The company has excellent management, including a bit of a celebrity as Executive Chairman. Som Seif is best known as a leader in bringing ETFs to Canada with Claymore Investments, which was sold to Blackrock in 2012.
He's also a co-founder of Wealthsimple. He's also one of the company's biggest shareholders, obviously a big believer in Ethereum-based businesses.
The company makes money in three ways. First, it provides consulting services and professional advice to those in the space.
For example, it has acted as a consultant to Purpose Investments and helped launch the Purpose Bitcoin and Purpose Ether ETFs, which allow Canadians to hold cryptocurrency in CAD and, as an added bonus, can tax shelter the holding.
Make no mistake: Ether Capital is a big player in the Ethereum ecosystem.
Secondly, the company is investing in the development of technologies which are aimed at decentralized application adoption.
Third, and perhaps most importantly, the company acts as an asset manager for several crypto holdings – primarily Ether. As of writing, the company had approximately $134M of ETH on the balance sheet, as well as smaller investments in various other cryptocurrencies.
In comparison, the company only has a market cap of $54M. That means it is trading at more than a 50% discount to ETH holdings. While most asset management firms do trade at a discount to assets due to overhead costs, the big gap here is unwarranted.
It is likely why the company announced an NCIB and has consistently repurchased shares since. As of September 2023, it had repurchased more than 261,000 of its shares. The company's shares are undervalued, and management recognizes this.
How can you take advantage? Whenever the discount to ETH assets is greater than 30%, it provides an attractive risk-to-reward prospect.
Of course, this stock will be dependent on Ethereum, but so long as one is bullish on ETH, Ether Capital has the potential to deliver outsized returns. However, like the rest of the stocks on this list, ETHC is a volatile name, so perhaps a smaller investment amount set aside for this stock would be prudent.