Many of the companies working on blockchain and other distributed ledger technologies have chosen to raise funds by unconventional means. These include so-called “initial coin offerings”, whereby companies sell digital tokens to investors to fund projects without offering equity.
Publicly listed companies that have announced forays into crypto-assets or distributed ledger technology have come under considerable scrutiny from regulators.
Jay Clayton, chairman of the US Securities and Exchange Commission, launched a blistering attack in January on “public companies with no meaningful track record” in blockchain technology.
The SEC, he added, was “looking closely at the disclosures of public companies that shift their business models to capitalise on the perceived promise of distributed ledger technology”. Most recently, it launched a review of Overstock.com, the US online retail group that launched its own digital coin — prompting a 10 per cent fall in the company’s shares.
Mark Carney, governor of the Bank of England, on Friday called for more rigorous oversight of cryptocurrencies, warning that banning them would be a less effective way of protecting consumers than regulating them.
Big US companies, such as photography pioneer Eastman Kodak and former drinks business Long Island Iced Tea — rebranded as Long Blockchain — have grabbed headlines for their moves into the new technology.
Smaller UK companies are also piling in. Some well-known businesses, such as Applied Blockchain, which announced earlier this year that the oil group Shell and private equity investor Calibrate had taken undisclosed minority stakes, have stayed private.
Others have seen being public as their chosen route.
Until late last year, Online Blockchain was an Aim-listed company called On-line, whose main asset was a stake in markets data site ADVFN. After formally changing its name in December, it completed a £1m share placing in January to raise working capital “to invest further in the development of blockchain projects as and when they arise”.
Since its strategy shift, Online Blockchain has developed the PlusOneCoin as part of a joint project with ADVFN. The company says the cryptocurrency will allow social media users to interact with and rate their peers’ content, through the PlusOneCoin cryptocurrency.
Online Blockchain says the digital wallet it has created along with ADVFN to hold its token “facilitates and introduces its large mature user base to cryptocurrency, blockchain mining and other aspects of this emergent sector”. It also “provides ADVFN users an educational platform to learn about cryptocurrencies, increased functionality on the ADVFN site as well as the potential of new products”.
Shares in Online Blockchain almost tripled in value from 17p a share to 47p in October, when the company announced its move away from incubating internet and information businesses and towards the cryptocurrency sector. Although trading is fairly thin — as is typical for most Aim-listed stocks — the company has held most of its gains: it now sits at about 83p a share, giving it a market value of £7.1m, according to FactSet data.
The company formerly known as Stapleton Capital, an investor in the telecoms sector, announced it January it was becoming Blockchain Worldwide and would look to invest in businesses that use the distributed ledger technology instead.
Shares more than doubled on the morning after the name change was announced, with the board changing the scope of its investment criteria to focus on the blockchain technology industry. Despite saying it had identified opportunities, no transaction has yet been announced.
Blockchain Worldwide’s shares climbed from just shy of 6p a share ahead of the announcement to a high of 10p a share shortly before the end of January. They have since fallen back to 7.5p a share, giving the company a market valuation of about £2.7m, according to Reuters.
When Coinsilium started trading on the ISDX Growth Market — now the Nex Exchange Growth Market — on Christmas Eve in 2015, it claimed the mantle of the first initial public offering of a blockchain investment company on a recognised exchange. Although shares on the market are technically unlisted, they can be bought and sold through brokers, and Coinsilium raised about £1m.
Set up in 2014, the company backs early-stage blockchain technology and digital token businesses, investing in some and providing advice to the founders of others to help them raise their first round of major funding.
Companies in its portfolio include CoinDash, an Israel-based company which managed to overcome a hack of its token sale last year to launch a crypto-asset portfolio tracker called Blox this week.
It also advises Gimli, a company apparently named after a dwarf from the Lord of the Rings, which is trying to capitalise on the burgeoning esports community. It offers “live stream crypto betting for gamers” using “smart contracts” on the Ethereum blockchain — essentially computer code that is automatically enforced when certain conditions are met.