Zug, 01.03.2024

Crypto queen removes company from stock exchange: The case of Smart Valor

After just two years on the Swedish stock exchange, Smart Valor is pulling out again and announcing the delisting of its own shares. The case of the Zug-based company highlights an old problem in the new sector: many companies are massively overvalued on paper.

The Swiss crypto sector is once again generating a sense of optimism. There is talk of an explosion in the value of Crypto Valley. This is no longer limited to the canton of Zug, but encompasses the whole of Switzerland and the Principality of Liechtenstein. Almost 1,300 companies with an estimated 6,000 employees are now active in this cluster.

The "CV VC Top 50 Report", which is published annually by the Zug-based venture capital firm of the same name, is regarded as a barometer for the local crypto scene. The latest edition shows: While the entire industry still had a stubborn cold during the crypto winter of 2022, it was largely able to recover last year.

The valuation of the top 50 companies in Crypto Valley more than doubled within a year from USD 185 million to USD 383 million at the end of 2023. In the same period, the leading currency Bitcoin gained 160 per cent against the dollar. Demand for crypto tokens and coins increased again, particularly in the second half of 2023. Prices rose accordingly, driven by Bitcoin.

"Currently evaluating alternative markets": Smart Valor head Olga Feldmeier. Image: Patrick Hürlimann (Zug, 12.04.2023)

Now just a penny stock

However, the bull market did not boost the entire sector. Smart Valor is one of the companies that did not benefit from the upturn. On the contrary. On 16 February, exactly one month after the publication of the ambitious "CV VC Top 50 Report", the Zug-based company announced the delisting of its own shares.

As a reminder, the company, which specialises in the deposit and trading of cryptocurrencies, had only gone public on Nasdaq First North, a Swedish offshoot of the US technology exchange Nasdaq, in February 2022, raising USD 130 million in the process.

Smart Valor's shares have lost almost all of their value since their peak immediately after the IPO. They are currently still traded as a penny stock: One share costs SEK 0.40, which corresponds to around CHF 3 cents. When they were issued, they were worth SEK 44.80.

Unfortunate timing

The imminent delisting, which according to a statement from Smart Valor will formally take place in three months at the earliest, is not seen by the company head as a defeat. The Swiss-Ukrainian entrepreneur Olga Feldmeier, also known in the scene as the "crypto queen", emphasises that this is not the end of Smart Valor, but merely another chapter in the company's pioneering history.

Smart Valor has achieved a lot in the last seven years since it was founded, but in retrospect the timing of the IPO was suboptimal, explains Feldmeier. The crypto winter, the war in Ukraine, the struggling financial markets, the momentous bankruptcy of the FTX trading exchange, the increasing regulation of the crypto industry in the USA - all of these had a negative impact on investor appetite. On the Swedish market, which Smart Valor wanted to use as a gateway to the US market, there was simply too little liquidity and interest in crypto companies; among other things, the company had difficulty finding a partner bank. "Therefore, it no longer makes sense for us to remain on the Swedish Nasdaq as a non-Swedish company."

The withdrawal from the stock exchange has no impact on the operating business, according to Feldmeier. The aim is to return to profitability in the current year. Smart Valor suffered a loss of CHF 1.4 million in the first half of 2023; no more recent figures are available. Customer deposits fell from CHF 8.6 million to CHF 8.1 million in the same period.

With the exception of the last two years, Smart Valor has always been profitable, says Feldmeier. This cannot be verified. The company has only been communicating financial figures since its IPO in February 2022.

Further IPO possible

Despite everything, the company head and Chairman of the Board of Directors does not want to rule out another IPO. The company is currently evaluating alternative markets where Smart Valor shares could be traded in the future. In the meantime, shareholders will retain their shares. The Swedish depositary receipts will soon become ordinary shares under Swiss law again.

For crypto investors, the Smart Valor case is yet another reminder that these are and will remain high-risk investments. Keeping track of the almost 1,300 companies in the Swiss Crypto Valley alone and picking out the most promising ones is a mammoth task. What's more, many companies in CV VC's annual report are massively overvalued. This is because the valuations are not based on current assessments by the financial markets, but on a value calculated by the authors of the report from investor funds, their own valuations and employee figures.

In addition, the still emerging sector is still subject to cycles. Or as Feldmeier puts it: "Up and down is quite normal here." In the case of Smart Valor, to the chagrin of investors, things have only gone in one direction recently: down. They suffered a loss of 99 percent. Nevertheless, Feldmeier is convinced that the valuation of USD 100 million from 2022 can soon be recovered and "significantly increased beyond that".