LongFin Corp. Makes A Surprising Double Reversal

It is a good thing news releases do not yet go out as irreversible blockchain transactions.

In yet one more bizarre story involving a cryptocurrency/blockchain company, LongFin (LFIN) issued a press release over GlobeNewswire that suddenly seemed to validate its recent price run-up. Several hours later, the company asked its audience to ignore that press release.

The first release proudly announced a $52.7M investment in convertible note instruments by “a multibillion dollar fund”:

“…The Notes consist of (i) Series A Senior Convertible Notes in the aggregate principal amount of $13,307,705.88 and (ii) Series B Senior Secured Convertible Notes in the aggregate principal amount of $39,392,294.12 for consideration. The nature of the investment will involve (i) an upfront cash payment in the amount of $8,000,000, and (ii) secured promissory notes payable by the investors to the Company in the aggregate principal amount of $38,376,000…Under the Investor Notes, the Investors are required to prepay the Investor Notes to the Company in two equal installments following the registration of the shares underlying the Notes and Warrants.”

To make sure the audience understood the significance of this investment, the press release went on to quote Venkat Meenavalli, Chairman of Longfin Corp, who underlined the valuation validation the company received from this investment:

“To secure funding from this large institutional investor at current market valuation will enhance the visibility and revenue growth of the company in a rapid way. We are confident in our goal of reaching a 250% revenue growth rate organically, and outnumbering our growth rate in 2017. This funding will also help Longfin in its acquisition endeavors within the Blockchain powered Smart Contracts and FinTech space across the globe…”

Just a month ago Meenavalli warned investors that they over-reacted to news of LFIN’s purchase of Meenvali’s blockchain company. He used words and phrases like “not justified,” “not reality,” “insane,” and “euphoric mania.” Naturally I was confused about the latest news with its apparent reversal in the assessment of LFIN’s valuation, so I sought more information. Perhaps the investor was getting a substantial discount on the conversion price for these notes? Perhaps Meenvalli meant that the big investment itself propped up the company’s valuation? I went out in search of the related SEC filing…but I could not find it.

After more searching I found the company’s reversal on the news. The company did not explain what happened, only that the press release of the big investment should be ignored. Some of it could be true. All of it could be false. All of it could be true just not yet ready for public notice (given the lack of SEC disclosure). We may never know. What we DO know is that investors and traders seemed to care little about the reversal. LFIN still closed up 8.9% on the day.


LongFin (LFIN) continues to defy the gravity the CEO initially tried to trigger.
LongFin (LFIN) continues to defy the gravity the CEO initially tried to trigger.

Source: FreeStockCharts.com

I continue to marvel at the stock market’s ability and desire to focus on the seemingly good side of the news for publicly traded companies dabbling in cryptocurrencies and blockchains. The pattern is repeated and relatively consistent (with some notable exceptions like Newater Technology). Who knows how long it will last, but as long as it does, I know the mania for all things crypto and blockchain is alive and kicking.

Be careful out there!

Full disclosure: No position

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