UBI Blockchain Internet is riding buzzwords to a stock boom.
It's become one of the most valuable publicly traded companies in the bitcoin universe – second only to LongFin Corp. The stock is surged almost 1,000% this year, valuing UBI Blockchain at US $ 1.2bil (RM4.89bil). Tony Liu, regulatory filings show.
But persuading would-be shareholders to wager on an untested business model could prove challenging for a company with 18 employees, no revenue and whose regulatory filings list a disconnected phone number. The volatility of bitcoin, considered a proxy for companies that rely on blockchain technology, is not helping either.
“The profile of this company is scary,” says Charles Lee, a professor of management and accounting at Stanford University. “Blockchain is right at the apex of saliency right now. But you have this problem because it's hard to verify anything. You do not want to own this stock. “
Blockchain is a big, universally accessible database that keeps a digital record of transactions. UBI Blockchain says in the filings with the US Securities and Exchange Commission that Tch Jesky, UBI's attorney at law firm Jesky Law, explains that “UBI Blockchain is in the process of building technology to trace pharma products made in China from the manufacturer to the end user. The idea is to prevent counterfeit products. “
Prospective shareholders might struggle to learn more about the company through other means. Calls to the phone number listed on the US SEC filings went to a number that had been disconnected, and a call to UBI Blockchain's New York office rings to the mobile phone of Hong Zhu, who is listed in the filing without a title. Zhu, who is selling 250,000 Class C shares in the offering, did not get a return call seeking comment.
UBI Blockchain's board approved a three-for-one share split, according to a filing Wednesday, to improve trading liquidity and to ” increase the company's flexibility in connection with possible future actions. “Each shareholder will receive a dividend of three common shares for each share of Class A and Class B common stock owned on Jan 9.
Like many companies hitching their fortunes to bitcoin and blockchain technology, UBI Blockchain's stock has seesawed violently this year. The shares surged more than 1,000% in the early part of December and continue to swing with bitcoin-like vicissitude. The company's shares rose as much as 27% early on Wednesday before giving up much of those gains, only to surge 21% after news of the stock split. They were trading at US $ 39.99 (RM163) at 1:10 pm. in New York.
Filings portray a company Which finances are tenuous. UBI Blockchain has an accumulated deficit of US $ 6.3mil (RM25.6bil) and just US $ 15,406 (RM62,820) in cash on hand. It burns through “approximately US $ 220,000 (RM897,050) per month,” according to the S-1 filing of Dec 21 outlining plans to sell shares. The document adds that “management is uncertain that the company can generate sufficient revenues in the next 12-months to sustain our operations.”
And yet, the company executives, rather than the company, would reap proceeds from the share sales. The CEO of Liu, who has personally managed this loan at a 7% interest rate, is selling 40 million shares.
Just eight of UBI Blockchain's employees work in “product development.” by year end. UBI Blockchain's recent S-1 filing lists four executives. Liu, 63, and director Jun Min, 57, of Hong Kong were American Oriental Bioengineering Inc. and Cosimo Patti, 66, of Cliffside Park, New Jersey, was an independent director there.
Aob was once a billion-dollar market value Chinese maker of the “UrinStopper Patch,” a bedwetting inhibitor said to contain a “radioactive photon “That would” warm the acupoints, “thanks to” patent technology from the University of California, Berkeley. “Baron's also reported that AOB had no licensing agreement with Berkeley. AOB now has a market capitalization of US $ 88,000 (RM358,800).
In addition to Liu's proposed sale, which represents two-thirds of his Class A shares, Patti is selling half his 500,000 Class C shares.
None of the employees list history in Internet technology, networking, currency trading, blockchain or bitcoin. “I do not think they have history in the blockchain,” Jesky says. “Not many people have a history in blockchain – it's new.”
UBI Blockchain did not do a traditional initial public offering. Rather, it merged into the shell of a Las Vegas, Nevada-based company called “JA Energy.” Similarly, AOB emerged through a reverse merger.
The stock rise is mirrored in a number of other companies that have folded cryptocurrency into their business plans. Shares of Digital Power Corp rose more than 700% in the last three months while Raven Blockchain is up more than 600%, Seven Stars Cloud Group Inc. has more than doubled and Siebert Financial Corp. has seen its shares more than 300%. Their combined market value is now US $ 5.8bil (RM23.65bil). Their combined annual revenue in 2016 was just US $ 22mil (RM89.7mil).
Mark DeStefano, the Las Vegas-based business affairs manager for the Jesky law firm insists that UBI Blockchain's will eventually create a useful, valuable blockchain technology. “We're not one of those crazy bitcoin companies,” he says. “We do not want to be lumped in with those stock frauds.” – Bloomberg