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Galaxy Digital Announces Third Quarter 2019 Financial Results and Provides Corporate Updates

NEW YORK , Nov. 26, 2019 /CNW/ - Galaxy Digital Holdings Ltd. (GLXY.V) ("Galaxy Digital", "GDH Ltd.", or the "Company") today released both Galaxy Digital Holdings LP's ("GDH LP" or the "Partnership") and GDH Ltd.'s financial results for the three and nine months ended September 30, 2019 ("Q3 2019" or "the third quarter"), as well as the Partnership's corporate updates through the date of this press release.

Galaxy Digital Holdings Ltd. (CNW Group/Galaxy Digital Holdings Ltd)

"While the third quarter proved to be another challenging one for the cryptocurrency markets broadly, the teams here at Galaxy Digital continued to make forward progress across each of our three primary operating business lines as well as to conservatively allocate new capital where we saw pockets of clear value in the industry," said Michael Novogratz , Founder and CEO of Galaxy Digital. "Whether one points to Trading's OTC market share gains and entry into the structured and derivative product markets, Asset Management's launch of the new bitcoin funds, Advisory Services' successful work on two IPOs on the NYSE and Nasdaq, or our Venture and Principal Investment teams' continued and acute focus on portfolio management and positioning, the second half of 2019 has seen the Company leverage our relationships and insights to improve our standing in the digital assets, cryptocurrency and blockchain technology industry."

Corporate Updates

  • As previously announced, Ashwin Prithipaul was appointed Chief Financial Officer of the Company and GDH LP at the end of September. Prior to his appointment as CFO, Prithipaul had been the Chief Accounting Officer at Galaxy Digital since August 2018 , and has over 15 years of accounting and finance experience in the financial services industry. Before joining Galaxy Digital, Prithipaul was the Director of Financial Reporting at Assured Guaranty (AGO). Previously, he was a senior manager in the Banking and Capital Markets practice at PricewaterhouseCoopers in New York and London . Prithipaul assumed the role of CFO from Donna Milia , who remains at the Company as a senior advisor.
  • As part of its previously announced share repurchase program, as of November 21, 2019 , the Company repurchased a total of 792,054 shares at an average per share price of C$1.25 .


Business Highlights

  • The Partnership's trading business, Galaxy Digital Trading ("GDT"), experienced an increase in both onboarded and actively trading counterparties in Q3 relative to Q2. While GDT trading volumes decreased over that same period, along with declines in the overall market, the business increased market share as its volumes decelerated at a slower pace than the broader market, as indicated by volumes on trusted exchanges. The reduction in broad market activity can be attributed to several factors, including geopolitical and regulatory uncertainty stemming from Libra, regulatory concerns related to international exchanges, and general de-levering during the summer months. Despite this market headwind, GDT expanded its counterparty outreach efforts and consistently onboarded new strategic partners throughout the quarter.
  • GDT's sustained enhancements to its product suite have generated ongoing demand across its lending, derivatives, and trading solutions. These solutions facilitate counterparty retention and should advantageously position the business when spot volumes reaccelerate again industry-wide.
  • Since the start of 2019, Galaxy Digital's Asset Management business, Galaxy Digital Capital Management LP ("GDCM"), has been capitalizing on the improvement in the digital asset market. Most recently, in November 2019 GDCM launched the Galaxy Bitcoin Fund and the Galaxy Institutional Bitcoin Fund (collectively, the "Bitcoin Funds"). Both funds are passively managed vehicles that are designed to mitigate the operational complexities of managing direct bitcoin investments. The funds offer institutional and accredited investors institutionally wrapped bitcoin exposure supported by vetted service providers, including Bakkt, a digital assets platform founded by the Intercontinental Exchange (ICE), and Fidelity Digital Assets as custodians for the funds, Bloomberg L.P. as pricing agent, Deloitte & Touche LLP for audit, and Ernst & Young LLP for tax. The Bitcoin Funds are a complimentary product offered alongside the existing Galaxy Crypto Index Fund.
  • The Galaxy Crypto Index Fund is a passively managed index fund that tracks the Bloomberg Galaxy Crypto Index (the "BGCI" or the "Index Fund"), an index co-branded and administered by Bloomberg which is designed to track the performance of a basket of the largest, most liquid digital assets, currently including Bitcoin, Ethereum, and others. The BGCI has returned 7.96%, 110.15% and -40.39% for the quarters ending March 31, 2019 , June 30, 2019 , and September 30, 2019 , respectively, while returning 15.94% on a year to date basis through November 25, 2019 .
  • Additionally, during the third quarter of 2019 the Galaxy EOS VC Fund LP (the "EOS Fund") made venture capital investments in Loopland Group Holding LLC, Verisart, Inc., Immutable, Predictive Pop, Inc., and a follow-on investment in FinCo Services, Inc.
  • As of September 30, 2019 , GDCM had assets under management ("AUM") of $336.0 million , which consists of $11.0 million in the Galaxy Benchmark Crypto Index Fund LP (as calculated per the terms of the fund's partnership agreement) and $325.0 million of committed capital in the EOS Fund.
  • The Advisory Services business continued to make meaningful progress during the third quarter of 2019 towards its strategic goal of becoming the leading corporate finance and strategic advisory firm in the blockchain technology and digital assets sectors. The Advisory Services business has a number of active mandates for potential financing transactions in various stages of execution, and its investment banking backlog grew compared to the end of the second quarter of 2019.
  • During the third quarter of 2019, the Principal Investments team closed three new investments and seven follow-on investments, representing $4.8 million and $16.9 million of invested capital, respectively.


Select GDH LP's Financial Highlights (Q3 2019)

  • As of September 30, 2019 , digital assets, including digital assets posted as collateral, stood at $133.5 million , an increase of $63.7 million from December 31, 2018 . This increase was primarily due to the increase in the fair value of the digital assets during the period, as the prices of digital assets held by the Partnership increased.
  • Investments stood at $156.5 million as of September 30, 2019 , a decrease of $22.9 million from December 31, 2018 . The decrease was primarily a result of the partial sale of Block.one shares, partially offset by unrealized gains on certain other investments during the period as well as $24.8 million of new capital deployed by the Principal Investments team over the nine month period.
  • Total equity increased by $77.0 million during the nine month period to $382.7 million as of September 30, 2019 primarily due to $58.4 million of net comprehensive income and further increased by $23.4 million of equity based compensation which did not have a net effect on equity due to the accounting treatment for such compensation.
  • As of September 30, 2019 , the Partnership's net book value1 per unit was approximately C$1.76 (US$1.33) representing an increase of approximately 21% in C$ compared to C$1.46 (US$1.07) as of December 31, 2018 .
  • For the three months ended September 30, 2019 , net comprehensive loss was $68.2 million , as compared to net comprehensive loss of $76.7 million for the three months ended September 30, 2018 . The current quarter's loss was largely a result of an unrealized loss on digital assets, i.e. cryptocurrencies which trade continuously in the market, and operating expenses. The unrealized loss was primarily on the Partnership's holdings of Bitcoin and Ethereum, whose prices fell during the three months ended September 30 , 2019.The net comprehensive loss for the three months ended September 30, 2018 was primarily a result of realized loss on digital assets and operating expenses. The realized loss was primarily on the Partnership's holdings of Ethereum and Bitcoin. For the nine months ended September 30, 2019 , net comprehensive income was $58.4 million , as compared to net comprehensive loss of $175.7 million for the nine months ended September 30, 2018 . The current year to date income was largely a result of realized gains on digital assets, partially offset by the year to date operating expenses. The realized gains were primarily on the Partnership's holdings of Bitcoin and Ethereum. The net comprehensive loss for the nine months ended September 30, 2018 was primarily a result of unrealized and realized loss on digital assets. The realized loss was primarily on holdings of Bitcoin and Ethereum, while the unrealized loss was primarily on holdings of Wax and Kin.


_____________________________

1 Net book value includes non-controlling interests.

 

GDH LP's Q3 2019 Financial Results


September 30,


December 31,


2019


2018

Assets




Current assets




   Cash

$

78,375,006


$

66,488,012

   Digital assets

124,697,695


69,765,339

   Investments

156,540,340


179,365,696

   Receivable for digital asset trades

2,472,350


8,579,058

Digital asset loans receivable

7,359,896


Assets posted as collateral

11,236,848


Receivables

2,056,531


1,238,694

Prepaid expenses and other assets

2,749,186


2,002,880

Loans receivable

14,890,368


2,369,024


400,378,220


329,808,703





Loans receivable

13,810,751


15,892,320

Right of use asset

5,335,434


Property and equipment

4,116,657


4,223,252


23,262,842


20,115,572

Total assets

$

423,641,062


$

349,924,275





Liabilities




Current liabilities




Digital assets sold short

$

8,892,355


$

18,666,957

Accounts payable and accrued liabilities

11,468,306


14,558,914

Payable for digital asset trades

7,444,945


9,832,737

Digital asset loans payable

6,945,202


Collateral payable

579,871


Lease liability

785,022


Due to related party


1,177,498


36,115,701


44,236,106





Lease Liability

4,796,833


Total liabilities

40,912,534


44,236,106





Equity




Partners' capital

375,171,378


301,520,591

Non-controlling interest

7,557,150


4,167,578

Total equity

382,728,528


305,688,169





Total liabilities and equity

$

423,641,062


$

349,924,275

 


Three months
ended
September 30,
 2019

Three months
ended
September 30,
2018


Nine months
ended
September 30,
 2019

Nine months
ended
September 30,
2018

Income (loss)






Advisory and management fees

$

1,260,725

$

1,473,297


$

4,110,936

$

2,806,510

Net realized gain (loss) on digital assets

(8,532,363)

(38,067,497)


107,038,137

(52,733,347)

Realized gain (loss) on investments

(18,159)


38,082,476

Interest income

1,272,231

349,395


2,898,153

646,469

Other income

5,187,275

185,837


10,886,584

205,659


(830,291)

(36,058,968)


163,016,286

(49,074,709)







Operating expenses






Equity based compensation

6,297,963

14,311,084


23,441,735

14,311,084

Compensation and compensation related

7,551,497

5,031,095


22,230,967

19,147,279

Professional fees

2,269,488

6,161,619


5,886,115

9,391,601

General and administrative

5,466,079

2,671,498


9,875,149

5,634,518

Interest

637,525

1,310,341


2,264,779

4,294,669

Insurance     

282,876

480,675


1,039,980

1,752,465

Director fees

50,000

25,000


150,000

25,000


(22,555,428)

(29,991,312)


(64,888,725)

(54,556,616)







Net unrealized gain (loss) on digital assets

(39,957,814)

366,717


(29,009,140)

(83,357,300)

Net unrealized gain (loss) on investments

(4,761,276)

(4,172,597)


(10,583,501)

16,545,019

Unrealized foreign currency gain (loss)

(136,911)

(1,474,820)


143,687

92,065

Realized foreign currency gain (loss)

16,704

893,387


(183,034)

893,387

Goodwill impairment

(6,216,914)


(6,216,914)


(44,839,297)

(10,604,227)


(39,631,988)

(72,043,743)







Income (loss) for the period

$

(68,225,016)

$

(76,654,507)


$

58,495,573

$

(175,675,068)







Income (loss) attributed to:






Unit holders of the Partnership

(63,531,407)

(75,148,680)


57,004,219

(174,169,241)

Non-controlling interest

(4,693,609)

(1,505,827)


1,491,354

(1,505,827)


$

(68,225,016)

$

(76,654,507)


$

58,495,573

$

(175,675,068)

Other comprehensive income (loss)






Foreign currency translation adjustment

(13,128)

(7,298)


(101,396)

(7,298)







Comprehensive income (loss) for the period

$

(68,238,144)

$

(76,661,805)


$

58,394,177

$

(175,682,366)







Comprehensive income (loss) attributed to:






Unit holders of the Partnership

$

(63,544,535)

$

(75,155,978)


$

56,902,823

$

(174,176,539)

Non-controlling interest

(4,693,609)

(1,505,827)


1,491,354

(1,505,827)


$

(68,238,144)

$

(76,661,805)


$

58,394,177

$

(175,682,366)

 

Income and expenses by each reportable segment of GDH LP for the three months ended September 30, 2019 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Income (loss)







Advisory and management fees

$

$

$

1,260,725

$

$

$

1,260,725

Net realized loss on digital assets

(8,073,212)

(459,151)

(8,532,363)

Net realized loss on investments

(18,159)

(18,159)

Interest Income

327,933

927,524

16,556

218

1,272,231

Other Income

5,008,525

190,000

(11,250)

5,187,275


(2,736,754)

640,214

1,249,475

16,556

218

(830,291)








Operating expenses

7,268,827

1,576,050

4,181,199

1,578,080

7,951,272

22,555,428








Net unrealized loss on digital assets

(33,151,646)

(6,806,168)

(39,957,814)

Net unrealized loss on investments

(4,761,276)

(4,761,276)

Unrealized foreign currency loss

(136,911)

(136,911)

Realized foreign currency gain

16,704

16,704


(33,271,853)

(11,567,444)

(44,839,297)








Net loss

$

(43,277,434)

$

(12,503,280)

$

(2,931,724)

$

(1,561,524)

$

(7,951,054)

$

(68,225,016)

 

Income and expenses by each reportable segment of GDH LP for the three months ended September 30, 2018 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Income (loss)







Advisory and management fees

$

$

$

1,370,658

$

102,639

$

$

1,473,297

Net realized loss on digital assets

(36,945,357)

(1,122,140)

(38,067,497)

Interest income

185,667

151,888

11,840

349,395

Other income

187,754

(14,660)

12,743

185,837


(36,571,936)

(984,912)

1,383,401

114,479

(36,058,968)








Operating expenses

6,343,281

3,510,693

4,343,292

3,564,262

12,229,784

29,991,312








Net unrealized gain (loss) on digital assets

1,922,433

(1,555,716)

366,717

Net unrealized loss on investments

(1,372,208)

(2,800,389)

(4,172,597)

Unrealized foreign currency gain (loss)

82,989

11,921

(1,569,730)

(1,474,820)

Realized foreign currency gain (loss)

(52,095)

945,482

893,387

Goodwill impairment

(6,216,914)

(6,216,914)


581,119

(4,356,105)

11,921

(6,841,162)

(10,604,227)








Net loss

$

(42,334,098)

$

(8,851,710)

$

(2,959,891)

$

(3,437,862)

$

(19,070,946)

$

(76,654,507)

 

Assets and liabilities by reportable segment of GDH LP as of September 30, 2019 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Total assets

$

207,572,115

$

195,640,729

$

2,150,689

$

943,034

$

17,334,495

$

423,641,062








Total liabilities

$

24,137,303

$

238,137

$

245,528

$

22,988

$

16,268,578

$

40,912,534

 

Assets and liabilities by reportable segment of GDH LP as of December 31, 2018 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Total assets

$

121,987,903

$

209,065,821

$

2,427,877

$

1,081,640

$

15,361,034

$

349,924,275








Total liabilities

$

28,720,908

$

162,086

$

105,946

$

157,811

$

15,089,355

$

44,236,106

 

Select statement of financial position information

The fair value of each asset class by reporting segment of GDH LP as of September 30, 2019 is as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Digital assets:







Cryptocurrency

$

114,075,206

$

10,622,489

$

$


$

124,697,695

Digital assets posted as collateral

8,768,777

8,768,777

Investments:







Pre-ICO

6,602,001

6,602,001

Convertible Notes

3,706,828

3,706,828

Preferred Stock

75,369,122

75,369,122

Common Stock

30,247,973

30,247,973

LP/LLC Interests

39,016,786

39,016,786

Warrants/Trust Units

1,597,630

1,597,630


$

122,843,983

$

167,162,829

$

$

$

$

290,006,812














 

The fair value of each asset class by reporting segment of GDH LP as of December 31, 2018 is as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Digital assets:







Cryptocurrency

$

62,662,014

$

7,103,325

$

$

$

$

69,765,339

Investments:







Pre-ICO

3,444,204

3,444,204

Convertible Notes

1,250,000

1,250,000

Preferred Stock

59,586,719

59,586,719

Common Stock

80,483,775

80,483,775

LP/LLC Interests

33,248,472

33,248,472

Warrants/Trust Units

1,352,526

1,352,526


$

62,662,014

$

186,469,021

$

$

$

$

249,131,035

 

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2019 and (ii) GDH Ltd.'s Management Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2019 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedar.com.

About GDH Ltd. and GDH LP (Galaxy Digital)

Galaxy Digital Holdings Ltd.'s only significant asset is a minority investment in GDH LP. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. GDH LP's multi-disciplinary team has extensive experience spanning investing, portfolio management, capital markets, operations, and blockchain technology. GDH LP currently operates four distinct business lines, which include: Trading, Asset Management, Principal Investing and Advisory Services. The CEO of GDH Ltd. and the general partner of GDH LP is Michael Novogratz . GDH LP is headquartered in New York City , with offices in Tokyo, Japan , London, England , Hong Kong , Jersey City , U.S., San Francisco , U. S., and the Cayman Islands (registered office). Additional information about GDH LP's businesses and products is available on www.galaxydigital.io.

Disclaimers and Additional Information

The TSXV has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy Digital.

FINRA's approval of a continuing membership application does not constitute or imply that FINRA approves of or endorses any security or product offered by the member firm.

This press release is not an offer to sell or the solicitation of an offer to sell or buy any security in any jurisdiction where such an offer or solicitation would be illegal, nor shall there be any sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.

The private placement shares of the Galaxy Bitcoin Funds and the Galaxy Crypto Index Fund (the "Funds") have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, and the shares are being offered pursuant to an exemption from registration provided by Rule 506(c) of Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws. An investment in the shares of the Funds is suitable only for sophisticated, well-informed investors, and investors will be required to represent that they are accredited investors as such term is defined in Rule 501(a) of Regulation D under the Securities Act.

BLOOMBERG is a trademark or service mark of Bloomberg Finance L.P. GALAXY is a trademark of Galaxy Digital Capital Management. Bloomberg Finance L.P. and its affiliates (collectively, Bloomberg) are not affiliated with Galaxy Digital Capital Management, the Funds and their respective affiliates (collectively, Galaxy). Bloomberg's association with Galaxy is to act as the administrator and calculation agent of the CFIX and the Bloomberg Galaxy Crypto Index (the "Indices"), which are the property of Bloomberg. Neither Bloomberg nor Galaxy guarantee the timeliness, accurateness, or completeness of any data or information relating to the Indices or results to be obtained. Neither Bloomberg nor Galaxy make any warranty, express or implied, as to the Indices, any data or values relating thereto or any financial product or instrument linked to, using as a component thereof or based on the Indices (Products) or results to be obtained therefrom, and expressly disclaims all warranties of merchantability and fitness for a particular purpose with respect thereto. To the maximum extent allowed by law, Bloomberg, it licensees, Galaxy and its and their respective employees, contractors, agents, suppliers, and vendors shall have no liability or responsibility whatsoever for any injury or damages—whether direct, indirect, consequential, incidental, punitive, or otherwise—arising in connection with the Index, any data or values relating thereto or any Products—whether arising from their negligence or otherwise.

Securities transactions are effected through Galaxy Digital Advisors LLC, a member of FINRA and SIPC.

Forward-Looking Statements

Certain information in this press release, including, but not limited to, statements regarding the future of the industry the Company or Partnership's anticipated results, business or opportunities, may constitute forward looking information (collectively, forward-looking statements), which can be identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," "continue" or "believe" (or the negatives) or other similar variations. Because of various risks and uncertainties, including those referenced below, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Forward looking statements are subject to the risk that the industry or the Company's businesses do not perform as anticipated, that revenue or expenses estimates may not be met or may be materially less or more than those anticipated, that expected advisory transactions may be modified or not completed at all and those other risks discussed in the risks and uncertainties section in the Partnership's and the Company's Management Discussion and Analysis for the year ended December 31 , 2018.  Factors that could cause actual results of the Company and its businesses to differ materially from those described in such forward-looking statements include, but are not limited to, a decline in the digital asset market or general economic conditions; the failure or delay in the adoption of digital assets and the blockchain ecosystem by institutions; a delay or failure in developing infrastructure for the trading business or achieving mandates; and for advisory transactions, a decline in the securities markets, an adverse development with respect to an issuer or party to the transaction or failure to obtain a required regulatory approval. In connection with the forward-looking statements contained in this press release, the Company has made assumptions that no significant events occur outside of the Company's and Partnership's normal course of business. Forward-looking statements are not guarantees of future performance, accordingly, you should not put undue reliance on forward-looking statements. Information identifying assumptions, risks and uncertainties relating to the Company and the Partnership are contained in Galaxy Digital's filings with the Canadian securities regulators available at www.sedar.com. The forward-looking statements in this press release are applicable only as of the date of this release or as of the date specified in the relevant forward-looking statement and Galaxy Digital undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

All figures are in U.S. Dollars unless otherwise noted.

SOURCE Galaxy Digital Holdings Ltd


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