(Click image to play video)
The booming financial technology, or fintech, sector is currently one of the hottest and most risk-adverse in capital markets
today. And one Canada-based company is gaining significant traction and investor interest in this cutting-edge space.
LUXXFOLIO Holdings Inc. (LUXX) (
CSE.LUXX,
Forum) has developed a blockchain technology that allows the company to record and authenticate unique identifiable assets (UIAs) and convert these UIAs into liquid assets. These may include:
- Registering the asset provenance of a unique piece of equipment such as a crypto miner onto our platform, and having the asset stored by a LUXX approved or owned & professionally managed custodian such as a data center, thereby allowing LUXX to run a proof of work algorithm to create fungible tokens such as Bitcoin;
- Authenticating physical collectibles such as memorabilia, vintage cars, or artwork and registering them on the platform, as well as having the asset stored by a LUXX approved or owned & professionally managed custodian, thereby allowing LUXX to produce a non-fungible LUXX token that can be traded on our platform.
LUXXFOLIO’s CEO Dean Linden (a surname that Vancouver hockey fans may be very familiar with) met up with Stockhouse Media’s Dave Jackson to talk about LUXX, the latest company news flow, and its unique fintech business model.
TRANSCRIPT BELOW:
SH: So, Dean, can we start off with a little background history about yourself and the history of LUXXFOLIO?
DL:
So to understand LUXXFOLIO, I think it's important to sort of go back to about 2015, as a matter of fact, my colleague, Kelly Klatik, and I founded a company called Cypress Hills Partners. And it was sort of Kelly's idea that people were taking too much risk for too little return. So we started Cypress Hills Partners, which has become one of Canada's largest private credit funds. And so around 2017, 2018, we started to get interested in blockchain technology to help us with our private credit business. And you know, like you said, in your intro, looking at things like how do you use the blockchain to take a tangible asset and move it into the digital world? So we spent a lot of time researching that and innovating and over a period of time, we recognized that we should raise some money and actually build out this technology.
So I think by about 2018 or 2019, we had a full working prototype that allowed us to authenticate, encrypt and upload to a blockchain and that would allow us to change tangible assets to virtual assets and then move them around and basically change the ownership of them. So we're quite excited about our innovation. However, when we went to sort of pitch it to people, they kind of said, Hey, this is really cool technology. This is really neat, but they couldn't connect the dots as to how it would become valuable to their business. And so we could see that we were ahead of our time or maybe we were just out to lunch. We weren't sure at the time. So we decided to put that technology on hold. And we sort of just had LUXX idling for a number of years, until early 2020.
We at Cypress Hills, again, were contacted by a group out of Silicon Valley who said, Hey, you guys got a lot of money available for private credit. Would you be interested in being a syndication partner with us in financing, crypto mining equipment? And we spent a long-time sort of underwriting and looking at that business. And we got really comfortable with the risk and really comfortable with the opportunity. And it occurred to us at the time that there was a real interest and opportunity for us to actually acquire Bitcoin miners. At that point in time, they were relatively cheap in what we paid to buy Bitcoin miners. Now you pay roughly three to four times what we paid. So we really liked the yield and the opportunity there. So we acquired 600 Bitcoin miners that will be delivered in late April of this year.
And then we went out and we're in the process of acquiring a custodian. That custodian we are acquiring is West block, which is based out of Calgary and their assets. They've got a 15-megawatt facility in New Mexico, in the United States. So that's kind of the evolution, it really sort of is organic. Now the interesting thing about, you know, where we started is that it's become new again. So the technology that I described at the outset is now what you would call it is, and, you know, we have the ability and need to create non fungible tokens. And that business has started to kind of take-off, and now the phone is bringing some of the people that I talked to a couple of years ago and they are going, Hey, you know, can we partner, can we work together on something like that? Because you know, we get it now. So we're really sort of running two parallel opportunities, one in sort of the non-fungible token opportunity and the other being in the you know, as a pure crypto miner. So we're truly a diversified digital assets company.
SH: Can you update our investor audience and your LUXXFOLIO shareholders on any new company developments, especially in the wake of COVID-19?
DL: You know, COVID-19 has been, obviously I think I can't understate it's been transformational. Both good and bad. I think that the developments for the company, as it pertains to COVID-19 really have been around innovation, we've been able to use this time to really attract some good people. I think there's been a lot of, you know, there's been a lot of downtime for people, so we've been able to sort of sponge up a lot of talent. And additionally I think it's created an interesting dynamic in the crypto space, because there's been a constraint in the supply chain, which has caused a shortage with these machines, these crypto miners. And the supply chain has been kinked and it's really sort of slowed down people's ability to mine crypto. So I think it's interesting that the difficulty rate hasn't gone up as quickly as you would think based on how the prices reacted. So that's created a really interesting opportunity in this space.
SH: Recently, you entered into a binding term sheet to acquire Westblock Capital Inc. Can you tell us some of the details of this deal and what it means for shareholders and would-be investors?
DL: Yeah, I think that's super exciting for us. We liked West block because they put together a management team and had sort of gone through the crypto winter that we saw so that, you know, it was pretty fun. And then it got really not fun. And this group was able to build relationships down in New Mexico with the utility there that helped them sort of survive that crypto winter. So when they came out of it again, you know, this is a seasoned management team that we're acquiring along with this group. Top tier power costs probably, you know, top 10% in North America. So this is a very, very low-cost opportunity for us and it's scalable. There's 15 megawatts there currently. There's about eight in operation, so we are going to be cash flowing you know, post-acquisition. And then when our machines arrive from China in late April early May, that's going to provide us with a, you know, it's going to make us a very, very profitable little entity.
SH: Can you also walk us through your partnership with alternative specialty lender Cypress Hill?
DL: So myself, along with Kelly Klatik as I said, we founded that in 2015. We're probably upwards of deploying North of $150 million since inception. We're focused on things like consumer loans, leases, shred credits, all those alternative type of investments. And we really feel like this opportunity with LUXX is significant in that especially for LUXX because it gives us access to debt. So a lot of other companies out there are forced to sort of, if they're going to expand their business, if they're going to do anything, they're going to have to dilute their shareholders and in our case, that relationship really sort of dulls the blow as it were in terms of what equity we may have to raise, because we do have a really solid debt partner that allows us to sort of move a little bit more freely in this space.
SH: Your deck states that “the Company is building a diversified holding company that value enables physical and digital assets through an asset authentication, tracking, and record keeping process.” For our audience that may be new to this kind of investment, can you give us a brief overview of how it works?
DL: I think an example that I could give you would be to let's take a look at somebody who is an athlete or entertainer that has some item that's significant to them and would be interesting for someone to collect or own that item. We will call that person a tastemaker for purposes of this conversation. They can partner with us and we can provide them with an encrypted tag - we worked with a company that does bank notes, and we got an encrypted tag that we're able to attach to the item, whether it be a, you know, a dress that somebody wore at the Oscars or a hockey stick, that somebody used to do something great with -- whatever that might be -- encrypt that and put it in some type of custodial arrangement.
So a warehouse ties it up and transfers ownership of that item digitally. So what it allows people to do is similar to owning a barrel of oil, or buying an oil future, something that you never expect that barrel of oil to be delivered to your front door. So this allows you to trade tangible assets, but things that you might not necessarily have a place for or want to keep. So you can collect, you can collect art, you can collect you know, any number of things, sports memorabilia without actually having to take ownership of it and it, and it can move freely around the world in an authenticated manner. It's actually authenticated by the tastemaker themselves. So you're not taking it to a third-party expert. That's saying, yeah, this is, this is real, or it's fake. The tastemaker really runs the show.
SH: You’ve said that LUXXFOLIO is one of the best valued companies in the industry? How so?
DL: You know, Dave, this conversation I'm having with you is, is really the first time we've spoken about LUXXFOLIO publicly outside of our own small investor group. So, you know, I think that, from a megawatt perspective on the crypto mining thing, we're probably trading, you know at maybe a 10th of what you know some of our peers might be trading at. And so, and it's really up, and it's really a function of this company has been completely incubated inside of Cypress Hills up until this point in time. So I think that we're just beginning to talk about it. So as you might imagine, there's not a lot of people that have heard or know about LUXXFOLIO.
SH: What sets the company apart from other fintech companies in this space and what makes your business model attractive to investors?
DL: You know, I think the relationship with Cypress Hills Partners is really what differentiates us from everybody else. We're looking at a lot of crypto miners out there that have done an extremely good job of navigating this really volatile market. We were talking to them and they're saying, look, you know, access to capital, you know, like short of going public, how do we access capital? And you know, we can provide that both with our access to the equity markets, through LUXX and our access to the debt markets through Cypress Hills Partners. So we've got a lot of levers to pull that a lot of other groups might not be able to do. We've got a level of sophistication and innovation that I think sort of might not be present with a lot of other groups. And we're small and nimble. We're just kind of getting started here. So if somebody is looking to make a move in this space, the one thing that they're not going to have to be concerned about with LUXX is overpaying for it at this point in time.
SH: From the investors perspective, can you tell us about the managerial and operational set-up of the Company and how LUXXFOLIO plans to position itself as an industry leader?
DL: I guess another thing about LUXX is it has, you know, I am the CEO, the rest of the staff of LUXX are primarily you know, the deals are being underwritten through the lens of Cypress Hills Partners. You know, would we, if we were going to do an acquisition, is this an acquisition of a company that we would lend to? So we've got this depth of knowledge that we're sort of able to kind of really dig deep into anything that we're going to do next from a very mathematical tactic. And I think that that is, is going to serve us, serve us well moving forward in the future.
SH: And lastly, Dean, if there’s anything else that I’ve overlooked that you’d like to add to the article, please feel free to elaborate.
DL: I think we're super excited about getting underway and sort of interacting with the investing public. We're you know, we're working on getting noticed in the United States. We're working on that. And I think that we're just a great value and it's an opportunity for people to invest in a really thoughtful, innovative company that's coming at this from, you know, for and doing it for the right reasons.
To find out more, visit
https://investor.luxxfolio.com/
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.