Breakaway

The Stock Pop From a Crypto Rebrand Doesn’t Last

Companies have been racing to tie themselves with blockchain and are seeing short-term gains.

2618P_SOLUTIONS_CRYPTO-CMS-This-image-can-only-be-used-with-attached-article-for-period-of-90-days-from-publication — Illustration: Tomi Um for Bloomberg Businessweek

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By Lily Katz and Mark Glassman

June 18, 2018 at 7:37 PM UTC

This article is for subscribers only.

This article is part of the June 18, 2018 issue of businessweek.

From late 2017 to early 2018, dozens of small- and mid-cap companies tried to use the hype surrounding Bitcoin to goose their stock market value. Fruit-juice enterprises touted ties to blockchain while tobacco businesses pivoted to cryptocurrency mining. “You may get an initial pop in the stock, but generally you’re going to see these things lag behind,” says Steven DeSanctis, a strategist at Jefferies LLC. “The market is going to figure out whether or not it has the appropriate growth profile.”

A hypothetical portfolio of 45 companies, equally weighted, that from Aug. 30, 2017, to Jan. 18 incorporated cryptocurrency or the blockchain into their businesses would have gained 800 percent since the start of that period, outpacing the S&P 500 and Bitcoin, the largest cryptocurrency by market value. Below are five of those companies that saw a pop in stock price soon after their switch: