MARC HASENFUSS: Champing at the bitcoin

How, I ask as a fun-loving investor, can you not thoroughly enjoy messing around in crypto currencies? I’d estimate that they make up less than 2.5% of the value of my humble investment portfolio — mainly bitcoin but also a handful of others such as solana and cardano, as well as some AI coins that I’d rather not mention. (Why risk ridicule and scorn?)

I spend an inordinate amount of my investment time on watching crypto — which is understandable since the markets are open 24/7 and my insomnia now spans some very lonely hours.

I have been lectured many times on the virtues of blockchain, but I still don’t quite get the valuation thesis for bitcoin. It seems to have taken on the role of an investment instrument (hedge against inflation and currency depreciation), rather than that of a digital currency through which to transact.

My bet on bitcoin is just enough not to earn the ire of my wife if it suddenly implodes, and just enough to keep me vaguely interested in its trajectory (which, in the past week, was sprightly). Others are bolder. Newly minted Africa Bitcoin Corp (ABC) (formerly Altvest) is certainly venturing confidently where other local investment companies fear to tread — and at a time when some punters might suggest it’s quite late in the game.

Sure, the easy money has been made in crypto. I was editor of Finweek in 2009 when tech writer Simon Dingle, to the horror of some old hands, touted bitcoin as a potential cover story. The fledgling currency was then trading at less than $10 a coin. If I had R100 for every angry letter I got for running that crypto cover, and had invested it into bitcoin 15 years ago, I might now be in a Mediterranean clime, worrying only about sharpening my padel chops.

Late in the game or not, ABC has set a cumulative capital raise target of at least $210m over the next three years, with bitcoin front and centre as its investment target. That’s double the size of private equity investor Ethos and almost the same size as Sabvest Capital (which ironically has an investment in a crypto trading platform that it values at zero).

The aim is to hold the mantle as the “largest African listed company holding bitcoin on the balance sheet based on market capitalisation and number of bitcoin held”. ABC’s bold capital allocation plan envisages accumulating 2,100 bitcoin in 21 months. Watch out, Winklevoss twins! So far, ABC has one bitcoin on its ledger, after paying $96,195 for the privilege on February 21.

A return of nearly 30% in dollars over seven months is quite enviable. But the appeal of a bitcoin treasury company is a little lost on me. Not only can I accumulate my own fractional stash of bitcoin, but I can diversify into other crypto currencies. Over a year cardano (+155%), stellar (353%) and ripple (463%) have easily outstripped the gains in bitcoin — which probably explains why the EasyEquities EC10 equally weighted crypto basket notched up a 12-month gain of 109% vs 100% for bitcoin.

Admittedly, over the past 10 years bitcoin has left pretty much every other asset class floundering in its wake with cumulative returns of more than 49,000%

Admittedly, over the past 10 years bitcoin has left pretty much every other asset class floundering in its wake with cumulative returns of more than 49,000%. Then again, always bear in mind that past performance is not necessarily an indicator of future results — even though there is a limited supply of bitcoin. Price movements in the sometimes volatile bitcoin will, I assume, inform ABC’s investment decisions.

So perhaps the best scenario for ABC is to snag coins during one of those classic bitcoin retreats. On the other side of the coin, a declining bitcoin price usually amplifies the incessant bear narrative about bitcoin, which, in turn, could dampen sentiment for ABC’s initiative. It’s an intriguing scenario, and one I shall watch with a good deal of interest over the next few years. Whether any other listed investment companies veer into crypto currencies will also be interesting. Judging by my chats to executives, I seriously doubt many will ... which might be telling in years to come.

It would be remiss of me not to return to last week’s column and those unbundled eMedia N shares that investment company Remgro’s larger institutional shareholders seemed to be hastily dumping. The ink had hardly dried on the column than a director or two at eMedia started snapping up tranches of N shares. eMedia itself this week bought back 15.3-million N shares (3.44% of the issued shares) at between 175c and 199c. To top it all, eMedia made a surprise offshore investment (a 30% stake in production technology company Pristine World Holdings) of just under R120m.

I’m ambivalent about these developments. I would have loved to purchase more eMedia N shares for less than 200c. The latest investment in Pristine and the share buyback will sharply reduce the end-June cash pile. But operational cash flows have traditionally been reassuring, so my rich dividend hopes remain. The differential between the price of the ordinary shares and N shares still remains fairly stark — 243c vs 200c at the time of writing. Compelling viewing, one might say.