What’s Lichtenfeld’s $30 Crypto Stock?

Checking out Oxford's pitch for the "Goldman Sachs of Crypto"

By Travis Johnson, Stock Gumshoe, August 26, 2021

This is a teaser pitch that I solved in a Friday File for the Irregulars back on May 7, but I continue to get a lot of questions about it so I’ve opened that solution up to the rest of our readers — most of what follows was published in that Friday File three months ago, and has been only lightly updated to incorporate the more recent quarterly updates. The stock was trading in the high-$20s going into this teaser pitch, and currently is at about $17.

From May 7:

Marc Lichtenfeld is out with a new pitch for a high-end Oxford Club service he’s launching called Predictive Profits ($1,497 “on sale” from $4,000, no refunds), and the key tease he’s dangling to get subscribers is “the ticker symbol for my #1 crypto stock” that will be revealed in a special report that he calls “The Tiny Crypto Stock Every American Should Own.”   That has generated some reader questions, and I’m seeing the ad a lot over the last day or two, so even though it’s not at all a tough teaser to solve we’re going to spend a little time on it for you, my favorite reader.

Here’s the intro to the tease:

“DON’T Pay $50,000-Plus for Bitcoin (Do THIS Instead)
✔ 36 crypto opportunities
✔ One investment
✔ Under $30”

And, as in so many of my favorite teaser pitches, he shows some Google images of the company’s headquarters to make it seem like he’s a private eye on a stakeout, really doing boots on the ground research…

“In this unassuming office building…

“10 minutes from Wall Street…

“One tiny company is collecting cash 24/7 in a market that NEVER closes.”

Exciting, right? And though it’s in New York, it doesn’t trade on a major US exchange — exotic!

“It doesn’t trade on the New York Stock Exchange…

“The Nasdaq…

“Or any major American exchange, despite being smack-dab in the middle of New York City and the world of finance.

“The average person doesn’t even know it exists.

“But if you know how to claim shares of this under-the-radar company…

“You could collect a substantial sum from the crypto markets.”

The ad then rolls through a lot of the general “crypto is growing” stuff that you already have heard many places — companies like Tesla are buying in, big-name investors who shunned it years ago are piling on, and the total market value for all cryptocurrencies has gotten too big to ignore, over $2 trillion now.

And he posits this as an easier entry to the market for regular folks…

“This crypto opportunity costs less than $30.

“And it’s a STOCK… not a token or coin.

“So you WON’T have to open a crypto account or set up a complicated wallet.

“You can do it in ANY standard trading account.

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“It’s the easiest way to play this trillion-dollar market… as more companies like Visa, PayPal and major banks adopt crypto technology.”

And not just easier, but maybe even better…

“The stock that I’m talking about today is an essential part of that foundation. It helps big companies make their crypto investments and profits from these new technologies.

“And as you’re about to see, it actually has far higher upside than almost any digital currency right now.

“This company has its hands in pretty much every aspect of this trillion-dollar industry.”

More clues about this stock?

“This stock has investments of its own in 36-plus pre-IPO crypto companies.

“And it manages $1.2 BILLION in crypto assets for clients, the way BlackRock manages stock portfolios for the ultra-rich.

“So by owning shares in this crypto stock, you can get in on the next generation of crypto projects BEFORE anyone else….

“I believe it’s the easiest no-brainer investment of this decade.

“Yes, even better than Bitcoin.”

I know, I know, that was plenty of clues and you know the answer to this one already… but indulge me a moment, I want to distill a bit of what Marc says he likes about the company, before I get into it in a bit more detail myself… he says this business has four “pillars”:

“Crypto Pillar #1: Trading Unit

“The first pillar of the crypto stock’s business is its trading desk.

“Trading desks are some of the most lucrative businesses in the world.”

In the context of Wall Street, the trading desks are the people who move the shares around, facilitating trades and taking a tiny commission at each step, so they profit from volatility. More trading action is good, and for institutional money managers who don’t want to be blamed for screwing up, trading institutional-level amounts of money in cryptocurrencies is terrifying on unregulated platforms or offshore exchanges. Lichtenfeld says this company processed $1.4 billion worth of trades last quarter, and also acquired two other companies that will enhance their offerings in derivatives and increase the trading volume on their platforms.

Next?

“Crypto Pillar #2: Asset Management

“Its crypto fund, which has $1.2 billion in assets under management – and that number is growing.

“It provides several different crypto investment funds folks can buy into.

“And this is a huge area of potential growth.

“Because 3 out of 4 advisors report getting questions about crypto from their clients.”

They also worked with Bloomberg to build a crypto index, apparently, which can be used for funds and ETFs and generate more fees.

“Crypto Pillar #3: Investment Banking….

“It arranges financing for other crypto companies.

“Another wildly profitable business model….

“According to Crunchbase, there are 4,048 crypto companies out there.

“And this early in the game, pretty much all of them will need funding.

“If this company manages to snag eight more deals each year – out of the 4,000 out there – revenue would DOUBLE.

“And if it does deals for just 2% of those companies…

“That’s a 12X increase in revenue!”

That’s all pretty much spitballing, we have no idea what will happen on that front — but it’s true that investment banking fees are shockingly high, and underwriters of IPOs make a lot of money on big deals. And yes, there are a lot of startups out there in crypto-land who need funding.

And the last one:

“Crypto Pillar #4: Venture Capital…

“Venture capital is the path to some of the BIGGEST investment gains in the world.

“And this tiny crypto stock has invested in 36-plus pre-IPO companies…

“So when you grab some shares of this publicly traded stock…

“You’ll have access to the vertigo-inducing profit potential of these breakthrough companies.”

There’s plenty of other teasing and hinting in the pitch… as I said, it’s not particularly super-disguised, you can even read the address of the building in the Google Earth image they use if you squint a little. He throws out a couple examples of the VC investments they’ve made, mentions that they’re also getting into mining as a fifth “pillar”, and mentions that, like some other folks, he calls this company the “Goldman Sachs of Crypto” — partly because the CEO was a Goldman partner, partly because it’s hoping to replicate Goldman’s massive success in a newish market.

So yes, of course, this is another tease of Galaxy Digital (GLXY.TO, BRPHF), which I’ve owned for a few weeks and first covered when Frank Curzio was also teasing it as the “Goldman Sachs of Crypto” a little over a month ago.

Galaxy Digital is a little bit tricky to value, because what we’re actually buying as investors is a holding company that owns a minority stake in GDH LP, the operating partnership which is controlled by, and majority owned by, Michael Novogratz (you can read the details in their SEDAR filings (I recommend the March 30 MD&A as a starting point) if you’re a glutton for details, but the way I calculate it the public company, GDH Ltd, owns 92.7 million shares and the other partners, largely Michael Novogratz, own 229 million shares). That would mean there are about 322 million shares outstanding, in total, which gives the company an effective market cap of about $8.9 billion at the roughly $28 price it trades at recently (that&#