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Bitcoin Mania Comes to the Stock Market

MARKETWATCH 9:57 AM ET 12/13/2017
Symbol Last Price Change
CRCW 223 0 (0%)
QUOTES AS OF 02:13:07 PM ET 12/12/2017

Investors are flinging cash at bitcoin because the price is going up and because they believe it could be the currency of the future. Investors are flinging cash at The Crypto(CRCW) Company because bitcoin is going up.

The hottest bitcoin company in the market is the offspring of a reverse merger this summer with a sports-bra company. Shares of Crypto(CRCW), which trade over the counter, are up more than 2,000% since September, though they had a minor setback Tuesday when they fell by two-thirds. That fall cost Crypto(CRCW)$8 billion in market cap, leaving it worth $4 billion. At its peak on Monday, Crypto(CRCW) was worth more than a quarter of the companies in the S&P 500.

What do investors get for that price? Crypto(CRCW) says it develops proprietary technology, like trading management and software for high frequency trading strategies. The company also offers consulting services on blockchain and cryptocurrency assets, as well as giving investors a way to own a portfolio of digital securities.

What has investors stoked is Crypto's(CRCW) portfolio of cryptocurrency. At the end of September that included $2.6 million in cash and $900,000 in cryptocurrency. That portfolio is likely worth much more after the recent run (https:// www.wsj.com/articles/bitcoin-the-worlds-most-dramatic-bubble-ever-1510303095) in cryptocurrency prices, but nothing close to $4 billion. "If I can quote Elon Musk, we are working very hard to grow into our valuation," CEO Michael Poutre said in an interview Tuesday. On Wednesday morning, Crypto(CRCW) issued more stock.

Low trading volume is the main culprit for the wild price fluctuations, according to Mr. Poutre. Four insiders, including Mr. Poutre, control more than 80% of shares outstanding, according to FactSet.

Crypto (CRCW) and the cryptocurrency are closely linked but there is one thing that sets the company apart from bitcoin--it has one full quarter of very revealing securities filings.

A look at the income statement (http://app.quotemedia.com/data/downloadFiling?webmasterId=101803&ref=11893101&type= HTML&symbol=CRCW&companyName=Crypto Company(CRCW) &formType=10-Q&formDescription=Quarterly report with a continuing view of a company's financial position&dateFiled=2017-11-14)reveals that stockholders are relying on management's skill in trading an unpredictable asset class. Total third-quarter revenues of about $488,000 were almost entirely from realized trading profits.

Corporate governance arrangements leave something to be desired. The board of directors comprises just three people, two of whom are insiders. Mr. Poutre said he expects the company to have a board with a majority of independent directors soon. In the meantime, the company says that officers approve their own business-expense reimbursements.

Those concerns have caught the attention of the OTC Markets Group(OTCM), which provides data on stocks that trade over the counter. The group last week designated (http://www.otcmarkets.com/learn/caveat-emptor) Crypto(CRCW) as a caveat emptor security, which means that a skull and crossbones icon sits next to the stock symbol on the OTC markets website.

Then again, investors shouldn't need any such warning to make due diligence a regular habit.

Write to Charley Grant at [e-mail] (mailto:[e-mail])

-Charley Grant; 415-439-6400; [e-mail]


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