Bitcoin Treasury Firm DeFi Technologies Claps Back With Report Its Stocks Tanked

One of the most high-flying crypto stocks came crashing back to earth this week after a report claimed it wasn’t rising “for the right reasons.” Today the company has vigorously defended its activities.

In its Tuesday issue, crypto newsletter CoinSnacks outlined an extensive marketing campaign undertaken in recent months to provide positive coverage of DeFi Technologies (DEFI) – a Toronto-based crypto fund provider that trades publicly on Canada’s Chicago Board Options Exchange (CBOE).

The price of DEFI stock has risen sharply, along with other companies that have adopted Bitcoin as their main treasury reserve, following the massive success of MicroStrategy (MSTR), now the top institutional holder of BTC. Amid the excitement, some analysts piped up become bullish on DEFI for fundamental reasons, claiming it is extremely undervalued.

On the Monday before the report came out, DEFI was trading at CAD $3.30, up 202% since May 31. At Tuesday’s close, the stock was down 35% to CAD $2.24 per share.

The company’s promotional efforts include a paid email and influencer campaign to get its name in the headlines, CoinSnacks reported to its 50,000 subscribers, as well as endorsements from Anthony Pompliano and Will Clemente – popular crypto investors whose market analysis firm Reflexivity Research was acquired by DeFi Technologies in January.

“Between the influencer pumps, being mentioned on CNBC, the email campaigns, and Pomp pumping, there is now strong evidence that the stock is not rising for the right reasons,” CoinSnacks wrote.

DeFi Technologies responded to the CoinSnacks report in a press release during Wednesday’s opening, calling it “defamatory, selective, inaccurate” and “misleading statements” about the company’s practices and financial condition.

The company even speculated that the report may have been commissioned by short sellers in the hope of depressing the share price.

DeFi Technologies said it was approached by a Canadian investment bank on June 10 with an offer of $15 million, which it said was an unusually low amount given the newfound strength of the company’s treasury. That same day, DeFi Technology reported that the treasury alone was worth $60 million, of which $7.9 million had been converted into Bitcoin.

“The company believes that coordinated efforts by short sellers and issuing misleading reports on publicly traded companies constitute market manipulation,” DeFi Technologies wrote.

CoinSnacks later replied to DeFi Technologies, stating that it has “currently, and has never, been paid by any short-seller to cover any company,” nor did its team hold a position in DEFI.

Late Wednesday, the company’s shares saw a modest recovery of 6% to CAD $2.30 each.

The CoinSnacks newsletter did not elaborate on DeFi’s Techology’s recent financial performance, instead referencing its days as a penny stock in 2023, when it generated a full-year net loss of CAD$18.9 million.

The company points to its gains so far this year as evidence that its shares are a worthwhile investment.

DeFi Technologies says its assets under management have soared this year alongside the broader crypto market, which is also increasing the rewards earned from its investments in crypto funds. These include exchange-traded funds for Solana, Bitcoin and dozens of other assets for which the company is allowed to deploy its assets and earn returns – earning an average of 7 to 10 percent on the assets it holds.

“Our assets averaged $400 to $450 million in the first quarter, and in the second quarter they will average $600 to $650 million,” said Russell Starr, Head of Capital Markets at DeFi Technologies. Declutter.

Those same assets under management (AUM) generated $10 million in revenue for the company’s operations in the first quarter, enough to cover all expenses for the entire year, Starr said. Given that current assets under management are now 50% higher, he expects DeFi Technologies to earn at least $15 million in pure profit for each of the next three quarters.

Meanwhile, Starr said the company’s newly launched DeFi Alpha trading desk made $85 million in the second quarter of 2024 alone. That brings the company’s net profit for the first six months to $100 million – more than 20 percent of the current market capitalization of $477 million.

For context, other crypto companies like Coinbase and Robinhood are currently trading at 30x and 40x their annual earnings.

“If you look at that article they wrote, they didn’t say anything fundamental,” Starr said. “The reason for this is that if they had taken the time to talk about the fundamentals, they would have realized very quickly that they have no recourse.”

Edited by Ryan Ozawa.