Global Blockchain Technologies Spin-Out Could Value It Closer to HIVE Blockchain

Global Blockchain Technologies Corp. (CVE:BLOC) stock trades at a fraction of the valuation of HIVE Blockchain Technologies Ltd. (CVE:HIVE)

SmallCapPower | November 21, 2017: Global Blockchain Technologies Corp. (TSXV:BLOC), a newer ‘kid’ on the blockchain in Canada, is an investment company that provides investors access to a basket of holdings within the blockchain space including blue chips (Ethereum and Bitcoin) and smaller cap crypto-holdings. Global Blockchain Technologies was originally established as a biotechnology company under the name Carrus Capital Corporation in 2010. Subsequently in 2014, the Company sold its biotechnology assets and changed its primary business focus to seeking high-return opportunities through investment in the securities of other companies, assets or businesses. On October 5, 2017, the Company changed its name to Global Blockchain Technologies Corp., with its business focus shifting to investments in the blockchain technologies.

Read: Global Blockchain Technologies Shares Continue to Roll on Partnerships News

Global Blockchain Technologies continues to be in the limelight after announcing fast-paced developments over the past month, including partnerships with Hyperledger and Wachsman, the acquisition of a 49.9% stake in Coinstream and its planned spin-out, and a $40 million bought-deal financing. The Company currently trades at a meager market cap of $47 million compared to cryptocurrency miner HIVE Blockchain Technologies Ltd. (TSXV:HIVE), which trades at a whopping $870 million. Spinning out its mining division Global Blockchain Mining Corp, which acquired a stake in Coinstream recently, could unlock significant value.

Investment Thesis

  • Vertically-integrated originator and manager of blockchains and digital currencies
  • Creates world’s first Cryptocurrency streaming company; plans spin-out that could unlock significant value
  • $40 million bought deal financing to fund future growth plans

First vertically-integrated originator and manager of blockchains and digital currencies

Global Blockchain Technologies is the first vertically-integrated blockchain company, having exposure to the entire blockchain system along with start-up equity and token diversification. Managed by a team of industry experts with Rik Willard at the helm, the Company provides investors access to a basket of holdings within the blockchain space by streamlining the current complicated process that interested investors need to undergo. Global Blockchain Technologies will provide investor exposure to digital currencies by offering one security that provides them with a diversified basket that can be accessed through an online brokerage account.

Global Blockchain Technologies is planning to deploy further capital into mature blockchain currencies such as Bitcoin and Ethereum, Initial Coin Offerings (“ICOs”) and pre-ICOs, Blockchain startups, as well as existing ‘growth tokens’ with market caps between $100 million and $1 billion.

Well positioned to capture growing market opportunity with a differentiated investment approach: According to CoinMarketCap, the total market cap of cryptocurrencies currently stands at a record $219 billion, up from $40 billion at the beginning of 2017. Bitcoin is the largest cryptocurrency with a market cap of $120 billion, followed by Ethereum at $32.1 billion.

Although the cryptocurrency market is exploding, the vast majority of current ICOs are baseless and offer no intrinsic value and most cryptocurrency hedge funds do not properly analyze the technical feasibility or business case behind the tokens they are investing in. Using a differentiated approach that focuses only on tokens, which solve real problems that can benefit from decentralization, Global Blockchain Technologies offers investors an efficient method of investing in cryptocurrencies and tokens. The Company’s focus includes best of breed cryptocurrencies, seed-stage equity investment in ventures that are a good fit for decentralization, the token economy and the ICO fundraising model. Additionally, Global Blockchain Technologies will help incubate portfolio ventures and structure all aspects of their ICO including business development, legal, marketing and blockchain technology development.

Establishes $20M Steem Fund to fund startups

Global Blockchain Technologies announced recently the signing of a joint venture agreement with blockchain-powered social media platform Steemit to establish a $20 million Steem Fund, which will fund the startups building solutions on the Steem blockchain and expanding the Steem ecosystem. The investments will be comprised of both Steem tokens tradeable on liquid exchanges and through traditional U.S. dollar investments. Faster and larger than the Bitcoin and Ethereum blockchains combined, the Steem Blockchain will grow even bigger, exponentially increasing the number of applications built on Steem with active cooperation of Global Blockchain Technologies. Both JV partners will jointly determine the ticket size and distribution of all investments, currently planned for full deployment by 2020.

Raises $40 million in a bought-deal financing for growth plans

On November 9, 2017, Global Blockchain Technologies announced an amended agreement with the lead underwriter and sole bookrunner, Canaccord Genuity Corp., increasing the size of the previously-announced offering by $10 million to $40 million. Under the revised agreement, underwriters have agreed to purchase 15.7 million units (comprising one common share and one warrant to purchase one common share at $3.5 within 24 months) of the Company on a “bought deal” private placement basis, at a price per unit of $2.55 for total gross proceeds of $40.035 million. Expected to close on November 30, 2017, the funds will be used to accelerate its growth strategies of investing in blockchain startups and cryptocurrencies.

Creates world’s first Cryptocurrency Streaming Company and plans spin-out that could unlock significant value

Global Blockchain Mining Corp., the company’s wholly-owned subsidiary, recently inked an agreement to acquire a 49.9% interest in Coinstream Mining Corp., the world’s first cryptocurrency mining company, in exchange for 3.8 million shares of BLOC, to employ the streaming model and provide strategic upfront capital and an additional payment upon delivery of the cryptocurrency. As per the terms of the streaming agreement, BLOC will receive an upfront payment of US$10M from CoinStream Corp in exchange for 2,500 bitcoins per year for five years at US$1,000 per coin and security against equipment.

Planned spin-out could unlock significant value: With the acquisition of Coinstream, the Company’s mining subsidiary Global Blockchain Mining Corp is well positioned as the first cryptocurrency streamer with high-quality mining assets (10 megawatts of power in purpose-built data centers) located in Manitoba, Canada. The Company believes that Global Blockchain Mining Corp., with its pure-play focus on cryptocurrency, represents an independent, highly-viable entity on its own with a unique business model differentiated from the other verticals and focuses within Global Blockchain Technologies Corp. Hence, the Company is contemplating an arrangement agreement with its mining subsidiary that paves the way for its listing as a publicly-traded Canadian entity. Being a pure-play crypto miner, Global Blockchain Mining would build shareholder value by offering investors cost predictability at a high margin, direct leverage to increasing cryptocurrency prices, additional growth through the accretive acquisition of new streams, and a high-quality, diversified operational base. As highlighted by another pure-play cryptocurrency miner HIVE Blockchain, which has nearly trebled to $870 million in market cap since its listing in September 2017, the spin-out and the listing of BLOC’s mining subsidiary could unlock significant value. You can read more about our analysis on HIVE Blockchain here.

Announces two key partnerships to build a team of developers and improve its brand image

On November 1, 2017, BLOC announced two new partnerships, one with Hyperledger Foundation, an open-source community for blockchain technologies, and another with Wachsman PR, a public relations firm specializing in blockchain technologies. While the alliance with Hyperledger Foundation helps the Global Blockchain Technologies build a strong team of developers in the Hyperledger, the alliance with Wachsman will help in building the Company’s brand image across the industry.

Outlook and valuation

Since the Company changed its name to Global Blockchain Technologies Corp. on October 5, 2017, along with a business focus shifting into investments in the blockchain technologies, shares of BLOC have gained more than 25%. Led by a team of industry experts with Rik Willard at the helm and supported by a high-profile advisory team that includes Jim Rogers, BLOC continues to announce fast-paced developments including the acquisition of 49.9% stake in Coinstream and its planned spin-out, partnerships with Hyperledger and Wachsman, and the raising of $40 million in a bought-deal financing that should continue to increase investor interest in this stock. The current market cap of $47 million looks attractive compared to HIVE Blockchain, which trades at a whopping $870 million. In the near term, value could be unlocked primarily by the spin-out of its mining subsidiary.

Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own units in any of the companies mentioned above.

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