Some companies recently changed their names and
business models in a shift to blockchain technology, and their
stocks have shot up.
That these companies get away with this is a sign of
just how far the global flood of liquidity has confused
speculators and turned them into knee-jerk betting
This can happen only during the very late stage of a bubble.
It just doesn’t let up. UBI Blockchain Internet, a Hong Kong
outfit whose shares trade in the US [UBIA], filed with the SEC to
sell an additional 72.3 million shares owned by its executives.
In other words, it isn’t selling the shares to raise money for
corporate purposes, but to allow its executives, including CEO
Tony Liu, to bail out.
This is happening after the company – which sports zero revenues
and a disconnected phone number in its SEC filings – managed to
get its shares to spike briefly by over 1,100%, pushing its
market capitalization to $8 billion.
UBI Blockchain didn’t do an IPO. Instead, in October 2016,
it acquired a
publicly traded shell company registered in Las Vegas, called “JA
Energy.” It then changed the name and ticker symbol to what
Over the six trading days starting on December 11, 2017, its
shares soared over 1,100%, from $7.20 to $87 on December 18, as
the word “blockchain” in its name and sufficient hype and
speculator-idiocy took hold. By December 21, shares had plunged
67% to $29. They closed on Wednesday at $38.50. At this price, it
still has a ludicrous market cap of $3.64 billion.
In its prospectus for the share sale, filed with the
SEC on December 26, UBI explains the
overcooked spaghetti of its dreamed-up activities:
UBI Blockchain Internet Ltd. business encompasses the research
and application of blockchain technology with a focus on the
Internet of things covering areas of food, drugs and
healthcare. Management plans to focus its business in the
integrated wellness industry, by providing procedures for
safety and effectiveness in food and drugs, but also preventing
counterfeit or fake food and drugs. With the advancement of the
blockchain technology, the Company plans to trace a food or
drug product from its original source within the context of the
Internet of Things to the final consumer.
It explains that “management is uncertain that the Company can
generate sufficient revenues in the next 12-months to sustain our
operations. We shall need to seek additional funding to continue
our operations and implement our plan of operations.”
It added that “due to the uncertainty of our ability to meet our
financial obligations and to pay our liabilities as they become
due,” the auditors in the financial statement for the year ended
August 31, 2017, questioned “our ability to continue as a going
For the year, UBI had an operating loss of $1.83 million on zero
revenues. It had $15,406 in cash, and: “In order to keep the
company operational and fully reporting, management anticipates a
burn rate of approximately $220,000 per month, pre and
Without any additional funding, the Company will be unable to
operate. Therefore, if we are unable to generate sufficient
revenues, we must raise additional capital in order to continue
operations in order to implement our plan of operations.
Alas, all of the shares will be sold by existing shareholders.
The company “will not receive any proceeds from the sale of the
common stock by the selling stockholders.” So even after the sale
of the shares, it will have no cash to operate on.
The selling shareholders are the CEO Tony Liu and five other
“individuals.” Speculators who buy these shares will hand
their money to those individuals – not the company. And the
company still has nothing, no revenues, no business model, no
This wasn’t the only outfit to leverage the word “blockchain” to
create hype and extract billions from gullible speculators.
There’s Longfin [LFIN]. The company went public in the US on
December 13, 2017. In its SEC filing,
it said it had revenues of $298,786 in the year 2017 and was
sitting on $75 in cash. What sent the stock soaring 2,700%, from
$5 to $142.82 in a few days, and gave it briefly a market
capitalization of over $7 billion, was the December
15 announcement –
an elegant and apparently very effective mix of gobbledygook,
hype, and silliness that started out like this:
Longfin Corp., a leading global FinTech company, announces the
acquisition of Ziddu.com, a Blockchain-empowered solutions
provider that offers Microfinance Lending against
Collateralized Warehouse Receipts in the form of Ziddu Coins.
What actually happened, according to
Longfin’s SEC filing: Longfin bought an asset called
“Ziddu.com” from Meridian Enterprises, a Singapore corporation,
95% of which is owned by Longfin’s CEO and chairman.
On Wednesday, Longfin shares closed at $59.95, down 58% from its
peak a few days ago.
This total insanity over outfits claiming to have a
blockchain-related activity has been an ongoing movement over the
past few weeks and months.
Shares of Digital Power Corp. [DPW], a dotcom-bust survivor, if
barely, soared 880% from $0.56 on November 21 to $5.50 on
December 18, though it shares have since plunged to $4.05. The
company makes lowly power supplies for computers, but after it
announced that it would aim its power supplies at cryptocurrency
miners, its shares took off.
There is a gaggle of others with similar trajectories:
Beverage-maker Long Island Iced Tea [LTEA] soared 280% within
seconds after it announced that it would change its name to Long
Blockchain; also Riot Blockchain, Seven Stars Cloud Group,
Siebert Financial Corp, among others. They all have minuscule or
no revenues, though their combined market capitalization is many
That these companies get away with this, that in fact speculators
fall for this crap, that they’re stupid enough to bet what are in
aggregate many billions of dollars in a matter of seconds after
“blockchain” flashes across their screens, is a sign of just how
far the global flood of liquidity has befuddled the minds of
these speculators and turned them into knee-jerk betting
automatons. This phenomenon happens only during the very late
stages of a bubble. But going back over the last three bubbles
and crashes, to 1987, I have never seen anything this crazy. This
is truly awe-inspiring.
Leverage is the great accelerator on the way up and on the way
down. Read… Peak Good Times? Stock Market Risk Spikes to New
Read the original article on Wolf Street. Copyright 2017. Follow Wolf Street on Twitter.