Entering the blockchain sector is having a magic effect on the shareholders in stock exchange shell Natural Resource Holdings Ltd. (TASE:NRH). The company notified the TASE yesterday that it had signed an agreement to purchase control of Canadian private company Backbone Hosting Solutions, whose commercial brand name is Bitfarms. The acquired company mines bitcoin and other digital currencies. The share price of Natural Resources, a company with a going concern warning in its financial reports, has risen by over 3,000% since the company announced its intention of entering the digital currency realm and changing its name to Blockchain Holdings in a report sent to the TASE on October 17. The share price zoomed 240% more in the past four days, pushing the company's market cap up to NIS 550 million, higher than the market cap of companies like Bank of Jerusalem (TASE: JBNK), Elron Electronic Industries Ltd. (TASE: ELRN), and Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) on the TASE.
The merger agreement was brought today to Natural Resource's board of directors, headed by controlling shareholder Roy Sebag, for approval. Under the agreement, Natural Resource will acquire 75% of the shares in Backbone Hosting in exchange for an allocation of 75% of its own shares. With the completion of the merger between the companies, 50 million shares in Natural Resource will be issued to Backbone Hosting, so that at the end of the process, there will be a total of 66.6 million shares in Natural Resource, four times the current number.
This means that according to its current share price, Natural Resource's market cap will reach NIS 2.2 billion following the merger. Up until six months ago, the market cap of Sebag's stock exchange shell, which he acquired in 2010 from Cidev Electronics for NIS 5.5 million, was NIS 15 million. The company's share price, which was a mere NIS 1 in mid-October, had skyrocketed to NIS 35 as of today.
Backbone Hosting to hold 75% of the shares
Sebag, 32, previously put gold and iron mines with a reported multi-billion dollar potential into Natural Resource, but the supposed potential has yet to materialize. Born on Moshav Ramot Naftali, he moved to Los Angeles with his family at age 3. "I felt that Israel wasn't for me, with my different mentality," he explained to "Globes" several years ago, "but I'm an Israeli patriot, and I love the country."
According to the agreement signed yesterday, Backbone Hosting will hold 75% of the merged company, and the existing shareholders in Natural Resource, headed by Sebag, will hold the other 25%. In Natural Resource's current control structure, Sebag owns 50% of the company's shares, foreign fund Valor 8%, and the public 42%.
According to information provided to "Globes" by the companies, Backbone Hosting current has 35 minority shareholders. Under the merger, the Backbone Hosting founders will receive 30.2 million of the 50 million shares that Natural Resource is allocating to the Canadian company. Following the dilution of Natural Resource's existing shareholders, Sebag will have a 13.5% stake in the company, while the public's stake will be 10.5%. The rest of the shares in the merged company will be divided among Backbone Hosting's four founders - Emiliano Grodzki (13.2%), Nicolas Bonta (12.5%), Pierre-Luc Quimper (9.9%), and Matthew Vachon (9.9%) - and among shareholders from the Canadian public, who will hold 28% of the merged company.
Bitcoin price over $14,000
More than 1,300 types of digital currencies are currently traded worldwide, but the leader in price and market cap is Bitcoin, the first digital currency, which was first issued in January 2009. The value of a Bitcoin rose 14% today, reaching an all-time record of $14,750, according to figures on the CryptoCompared website. The global trading volume in Bitcoin over the past 24 hours was $2.8 billion, following a rise of over 100% over the past month and more than 1,400% since the beginning of the year.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 7, 2017
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