Global Blockchain Technologies Corp (OTC:BLKCF), hereafter "GBC," is an investment company which promises to be the first “vertically integrated manager” of cryptocurrencies and blockchain projects. The company’s promise to investors is to help them gain exposure to the often complicated world of digital currencies and ICOs - providing a mix of investment in leading currencies such as Bitcoin and Ethereum, alongside new “growth coins” and pre-coin ventures they have vetted and believe will be successful.
A fundamental aspect of this proposition revolves around investors trusting GBC to navigate the digital currency world on their behalf, instead of investing directly in the underlying coins or ICOs themselves - most of which are, by their nature, available to individual investors. Yet GBC’s initial investments in the space raise serious questions about their due diligence processes and ability to evaluate potential ICOs. Additionally, a review of their current staff and operations casts doubt on their ability to run a successful incubator program and offer blockchain-based startups “technical development personnel” among other resources.
In GBC’s latest investor update, they tout several recent investments in blockchain projects, many of which lie in the theoretical or hypothetical realm. Most do not have clear business models or functioning platforms. Let's go through a few of these investments in detail.
One of GBCs primary investments has been in Kodak's (KODK) pre-ICO for their forthcoming Kodak Coin. GBC touts itself as the "lead investor" in the project and has highlighted their stake in multiple press releases, along with their latest investor update.
For those unfamiliar, Kodak’s recent venture into cryptocurrency caught many by surprise and generated significant press coverage. In short, their plan is to create a blockchain-based platform called "KodakOne" to help photographers receive compensation for their work and track where their work is being shared or used. It is important to note that Kodak is not developing this technology themselves, they are simply adding their branding to a platform being developed by WENN Digital - a company some have raised concerns over, as the CEO has previously been banned from the Alberta Stock Exchange in Canada.
Perhaps most importantly for investors, the venture appears unlikely to produce any material returns for at least the next two years (and likely, ever) as the entire platform and ecosystem have yet to be built. There is a nice evaluation of the short-to-medium term implications of Kodak’s venture here, courtesy of Forge River Research.
The larger notion of the project itself is also highly questionable. There is nothing in Kodak’s proposal to answer the question of why a blockchain-based photo licensing service would be superior to one built without blockchain technology (this last point is a key litmus test when evaluating ICOs). Kodak’s proposal requires photographers to upload their images to a centralized service and for buyers to go through Kodak’s portal. A web scraping tool will then search for copyright violations on other sites. None of this technology requires a blockchain-based solution, and it’s unclear what advantages such an approach actually offers.
The proposal also specifies photographers will be paid in Kodakcoins, which they can sell for cash. Beyond the inconvenience of being paid in a potential volatile currency, the coins will also only be available to purchase (through their ICO) by accredited investors in the United States with a net worth of $1 million or more. While Kodak believes their tokens will eventually be freely traded, that is far from certain and the strict investment requirements raise serious concerns over the future liquidity of the marketplace. If photographers cannot find buyers for their KodakCoins, they will have no way to convert their “earnings” into usable money.
A secondary part of Kodak’s plan is to release a Kodak-branded bitcoin mining machine which customers can lease for $3,4000 in exchange for half the bitcoin the machine produces over the next two years. Assuming a bitcoin value of $14,000, a customer could expect to make $375 a month in bitcoin from the arrangement. As others have noted, this math does not take into account any increases in mining difficult which would significantly reduce earnings over the lease period. It also seems like a less appealing offer with bitcoin prices hovering around $9K, not to mention that the miners Kodak is rebranding can be purchased outright for approximately $2,320.
The fact that GBC touts its role as the “lead investor” in KodakCoin, and uses it as a prominent example of the type of ventures investors can gain exposure to through their stock raises serious concerns over the judgement and due diligence of GBC’s team. The feasibility of the Kodak’s project and the valid concerns over their choice of partners (which have been raised by outlets such as the New York Times, Bloomberg, and others) should have raised numerous red flags for GBC, if in fact they are trying to generate long-term value through viable blockchain-based projects. At best, this investment appears to be an attempt on GBC’s part to piggyback off of the hype surrounding any blockchain project announced by a large brand.
This is another investment GBC touted in their latest update, writing they had committed to investing up to $7 million in Millennial Esports - a digital gaming and content company. As with KodakCoin, I am equally doubtful this investment will produce returns. This is in part due to the complete lack of business plan, infrastructure, or even clear idea of what the exactly Millennial Esports is going to use "blockchain-based applications" to do.
In the investment announcement, GBC's President Shidan Gouran is quoted as saying “The token project that Millennial is implementing is very exciting and one of the biggest motivating factors behind our investment.” What exactly is this token project? The only details in the announcement relate to Millennial’s recent creation of “a new division focused on the creation and implementation of blockchain based ‘in game and cross platform’ game and digital content tokens.” There is a vague allusion to “monetization” of Millennial’s user base “through tokenization.”
Digging into Millennial Esports' own press releases offers no additional clarity. In early November, Millennial put out a release saying they intended to establish a “new blockchain division” and that “The company is currently exploring various synergies in implementing blockchain-based applications and protocols to enhance the community and user experience.”
A press release put out a few days later said they were establishing a “Blockchain Advisory Board” to guide the design and implantation of “blockchain-based game and digital content tokens.”
Given the lack of even a basic business plan, model, or technical specification, there is no reason to spend significant time evaluating this investment. Taking these announcements at face-value, Millennial Esports is in the very first steps of evaluating some sort of blockchain-based initiative, which will likely take years to finalize, develop, and implement, if the idea is even found to be feasible. Seen cynically, these announcements amount to nothing more than a quick publicity ploy to lure in investors looking for easy “blockchain” based returns.
GBC’s $3 million investment into Breaking Data Corp. echoes that of Millennial Esports. Breaking Data Corp. owns GIVEMESPORT, a sports content network with a relatively significant Facebook reach. Much like Millennial Esport’s “project” there is no definite plan or coherent idea on how to implement a blockchain-based solution, or even why a blockchain-based solution would improve Breaking Data Corp's current products.
In the investment announcement, GBC President Shidan Gouran is quoted as saying “We see a very substantial opportunity to introduce blockchain technology in the GIVEMESPORT ecosystem and support this with our blockchain expertise. It is a key factor in our investment here.”
What that “substantial opportunity” might be however, is never specified. Likewise, GBC as a company has no previous experience introducing or developing blockchain-based technology.
Much like their investment into Millennial eSports, there is simply no substance behind this project (at least that they have shared) or coherent plans to turn the companies assets into a product.
This brings us to their claims of having an “in-house innovation incubator.” This claim is prominently featured on GBC’s "About Us" page and is touted as “A unique dimension of Global Blockchain's value to its investors.” However none of the press releases for their investments in Millennial Esports or Breaking Data Corp. mention this incubator, despite the nascent status of those projects. And while GBC claims companies in its incubator program will receive resources including “initial capital, technical development personnel, and legal support,” the company has no developers or other technical talent on staff. Their “Team” page lists a handful of executives (although tellingly there is no CTO here), and then another handful of “Advisors.” Of the six individuals affiliated with the company on LinkedIn, there are no technical or development staff listed.
All of which suggests the company does not have the in-house resources to provide the kind of technical development support that, say, a digital content company would need to develop and launch a viable ICO from scratch.
One of GBC’s primary selling points about why investors should entrust their money to them, rather than investing directly into digital currencies or ICOs, is that they have the necessary skill and industry knowledge to scout promising projects.
Given the dubious nature of their investments to date, and the lack of due diligence their investments so far have shown, there is significant reason to doubt these claims. This, coupled with their seeming complete lack of developers or technical staff - which would be key to making their in-house incubator successful - gives little reason for investors to believe their claims or trust they are interested in generating long-term value.
Cryptocurrencies and blockchain-based ventures are often risky, but GBC looks just as perilous an investment.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.