty much every aspect of global industry, is the underlying technology for these cryptocurrencies and so almost thr0ough nothing more than a proxy relationship to the sector, companies that pivoted to operate in the space drew some substantial speculative attention.
And that’s what happened with Long Blockchain. At its peak, and as mentioned in the introduction to this piece, the company traded for close to $7 a share, a run that – at the time – boosted market cap essentially overnight by 200% plus.
The move had its downside, however.
Sure, a focus on the blockchain space for a company like this one, a nimble, fast-moving entity in the publicly traded space, was always going to attract attention. This was a time after all, that wider markets were looking for an exposure to the sector without having to actually buy cryptocurrency (security, storage, all that sort of thing serves up substantial barriers to entry and maintenance) and publicly traded small caps that had an interest in the technology and the space served up exactly the sort of entry/exposure opportunity that these investors were looking for.
At the same time, however, shifts like this drew considerable attention on the suggestion that the companies involved were looking to capitalize short term on the attention that the space was getting but that, longer term, there was no real substance to the activity.
And it wasn’t just market operator attention – these companies also started drawing the attention of the regulatory authorities and the exchanges on which they trade, with a spate of suspensions and de-listings hitting press during the first few months of this year as said parties sought to protect traders and investors from any malicious operators.
And Long Blockchain Corp, has fallen foul of this scrutiny this month, picking up a delisting in line with many other companies that have operations in this space but that, for whatever reason, perhaps aren’t able to demonstrate the extent to which these operations are active, in place or – ultimately – a long-term focus.
So, this is where we come in.
As already mentioned, we suspected that the actions of the authorities and NASDAQ were more of a sweeping move to protect investors and that – as a result – there would almost certainly be a couple of companies that found themselves wrapped up in this sweeping protective move unjustifiably.
In other words, these companies have been mixed in with the malicious operators and, as a result, should stage a recovery once things play out moving forward.
We took a look behind the scenes and Long Blockchain is the company that we think best exemplifies this one off/special situation investment opportunity.
What’s the play here?
First up, let’s discuss the reason for the delisting.
The WSJ reported on April 11 that NASDAQ was upholding a decision that it took back in February to suspend/delist the company from the exchange based on the suggestion that Long Blockchain hadn’t sufficiently responded to concerns surrounding statements it had made to investors.
Now, first up, this is a very vague and generic reasoning. Reportedly, the statements were rooted in the pivot and the companies intentions to invest in various blockchain related companies, but that’s pretty much all we got in terms of specifics. We also now know that Long Blockchain hasn’t been able to submit its most recent financials on time (reportedly based on the fact that its auditors haven’t been able to sufficiently go through all records) and that this has contributed to the delisting.
Essentially, then, NASDAQ is taking the fact that the company has said it’s operating in the blockchain space but has been unable to subsequently support this statement with audited financials.
That’s understandable, to a degree, but in our opinion, it’s also a little hasty.
After all, we’ve seen a number of examples of activity in line with Long Blockchain’s statements hit press over the past couple of months and, while we’ve not yet seen audited financials, this activity is undeniably blockchain based.
On March 20, for example, Long Blockchain reported that it has closed on a strategic investment in Stater Blockchain Limited, a technology company focused on developing and deploying globally scalable blockchain technology solutions in the financial markets. Importantly, Stater’s wholly-owned subsidiary, Stater Global Markets, is a Financial Conduct Authority (FCA) regulated brokerage that facilitates market access across multiple instruments including spot FX, exchange-traded futures and contracts for difference (CFDs).
Bitcoin CFDs are a hot topic right now and to have a subsidiary that not only operates in the CFD space but that is also FCA regulated is a major boost to both relevance and credibility for this company, in this space.
A few weeks earlier, on February 28, the company announced the appointment of Loretta Joseph to its Board of Directors. Ms. Joseph will serve as an independent director and has over 25 years of experience in the global financial services industry, is a blockchain and technology advisor to many companies, organizations and governments and has held senior positions at investment banks across Asia and India where she was responsible for managing multiple asset classes and emerging markets environments, including RBS, Macquarie Group, Deutsche Bank, Credit Suisse and Elara Capital.
In short, she’s a very strong addition to the team and one that could serve to really kick start the company’s activity in the blockchain space not just through her personal expertise and experience but through the network she has built in her role as an advisor to companies that are already operating in the sector.
To put all this another way, in the last 8 weeks alone, and almost immediately subsequent to the first report that NASDAQ was considering delisting this company, Long Blockchain has taken action to operate directly in the blockchain space through its investment in Stater and has shored up its leadership team (and, at the same time, its network) with the addition of Joseph to its board of directors.
And these are just two examples of many.
On March 23, Long Blockchain announced that it has closed on a strategic investment in TSLC Pte Ltd., the parent company of CASHe, a leading provider of digital money and short-term financial products to young millennials across India.
And on March 15, the company announced that it has entered into a definitive agreement to acquire Hashcove Limited, an early stage UK-based technology company focused on developing and deploying globally scalable distributed ledger technology solutions.
Hashcove has a whole bunch of operational activity in this space, and (as per the release that recorded the transaction) is developing tokenized platforms, crypto-exchanges and wallets, smart contracts for initial coin offerings (ICO), know-your-customer (KYC) and financial clearing technology on the blockchain, and other related blockchain applications.
In other words, Long Blockchain isn’t just claiming a tenuous link to the space and riding its luck on this link.
Instead, the company is pushing forward (perhaps more than any other publicly traded entity) on all fronts, driving operations in many of the major subsectors of the blockchain industry – exchanges, wallets, etc.
For anyone looking for an exposure to this space that’s traded publicly, Long Blockchain would have been a nice allocation at higher prices. Now it’s been delisted (important to recognize here that it’s been delisted from NASDAQ but it still trades OTC), it’s even cheaper than it was and – for us – looks set to revalue to the upside once the dust settles and the markets take operational activity across the last 8 weeks into account.
And as if that wasn’t enough reason to take a serious look at this company right now, the industry in which it operates is currently undergoing a longer-term reversal, with price turning to the upside and staging a recovery on the decline that has led much speculative capital to exit the market over the last couple of months.
Don’t get us wrong here – we’re more than aware that this is a risky play. Any delisting is a red flag and due diligence is key before jumping into a position.
With that said, for anyone that’s still looking for an exposure to bitcoin and blockchain that doesn’t want to buy the cryptocurrency directly and that is willing to shoulder a bit of risk on their position, Long Blockchain looks like a great choice.
Disclosure: We have no position in LBCC and have not been compensated for this article.
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