Crypto Company's Accredited Investors Get a Sweetheart DealBy
Companies rebranding themselves as cryptocurrency firms aren’t the only ones benefiting from bitcoin mania.
Crypto Co. today disclosed a private stock sale to accredited investors at $7 per share, a 97 percent discount to yesterday’s closing price of $223. Investors typically expect a discount in exchange for participating in these sales, but a markdown of this magnitude is rare if not unprecedented.
"It looks funny when you’re sitting here like this," said Michael Poutre, chief executive of Malibu, California-based Crypto, which is investing in and trading digital assets, and developing source code for managing them, according to its regulatory filings. “But it seemed very reasonable at the time.”
The $7 offering price was communicated to potential buyers weeks ago -- before the stock surged more than 3,000 percent to its $642 peak on Dec. 11, Poutre said in a phone interview. Crypto is the product of a reverse merger with a company that made water and radio-wave resistant sports bra pockets, according to a November filing.
"We could have let [the sale] go for a few more weeks and taken in more money,” Poutre said. “The decision was made in consultation with counsel that it was best to close it now.”
Crypto is not the only company in its space to offer shares amid soaring valuations. Hive Blockchain Technologies Ltd. today announced a maximum C$100 million ($77 million) private placement with its stock up more than 3,200 percent this year. Last week, Bitcoin Investment Trust announced it will resume its private placement with shares up nearly 1,300 percent year-to-date.
Crypto’s stock rose 41 percent to $314 as of 12:32 p.m. in New York.
The company’s stock surge has attracted the attention of market operator OTC Markets Group, which added a skull-and-crossbones icon next to Crypto’s stock symbol last week to signal to investors to be extra cautious before buying the stock.
“As with any stock, investors in emerging companies have a responsibility to do their own research and exercise caution if a high market valuation is not based on the underlying audited financials and operations of a company," Cromwell Coulson, chief executive of OTC Markets, said in a Dec. 11 email interview.
— With assistance by Tom Metcalf