Novogratz’s Crypto Bank Debuts on Stock Exchange
Billionaire Michael Novogratz listed his crypto-focused merchant bank on the Canadian Stock exchange this week despite the fact that cryptocurrency prices have been steadily declining this year.
Novogratz, a former Goldman Sachs executive, launched his merchant bank Galaxy Digital in November 2017, just one month before Bitcoin hit its all-time high of $20,000.
The company is trading under the name Galaxy Digital Holdings Ltd., with the ticker GLXY on the exchange. TSX is the largest stock exchange in Canada and the third largest in North America based on market capitalization. The top two stock exchanges on the continent are the New York Stock Exchange and the NASDAQ.
Digital Galaxy’s shares opened at a price of Can$2.75 per share (~US$2.11 per share) on Toronto’s TSX Venture Exchange. However, within half an hour of trading, the share price of the company dropped by 20% and by mid-afternoon, Digital Galaxy’s shares were trading down at Can$1.98 per share (~US$1.52 per share).
Challenges with Listing Galaxy Digital
Novogratz was not allowed to list his firm on US exchanges because he did not meet the criteria that his company needed to show 2-years’ worth of audited financial reports.
Therefore, the billionaire decided to list his company on the Toronto exchange. However, Canadian regulators did not allow the company to list its stocks for 8 months, during which time Bitcoin lost more than 50% of its value.
To be able to fast track his company’s listing on the Canadian exchanges, Novogratz took a rather unusual route. He bought Canadian cryptocurrency startup Coin Capital, and then merged it through a reverse takeover with a Canadian shell company called Bradmer Pharmaceuticals, which was already listed on the TSX exchange. Then, the new company was renamed and is now trading under its new name, Galaxy Digital Holdings Ltd.
Prior to being listed on the TSX, Galaxy had sold its shares at Can$5 per share (~US$3.80). However, thanks to the drop in cryptocurrency prices, Galaxy Digital took a $134 million hit on its revenue in the first quarter of 2018. The company suffered a net loss of $103.3 million in trading, of which $13.5 million were in digital assets and $85.5 million were in unrealized losses on those digital assets.
Novogratz said that if he had known that the cryptocurrency markets were going to slump so badly, then he would have put off listing Galaxy for another year or so. However, he said, he still doesn’t think it’s a mistake to list a company like his on the stock exchange.