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Galaxy Digital Announces Fourth Quarter and Full Year 2018 Financial Results and Provides Corporate Updates

NEW YORK , April 29, 2019 /CNW/ - Galaxy Digital Holdings Ltd. (TSXV: GLXY; Frankfurt : 7LX) ("Galaxy Digital", "GDH Ltd.", or the "Company"), today released both Galaxy Digital Holdings LP's ("GDH LP" or the "Partnership") and GDH Ltd.'s financial results for the fourth quarter ("Q4 2018" or "the fourth quarter") and full year ("FY 2018" or "2018 year-end") ended December 31, 2018 , as well as the Partnership's corporate updates through the date of this press release.

GDH Ltd. is a holding company which holds a minority interest in GDH LP as its only material asset. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. The financial results of GDH LP have been prepared and are shown separately, as GDH LP is not deemed to control GDH Ltd. as of December 31, 2018 .

"While 2018 was a challenging year for the industry, I am pleased with the ways in which our team navigated difficult market dynamics, and believe we are well positioned to scale our business strategically over time. We have used our capitalized position to both identify and invest in a number of unique opportunities, while also continuing to build an institutional-quality platform," said Michael Novogratz , CEO of Galaxy Digital. "The first few months of 2019 have yielded a notable increase in activity across our business lines. We are already benefiting from both the strong foundation we laid in 2018 as well as the year-to-date rally in digital asset markets. We expect to continue to build upon this positive momentum through the remainder of 2019 and beyond."

Corporate Highlights

Principal Investments

  • During the fourth quarter, the Partnership's principal investments team ("GDPI") executed on eight new investments and three add-on investments, representing $19.7 million and $4.5 million of invested capital, respectively. These investments included:
  • Six new and one add-on equity investments, including:
  • Two new and one add-on convertible notes; borrowers included a distributed digital assets data library which serves as an investor portal and directory for digital assets, a digital asset-secured consumer lending platform, and a company which provides network resources to applications ( $1.2 million in total).
  • An additional $2.0 million of eligible loans were purchased from a digital asset-secured consumer lending platform.
  • In aggregate, GDPI deployed approximately $132.9 million represented by 25 new investments and 10 add-on investments for the full year 2018.


Asset Management

  • Since the start of 2019, Galaxy Digital Capital Management ("GDCM") has been capitalizing on the improvement in the digital asset markets, generating inflows into the Galaxy Benchmark Crypto Index Fund ("the GBCIF") and making meaningful progress towards future commitments. The GBCIF is a passively managed index fund which tracks the Bloomberg Galaxy Crypto Index ("the BGCI"), an index co-branded and administered by Bloomberg which is designed to track the performance of the largest, most liquid portion of the digital asset market. Since the start of the year, the BGCI has returned 18.8%1.
  • During the fourth quarter, the Galaxy EOS VC Fund, LP closed on investments in Bloq, Inc., Varius Solutions, Inc., GoQii, Inc., Mythical, Inc., Clause, Inc., Good Money Group, Inc., and Freelance Labs, Inc., with additional investments made in early 2019 in Lucid Sight, Inc., OutThere Labs, Digital Assets Data, Inc., and Ciphertrace, Inc.

Trading

  • The Partnership's trading business ("GDT") continued to build upon its full-service platform offering, providing clients with access to intelligent and bespoke trading solutions, market insights, and research.
  • During the fourth quarter, GDT nearly doubled the number of onboarded counterparties from the quarter prior. These new counterparties include a diverse and strategic group of the largest crypto funds, venture capital funds, digital asset mining companies, blockchain companies, family offices, and high net worth individuals.
  • During the first quarter of 2019, GDT expanded its product offerings to include borrowing and lending to a select group of clients.
  • GDH LP currently has no exposure to Bitfinex or Tether.

Advisory

  • During the fourth quarter, the Partnership's advisory business, Galaxy Digital Advisors ("GDA"), repositioned its focus from token and blockchain consulting to instead focus on institutional-quality advisory services. GDA helps companies raise capital to strengthen and grow their businesses and assists clients in managing their asset and liability exposures and their capital. GDA will focus on developing and maintaining long-term relationships with a diverse and global group of corporate and institutional clients.
  • In early 2019, GDA selectively hired new bankers and implemented a comprehensive coverage plan for companies in the space. As of the first quarter end of 2019, GDA has made significant progress, with several active mandates for clients across financing, mergers and acquisitions, and other strategic matters.


_____________________________

1 Data as of April 26, 2019. Source: Bloomberg


Select GDH LP's Financial Highlights (Q4 2018 and FY 2018)

  • As of December 31, 2018 , digital assets and investments totaled $249.1 million , a decrease from $323.0 million as of September 30, 2018 . The $73.9 million decrease for Q4 2018 was primarily a result of $48.7 million of net realized losses on digital assets and $25.0 million of unrealized loss on investments.
  • Partners' capital decreased $78.3 million to $301.5 million as of December 31, 2018 , primarily due to the $97.0 million net comprehensive loss, partially offset by $17.0 million of equity-based compensation (which does not have a net effect on equity due to the accounting treatment for equity-based compensation).
  • As of December 31, 2018 , the Partnership's net book value per unit2 was approximately C$1.46 (US$1.07) .
  • The net comprehensive loss for the year was $272.7 million due primarily to net realized and unrealized loss on digital assets of $101.4 million and $75.5 million respectively and operating expenses of $88.4 million . The primary drivers of the operating expenses were $31.3 million of equity-based compensation and $26.9 million of compensation and compensation related expense.


__________________________

2 Net book value per unit is calculated as GDH LP's partners' capital divided by the outstanding number of units as of December 31, 2018.

 

GDH LP's 2018 Financial Results


December 31,

December 31,


2018

2017

Assets



Current assets



Cash

$

66,488,012

$

32,098,217

Digital assets

69,765,339

22,650,240

Investments

179,365,696

-

Receivable for digital asset trades

8,579,058

-

Receivables

1,238,694

-

Prepaid expenses and other assets

2,002,880

-

Loans receivable           

2,369,024

-


329,808,703

54,748,457




Loans receivable

15,892,320

-

Property and equipment

4,223,252

-


20,115,572

-

Total assets

$

349,924,275

$

54,748,457







Liabilities



Current liabilities



Accounts payable and accrued liabilities

$

14,558,914

$

1,011,795

Payable for digital asset trades

9,832,737

-

Digital assets sold short

18,666,957

-

Due to related party

1,177,498

42,650,240

Due to exchange

-

9,344,613

Total liabilities

44,236,106

53,006,648




Equity



Partners' capital

301,520,591

1,741,809

Non-controlling interest

4,167,578

-

Total equity

305,688,169

1,741,809




Total liabilities and equity

$

349,924,275

$

54,748,457

 




For the period from




formation on



Year

November 30, 2017



ended

to



December 31, 2018

December 31, 2017

Income (Loss)




Advisory and management fees


$                  4,192,808

$                               -

Net realized gain (loss) on digital assets


(101,394,823)

1,495,597

Interest income


1,361,203

-

Other Income


1,085,092

-



(94,755,720)

1,495,597

Operating expenses




Equity based compensation


31,281,892

-

Compensation and compensation related


26,875,317

815,000

General and administrative


11,777,456

277,947

Professional fees


11,391,527

-

Interest


4,798,337

135,962

Insurance


2,188,081

-

Director fees


50,000

-



(88,362,610)

(1,228,909)





Net unrealized gain (loss) on digital assets


(75,494,453)

1,475,121

Net unrealized loss on investments


(8,459,854)

-

Unrealized foreign currency gain


35,196

-

Realized foreign currency gain


612,407

-

Goodwill impairment


(6,216,914)

-



(89,523,618)

1,475,121





Income (loss) for the period


$           (272,641,948)

$                 1,741,809





Income (loss) attributed to:




Unit holders of the Partnership


(267,930,435)

1,741,809

Non-controlling interest


(4,711,513)

-



$           (272,641,948)

$               (1,741,809)

Other comprehensive loss




Foreign currency translation adjustment


(35,766)

-

Comprehensive income (loss) for the period


$           (272,677,714)

$                 1,741,809





Comprehensive income (loss) attributed to:




Unit holders of the Partnership


(267,966,201)

1,741,809

Non-controlling interest


(4,711,513)

-



$           (272,677,714)

1,741,809

 

Income and expenses by each reportable segment of GDH LP for the three months ended December 31, 2018 are as follows:





Principal


Asset


Advisory


Corporate





Trading


Investing


Management


Services


and Other


Totals

Income













Advisory and management fees

$

-

$

-

$

1,344,705

$

41,593

$

-

$

1,386,298

Net realized loss on digital assets


(10,071,594)


(38,589,882)


-


-


-


(48,661,476)

Interest Income


24,140


662,202


-


27,554


838


714,734

Other Income


803,345


88,831


(12,743)


-


-


879,433



(9,244,109)


(37,838,849)


1,331,962


69,147


838


(45,681,011)

Operating expenses













Equity based compensation


5,174,613


2,651,917


3,235,635


2,224,673


3,683,970


16,970,808

Compensation and compensation related


1,873,961


760,028


2,118,634


1,026,418


1,948,997


7,728,038

General and administrative


1,762,060


1,134,464


1,189,086


409,036


1,648,292


6,142,938

Professional fees


421,129


404,316


(16,560)


(49,595)


1,240,636


1,999,926

Interest


14,345


489,323


-


-


-


503,668

Insurance


-


-


-


-


435,616


435,616

Director fees


-


-


-


-


25,000


25,000



9,246,108


5,440,048


6,526,795


3,610,532


8,982,511


33,805,994














Net unrealized gain (loss) on digital assets


11,708,464


(3,845,617)


-


-


-


7,862,847

Net unrealized (loss) on investments


-


(25,004,873)


-


-


-


(25,004,873)

Unrealized foreign currency gain (loss)


(75,715)


-


-


18,846


-


(56,869)

Realized foreign currency  (loss)


(280,428)


-


-


-


(552)


(280,980)



11,352,321


(28,850,490)


-


18,846


(552)


(17,479,875)

Net (loss)

$

(7,137,896)

$

(72,129,387)

$

(5,194,832)

$

(3,522,539)

$

(8,982,225)

$

(96,966,879)


* Above table represents the three months ended December 31, 2018.  These amounts can also be derived by subtracting the nine months ended September 30, 2018 from the year ended December 31, 2018, with the exception of certain figures relating to the macro-trading of the Partnership's digital assets which were reclassified from the Trading segment to the Principal Investing segment.

 

Assets by each reportable segment of GDH LP as of December 31, 2018 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Assets







Cash

$      35,887,352

$          19,064,478

$    1,782,993

$          349,155

$    9,404,034

$     66,488,012

Digital assets

20,920,345

48,844,994

-

-

-

69,765,339

Investments

-

179,365,696

-

-

-

179,365,696

Receivables for digital asset trades

8,579,058

-

-

-

-

8,579,058

Receivables

19,950

222,855

641,255

129,466

225,168

1,238,694

Prepaids and other assets

109,756

137,871

3,629

227,988

1,523,636

2,002,880

Loans receivable

-

2,203,828

-

165,196

-

2,369,024


$      65,516,461

$        249,839,722

$    2,427,877

$    871,805

$  11,152,838

$ 329,808,703

Loans receivable

-

15,693,341

-

198,979

-

15,892,320

Property and equipment

4,200

-

-

10,856

4,208,196

4,223,252


4,200

15,693,341

-

209,835

4,208,196

20,115,572


$      65,520,661

$       265,533,063

$    2,427,877

$      1,081,640

$  15,361,034

$ 349,924,275








 

Select statement of financial position information

The fair value of each asset class by reporting segment of GDH LP as of December 31, 2018 is as follows:



Principal

Asset


Corporate



Trading

Investing

Management

Advisory

and Other

Totals

Digital assets:







Cryptocurrency

$  20,920,345

$     48,844,994

$                -

$                -

$                -

$   69,765,339

Investments:







Pre-ICO

-

3,444,204

-

-

-

3,444,204

Convertible Notes

-

1,250,000

-

-

-

1,250,000

Preferred Stock

-

59,586,719

-

-

-

59,586,719

Common Stock

-

80,483,775

-

-

-

80,483,775

LP/LLC Interests

-

33,248,472

-

-

-

33,248,472

Warrants/Trust Units

-

1,352,526

-

-

-

1,352,526


$  20,920,345

$    228,210,690

$                -

$                -

$                -

$   249,131,035

 

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2018 and (ii) GDH Ltd.'s Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2018 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedar.com

About GDH Ltd. and GDH LP (Galaxy Digital)
Galaxy Digital Holdings Ltd. is a holding company whose only significant asset is a minority investment in GDH LP. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. GDH LP's multi-disciplinary team has extensive experience spanning investing, portfolio management, capital markets, operations, and blockchain technology. GDH LP currently operates four distinct business lines, which include: Trading, Asset Management, Principal Investing and Advisory Services. The CEO of the general partner of GDH LP is Michael Novogratz . The Partnership is headquartered in New York City , with offices in London , Tokyo , Hong Kong , the Cayman Islands (registered office) and New Jersey . Additional information about GDH LP's businesses and products is available on www.galaxydigital.io.

Disclaimers and Additional Information

The TSXV has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy Digital.

Forward-Looking Statements

Certain information in this press release, including, but not limited to, statements regarding the future of the industry and our results, business or opportunities, may constitute forward looking information (collectively, forward-looking statements), which can be identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," "continue" or "believe" (or the negatives) or other similar variations. Because of various risks and uncertainties, including those referenced below, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements are not guarantees of future performance, accordingly, you should not to put undue reliance on forward-looking statements.  Information identifying assumptions, risks and uncertainties relating to Galaxy Digital is contained in Galaxy Digital's filings with the Canadian securities regulators available at www.sedar.com. These risks include those discussed in the risks and uncertainties section in the MD&As filed concurrently with this release. The forward-looking statements in this press release are applicable only as of the date of this release or as of the date specified in the relevant forward-looking statement.

SOURCE Galaxy Digital Holdings Ltd.


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