Buying Shares in Crypto Firms Is Risky Business -- WSJ
27 Noviembre 2019 - 02:02AM
Noticias Dow Jones
By Paul Vigna
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 27, 2019).
Investors looking for a piece of the cryptocurrency game have
one avenue that is sometimes overlooked: stocks.
Buying bitcoin itself is a minefield of volatility. The price is
declining again, and another high-risk crypto startup called it
quits. On the other hand, Facebook Inc. is building its own
cryptocurrency. Governments and companies are still exploring
blockchain technology.
There is still an opportunity for investors, assuming they can
make the right bet.
In five years' time, the technology behind bitcoin and
blockchain is probably going to be used across a range of
industries, said Tom Forde, an analyst at D.A. Davidson. The trick
is figuring out which cases will bear fruit, and which companies
are going to profit from it.
"That's what makes it so exciting and challenging at the same
time," he said.
Mr. Forde recommends a checklist for investors, who he suggests
tread cautiously: Does the company have patents? Is there a
business that can be built off those patents? Is it a case where
the first company can be successful, or will it take several
generations of the technology? Is there enough financing to make
the business work?
Mr. Forde follows Overstock.com Inc. closely (he rates it a
"buy"), but he also keeps a list of dozens of other companies in
the space as potential investment opportunities. He breaks them
into three categories: existing companies, crypto companies and
opportunists.
Big chip maker Nvidia Corp. became a crypto darling when
"miners" started buying its specialized videogame chips. That
helped push the stock to an all-time high of $289 in October 2018.
When crypto cratered, though, Nvidia's stock stumbled. Today it has
stabilized and resumed its march upward, up 63% year-to-date at
$217.
Among, crypto companies, Toronto-based Hut 8 Mining Corp.
operates mining services and went through a bout of belt-tightening
in 2019 after the crypto bubble popped. In its recently reported
third quarter, the company posted a loss of $1.7 million, partially
offsetting a $26 million profit for the first nine months of 2019.
Shares were most recently at $1.41.
Longfin Corp., meanwhile, is an example of how risky this space
can be. The company went public in 2017, listing on Nasdaq, and
raised $5.7 million. It claimed to have two businesses, trade
finance for commodities trading and risk-management software. The
timing was good; the stock rose as high as $17 in early 2018.
Today, the stock still shows up on the charts, at 40 cents even,
but the company is no more. It was investigated by the Securities
and Exchange Commission and shut down. Founder Venkata Meenavalli
was charged in June with committing fraud by the SEC and Justice
Department.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
November 27, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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