A shift from gold to the blockchain has paid off handsomely for a tiny Vancouver shell company.
Mineral-exploration firm Leeta Gold Corp. traded for pennies a share on the TSX Venture Exchange until it morphed into Hive Blockchain Technologies Inc. in recent months through a series of transactions that saw it acquire cryptocurrency data centres in Iceland. By early this month its shares had skyrocketed to more than $6 apiece, giving Hive a market value of more than $1.2-billion. Not bad for a company that has yet to release a quarterly earnings statement.
Hive is backed by some well-known names in the gold-mining industry, including Frank Giustra, a financier who has worked closely with former U.S. president Bill Clinton on philanthropic endeavours. Early shareholders include Vancouver mining promoter Tommy Humphreys and Frank Holmes, chief executive of U.S. Global Investors, a Texas-based precious-metals mutual-fund company. Mr. Holmes is also Hive's chairman.
Hive describes itself as "building a bridge from the blockchain sector to traditional capital markets." The blockchain, sometimes referred to as a "digital ledger," is a public record of cryptocurrency transactions.
After its blistering debut, Hive's shares have pulled back. In a Nov. 3 announcement, the company said it was moving up by a week the date at which some holders who were previously subject to lockup agreements could sell stock.
"There was an imbalance of orders in the market, leading to queries from the regulators, including IIROC [the Investment Industry Regulatory Organization of Canada], in relation to the rapid rise in the share price," Hive CEO Harry Pokrandt wrote in an e-mail to The Globe and Mail this week. "Acceleration of the voluntary hold of the shares was approved in order to address this imbalance."
Also this week, an anonymously penned short-seller report raised questions about Hive's valuation. In another e-mail to The Globe, Mr. Pokrandt pointed out a number of mistakes in the report.
GMP Capital Inc., the firm's main underwriter, also dismissed the report. Toronto-based GMP has led a number of bought deals for Hive that have seen the company raise about $60-million, the most recent at $2.80 a share.
Employees at GMP and fellow independent dealer PI Financial Corp. were among those who bought shares in Hive early on in a $16.5-million seed financing round done at 30 cents a share that was announced in June.
"GMP employees participated for a very small amount," GMP spokesman Rocco Colella wrote in an e-mail. He added that the independent dealer's employees are prohibited from selling their positions for nine months.
Blake Corbet, head of technology and health-care investment banking at Vancouver-based PI Financial, also said certain PI employees acquired a small number of shares in the 30-cent round. He said PI is following TSX Venture Exchange regulations, which means those employees are prohibited from selling for four months.
Official Hive insiders and management are also still subject to lockup arrangements that prohibit them from selling, the company confirmed.