Hey everybody and welcome to new subscribers.
Last week I had a call with Neptune Digital Assets (TSX-V:NDA OTC PINK:NPPTF) CEO Cale Moodie who was extremely generous with his time, speaking with me for close to an hour and would have kept going but I didn’t want to tie him up longer than that.
I got the full backstory on Neptune: how their original idea was to be a Dash supernode operator and they set up six of them prior to an RTO in December 2017. Those of you who have been following crypto for awhile will recognize that date, it marked the all-time-high in Bitcoin and crypto-currencies before the bear market of 2018-2020.
Neptune was caught in the downdraft: they placed their offering at 0.50 CAD but by the time the shares hit the public in January, “pretty well everybody sold on day 1”, crashing the stock down as far as 0.05 or 0.06 (CAD). Things were lean for awhile, and they stopped drawing salaries while they worked out the turnaround process.
They’re still involved in Dash with 2,030 on their balance sheet, currently worth $523K USD ($659K CAD), but part of their rebuilding process had them branch out to other crypto currencies. I mentioned in TCC #1 that Neptune struck me as a kind of “crypto royalty” outfit, analogous with a Franco Nevada or Wheaton Precious Metals from the gold/silver space, and personally I like that model.
Moodie pretty much confirmed my assessment and agreed with the comparison, he thinks of Neptune as a “proof of stake” company.
An updated table of their crypto holdings, updated for today’s prices follows:
Even Neptune’s entry into Bitcoin mining has them offloading all the operations to Link Global (CSE:LNK), with whom they’ve entered into a JV to build a green energy Bitcoin mining data center (using solar, wind and natgas).
I’ve been meaning to look into Link, currently trading at 0.88/share with a market cap of ~ $35M CAD, but when I look at Neptune by comparison, it just feels like we get the upside, without a lot of the headaches like having to worry about operating a data center (as a guy running an IT company that didn’t get a lot of sleep Sunday night because of an outage in our data center, I find the prospect of that being somebody else’s problem somewhat attractive).
Private Placement
Neptune has announced a private placement which should have closed by now, raising $500,000 CAD 0.80/share, which will issue another 625,000 shares when it closes (the table above doesn’t reflect the new shares). Also, half-warrants executable at $1.00 for the next three years.
I added more shares at 0.88 myself. Today NDA is trading around 0.67 (CAD) and I may pick add to my position. As I’ve already said, I don’t claim to be a technical analyst, but it certainly looks oversold to me, given the Stochastic reading below the median and possibly close to touching the 20 band and yet with the uptrend intact and being above the 50 and 200 MA. Could it hit the 50 MA support and dip below 20 on the Slow STO? Sure. But I’m not trying to daytrade this and my investment horizon is long enough that it won’t matter if my cost base is 10 or 20 cents one way or the other. There are marginal Bitcoin companies with market caps north of a billion and I don’t think Neptune is a marginal company.
My sense of Neptune is that they understand capital allocation, compounding and risk (they have some hedges and some yield generating deposits in place with another portfolio holding of ours, Galaxy Digital (TSE:GLXY). They reported earnings last week and I will review those in the next newsletter.
The main thing is I wanted to get this alert on Neptune out because I made a trade on it, and I think this looks like a reasonable entry point.
COMING EVENTS:
Coinbase goes public next week on April 14. Is it a buy? I’ll be putting out a note on that tomorrow or Friday at the latest so you can think about it over the weekend.
