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Exodus Movement Tokenized Stock (EXOD): Is it a good buy?
Key points:
- Exodus Movement is the US-based company behind Exodus Wallet, a versatile, easy-to-use cryptocurrency wallet with in-app trading and staking options.
- They are one of the early pioneers of stock tokenization: Exodus shares were launched in a mini-IPO on the Algorand platform in 2021.
- An expected launch on the NYSE in 2024 would have made Exodus the first publicly traded American company with tokenized assets. However, an SEC review has delayed this indefinitely.
We believe tokenized stocks are the future of Wall Street.
It’s clear that investors already think of crypto tokens like stocks, and so do we (read more about our investment approach here.) But it’s a different matter for a company to create a token that’s legally equivalent to owning shares.
One of the pioneers of tokenized stocks is the Exodus Movement, which issued a token (EXIT) as a legally constituted stock ($EXOD) and is fighting with the SEC to list it on the NYSE.
This represents an exciting opportunity for both traditional and crypto investors, as we believe it is a sign of things to come.
In this piece we will trace the history of the Exodus Movement and examine in depth its background and financial performance. We will also evaluate the risks, challenges and investment potential of $EXOD as a legally tokenized security.
Overview of the exodus movement
Exodus Movement was founded in 2015 by JP Richardson, a blockchain coding expert, and Daniel Castagnoli, an interface designer who had worked on projects for major brands like Apple and Disney.
Primarily a blockchain technology company, Exodus Movement’s main product is a cryptocurrency wallet designed to make cryptocurrencies more accessible to new users.
THE Exodus wallet is a software platform for storing thousands of digital assets from over 50 major blockchain networks. It is available as a browser plugin for PC, mobile apps on iOS and Android, and desktop wallets for Windows, Mac, and Linux systems.
This self-contained wallet is a good choice for new users with its intuitive interface, support for multiple networks, and in-app staking support. However, the convenience comes at the expense of some advanced features, making it less appealing to advanced users.
Second Coingecko, Exodus was the ninth most popular “hot” cryptocurrency wallet in the world, with just over one million installs and total users. The company earns revenue through commissions on in-app token exchanges and other transactions.
Exodus tokenized stock history
In 2021, Exodus Movement announced his intention launch a tokenized version of its shares on a blockchain network before publicly listing them on any traditional exchange. The company wanted to give cryptocurrency enthusiasts and Exodus wallet users the first chance to become shareholders.
The digital tokens were called EXITs, and one token represented one share of the Exodus Movement’s Class A common stock. EXIT launched in June 2021 on the Algorand blockchain. The company raised $75 million through the issuance of 2.73 million shares.
The entire process was facilitated by Securitise, a platform that helps companies issue tokenized shares to raise capital from investors. Officially recognized by the SEC, Securitize has a strong focus on transparency and regulatory compliance.
After the initial success of the digital launch, EXIT shares began trading on the securitization markets platform in the first quarter of 2022. Investors from over 40 countries, including all US states, can publicly trade EXIT tokens on the market with a Securitize Markets account. At the same time, tokenized shares began trading in OTC markets under the ticker $EXOD (since the ticker $EXIT had already been used). To be clear, their stock is now $EXOD, but EXIT tokens still exist and can be converted on a 1:1 basis to $EXOD.
After reaching an initial selling price of $27, EXIT suffered a -94% decline in value (YTD) in Q4 2022 as part of the industry collapse.
Tokenized Stocks: The Future of Wall Street
A tokenized security is a digital representation of your ownership of traditional shares on the blockchain. Unlike most crypto tokens, these securities are backed by real companies. Investors who own the token also own equivalent shares in the company’s stock.
Here’s how stock tokenization works:
- One company will partner with a blockchain company that specializes in stock tokenization. Securitize and Tzero are examples of such entities.
- A percentage of the company’s shares are placed in a special purpose vehicle, corporate trust or other legal entity.
- The entity will then issue tokenized securities with the assistance of its blockchain partners. Exodus launched the EXIT token on the Algorand blockchain.
- Usually, a single token will represent a share of the company’s shares. Fractional shares may also be issued.
- Investors can purchase and trade these tokens on specific blockchain markets. Securitize Markets is a good example.
- Ownership of the shares/tokens is recorded on the blockchain. Token holders are entitled to the same benefits as regular shareholders, such as dividends, voting rights, etc.
$EXOD shares in the OTC markets
In 2023, Exodus Movement launched its Class A shares under the ticker $EXOD on the OTC Markets, one of the largest regulated over-the-counter securities markets in the United States. Initially, shares traded on the OTCQB market before moving to the more strictly regulated one OTCQX Market in April 2024.
Even though these OTC markets are regulated, they still do not enjoy the trust of primary markets, such as the NYSE. Getting a listing on the NYSE would not only gain confidence for $EXOD, but would also unlock much greater liquidity and potential interest from institutional investors.
Launched in June 2023 with a par value of 0.000001, the value of $EXOD peaked at $20 in May 2024 ahead of its expected upgrade to the New York Stock Exchange (NYSE) on May 9. However, the SEC’s decision to revise its registration statement delayed the listing.
This was reflected in the value of $EXOD, which fell to $12 by mid-May 2024. However, by the end of May, the price had largely recovered to $17.58 per share, and investors remain confident that the SEC will approve the value of $EXOD. EXOD listing on the NYSE.
Below is a quick overview of the other fundamentals:
- Market capitalization: $312.39 million
- Shares outstanding: 4,514,274
- Volatility: high (3.5 Beta, 5 years monthly)
Financial performance of the exodus movement
In the first quarter of 2024, Exodus announced its fiscal results for 2023 with the following main points:
- Total revenue: $56.2 million
- Income from operations: $8.4 million
- Net loss: $12.8 million
- Adjusted EBITDA: $17.6 million
Total revenues increased 11% versus 2022. Adjusted earnings of $17.6 million represent a positive turnaround of 1122% from the prior year. The number of active (monthly) users of the Exodus wallet also increased by 22%.
The company’s reported assets include $138.3 million, including $55 million in cash and cash equivalents (including USDC and Treasury bills) and $80 million in cryptocurrencies (bitcoin and Ethereum). The liquidity ratio is 7.29 and the current liquidity ratio is 18.94.
As mentioned, Exodus Movement’s main source of income is transaction fees on the app/wallet platform. A 4% increase in exchange provider processor volume and a 22% increase in active users contributed to revenues in 2023.
Preliminary reports from the first quarter of 2024 they also indicate an increase in revenue of 118% compared to the first quarter of 2023 and an increase in operating profit of 6,920% for the same period. Net income increased $54.8 million from just $0.8 million in 2023.
Benefits of stock tokenization
Moving company shares to the blockchain has numerous advantages and benefits for companies and investors:
Accessibility: Traditional investments are often reserved for accredited investors. Moving stocks to the blockchain would make them more accessible to a broader pool of investors, albeit with some reasonable restrictions.
Liquid assets: Fractional ownership could open up equity investing to untapped groups of investors, potentially increasing liquidity for companies looking to raise capital.
Trade 24/7: Traditional stock exchanges have fixed market hours. On the other hand, blockchain-based trading has no such time limits and can facilitate round-the-clock trading from anywhere in the world.
Transparency: The permanent nature of Blockchain makes it highly transparent and secure. Recordkeeping is not left under the control of any centralized entity.
Risks and challenges
The main challenge against stock tokenization comes from regulators. In the United States, the SEC has been active in prosecuting cryptocurrency exchanges and popular blockchain projects for alleged violations of securities regulations.
The lack of regulatory clarity on the impact of securities laws on blockchain operations has chilled broader adoption of the technology. We need regulatory clarity before we see widespread adoption of tokenization by public companies.
The decision to delay the listing of $EXOD on the NYSE came at the last moment.
The US government’s stance towards cryptocurrencies has been characterized by an excess of caution. Since 2023, the SEC and CFTC have imposed a broad crackdown on cryptocurrency-related activities. On May 6, 2024, the Chairman of the CFTC, Rostin Behnam indicated that further regulatory actions will be taken against the cryptocurrency ecosystem in the next two years.
In this regulatory climate, the SEC’s move to delay the listing of a company with tokenized shares on the NYSE does not seem out of the ordinary. Exodus has indicated that it will wait until the SEC provides a definitive response after a full review. It’s difficult to predict $EXOD’s prospects; however, investors appear optimistic about the company’s future and eventual listing on the NYSE.
Takeaway for investors
Investors can already buy and sell $EXOD on the OTC markets. Like most other companies closely associated with the blockchain ecosystem, Exodus Movement’s stock price has been quite volatile. Increased regulatory pressure could complicate matters further.
On the other hand, recent financial data from Exodus indicates that the blockchain business has seen a strong recovery after the market crash in 2022. The company could grow as more and more users join the ecosystem as its wallet is more geared towards cryptocurrency beginners.
As it stands, $EXOD holds some promise. Unfortunately, its plan to become a publicly traded company clouds the picture, as it requires a positive response from the SEC. Given the highly volatile regulatory climate, a wait-and-see approach may be better.
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