A couple of weeks ago, FIRST BITCOIN CAP COM NPV (OTCMKTS:BITCF) had its shares halted by the SEC. The suspension remained in place for 10 days and the company resumed trading on Friday last week. Almost immediately subsequent to resumption, its share price took a circa 68% hit and, during the couple of sessions since, hasn’t managed to recover any of the lost ground.
This is one that we have looked at on a couple of occasions before and, on each, we have noted that this is a tricky space right now and making calls as to which companies are likely to prove potentially rewarding longer-term is a hit and miss game at best.
So what is our take on this one now?
Can the company regain some of its lost strength and get back on the track that helped it appreciate throughout the first half 2070, or is the recent suspension too much to overcome?
Let’s try and answer that question.
First up, it’s important to note that with all this happening in the background, it would’ve been easy for First Bitcoin to just go quiet and let the situation play out organically and in line with the actions of the SEC. Instead, however, management has been pretty active in communicating with shareholders and wider markets and it looks like, from an operational perspective, at least, First Bitcoin is forging ahead.
When we have discussed these sorts of companies before, one of our primary criteria for evaluation is operational activity. In that regard, then, First Bitcoin gets a tick.
Of course, this operational activity has to mean something for it to be valuable as an investment thesis, so what has this company been doing over the last couple of weeks?
Well, perhaps most notably, management has agreed to offer a cryptocurrency that it has created (and that will be available to trade over the exchange it is building right now), called XOM, in exchange for shares of the company. Specifically, one unit of XOM will be offered in return for two shares of BITCF. In essence, then, this is a sort of buyback program.
So how does this work out numerically?
Right now, one XOM is worth around 0.0003 BTC. This is about $1.29 when exchanged for fiat currency. So, First Bitcoin is asking shareholders to trade two shares for the equivalent of $1.29, meaning anybody who takes the company upon the buyback offer is getting about $0.64 per share. At its most recent close, First Bitcoin went for around $0.38 a share, meaning that – at current prices, at least – this looks like a great deal.
Of course, there are lots of external factors that could alter this equation. Most notably, XOM could depreciate in value against bitcoin. Alternatively, bitcoin could appreciate in value against the USD. This would reduce the de facto price that shareholders are getting for the shares they offer as part of the buyback program, and in turn, reduce the attractiveness of the offer.
With that said, however, both of these outcomes could be equally as valid in the reverse, which would make the transaction more attractive from a shareholder perspective and, of course, would also bring with it the added benefit of shares being removed from the open market.
So what are we looking for next? We want to see the company get its exchange up and running as soon as possible. The liquidity of alternative coins like XOM (and the TESLACOIL coins that the company is about to issue as a dividend) is crucial to their being worth anything and, right now, many exchanges won’t list these coins if they trade below a certain volume. As such, the launch of the platform in question is a major catalyst for this company near term.
Bottom line here is that this is still a risky play and it will remain so whilst the driver behind the SEC suspension and the outcome of any ongoing investigations remains in the dark. With that said, however, this looks to be one of the most active bitcoin plays available right now and that makes it well worth keeping an eye on.
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Image courtesy of Steve Garfield via Flickr
Disclosure: We have no position in BITCF and have not been compensated for this article.