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Longfin: $10BN Vaporware

|About: LongFin Corp.A (LFIN), Includes: GBTC, HIVE, OSTK, RIOT, XNET

Summary

At $120.00, LFIN has a market cap of $10 billion. The list of firms with deminimis revenues and profits but a $10 billion valuation is very short.

Today announced suspicious acquisition of a website with no revenues for $300 million from LFIN founder.

House of cards barely supports a $5.00 valuation. Potential downside > 95%.

Long investors advised to get out now while you still can.

On December 13th (4 trading days ago), Longfin Corporation (OTCPK:LFIN) went public at $5.00 or a $425 million market capitalized valuation.

Today, at $120.00, LFIN has a current market valuation of over $10 billion, a 2300% return in just 4 trading days.

Part of the reason it is up today is because LFIN announced an acquisition of a website called ziddu.com.

While the press release was scant on the details, buried in the 8-k filing was a disclosure that the Ziddu.com's owner is none other than LFIN's Chairman/CEO, Venkat Meenavalli.

Let's forget for the moment the whole host of related party, conflict of interest issues with the Chairman/CEO selling a website to a company he controls and just took public 4 days ago.

LFIN acquired Ziddu.com for 2.5 million shares or $300 million at the current stock price. If you look at Ziddu.com's website, Ziddu does not currently have an operating business. Sure, there are grand words and visions painted across several pages. But at the core, it is nothing but vaporware.

The rest of LFIN is mostly the same. LFIN's website and S-1 are long on grand statements and strategy, but very little on details and substance. The LFIN business did approximately $300,000 of total sales in 2016 and did not generate a material profit.

LFIN also merged with a company called Stampede Tradex (another company owned by the Chairman/CEO - notice a pattern?). Stampede is an electronic trading firm that generated $28 million in sales and a few million in profit. That seems like a fine little business (with lots of competition), but hardly worth close to $10 billion or $120 per share. The stampede business is probably worth ~$1-2 per share.

Yes you can find presentations of the Chairman/CEO where he talks a big game. But for investors that want to shell out money today at $120.00 in order to buy LFIN, the business fundamentals will eventually have to support a $10 billion valuation. The history of firms that trade at a $10 billion with little to no revenues and profits is very short.

LFIN valuation is egregious even compared to other red-hot crypto-stocks with similar business models (in that they don't have a business model yet). Valuations of OSTK, RIOT, HIVE, XNET, etc... are between $300 million and $2 billion. How does LFIN justify its $10 billion valuation?

Advice to long LFIN investors: get out now while you still can.

Disclosure: I am/we are short LFIN.