Effects of the PRE XMAS BTC RUN on Tech Company "Longfin"
As bitcoin reached crazy highs before Christmas, many tiny stocks were racing to make profits, which is probably going to lead to confusion for investors who are looking for legitimate ways to invest in the crypto market.
Longfin, a small-cap financial technology company is the most recent example, soaring in volatile trading the last two days after saying it was buying a blockchain company, Ziddu.com.
There has been huge interest since in Longfin, which saw its stock price more than quadruple on Friday to almost $24 a share. Then a week later, the mania spread with the stock hitting a high of almost $143. In mid-afternoon trading on Monday, the stock was at $126.66. Bloomberg reported that the company’s stock market worth hit $7 billion.
Investor enthusiasm over everything related to digital currencies, led by bitcoin, shows no signs of abating. The price of bitcoin, the most popular and highly-valued digital currency, hit over $19,000 that week, up from less than $10,000 at the end of November and under $1,000 at the start of the year, according to the Coindesk website.
As a part of the acquisition, Longfin agreed to buy Ziddu from Meridian Enterprises in exchange for 2.5 million shares of the company. Adding to the confusion and volatility surrounding this move is that the filing for the deal notes that Meridian Enterprises, which sold Ziddu to Longfin, is a private Singapore company that is 95 percent owned by Longfin's CEO and chairman, Venkat Meenavalli.
The company's stock closed up 230 percent Friday and was up more than fivefold at one point Monday, bringing its two-day surge to more than 2,000 percent. Monday was a particularly volatile day as investors tried to assess what this deal actually means.
Longfin currently has 44 million shares outstanding, according to an email from the company's investor relations spokesperson Lijie Zhu. That gives the stock a market value of between $2 billion and $3 billion.
The company had its initial public offering on the Nasdaq on Dec. 13 and is based in New York. It describes itself as a technology company that uses artificial intelligence to deliver financial services for small companies.
For its part, Ziddu.com "presents a blockchain solution for micro lending and warehouse financing," according to a SEC filing. "It offers Trade and Micro finance in the form of warehouse Coins to the small and medium imports/exports against collateralization of traders warehouse receipts."
But the IPO filing also contains some interesting and unusual language. A risk factor warned "as an investor, you should be able to bear a complete loss of your investment."
Longfin also announced some executive changes last week. Both the company's chief financial officer, Krishanu Singhal, and chief operating officer Raj Mondraty resigned on Dec. 11, according to the SEC filing.
The Longfin's CEO will appear on CNBC's "Fast Money" Monday at 5 p.m. ET.
Daily average trading volume is also rising with 185,000 shares traded Thursday, 15.5 million shares traded on Friday and nearly 6 million shares traded through midday Monday.
Bitcoin is up more than 2,000 percent in the last 12 months, according to Coinbase.