Molten Indicates Depreciation of Ledger and Revolut
Ledger and Revolut, likened to a familiar quote from the Old Testament, have been weighed and found wanting. According to the specialists at investment firm Molten, the fair market value of these crypto projects has taken a substantial hit this past year.
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London-based Molten Ventures, known for its investment in burgeoning tech businesses, is the most significant tech-related venture firm listed on the London Stock Exchange.
The fair price or fair value is indicative of the potential earnings an investment asset could yield. A proper grasp of fair value aids investors in making well-informed decisions, circumventing mistakes in projections and accounting. Otherwise, businesses could be misguided, and investment bubbles could emerge in markets.
Molten Ventures staved off such a bubble. In the second week of May, the company published its annual report for 2023. It reported that the fair value of Molten's investment in the cryptocurrency wallet Ledger was £71.8 million (or $91.5 million) at the end of March this year. This is 22% less than the corresponding figure in March 2022. Meanwhile, the fair value of its investment in digital banking service provider Revolut dropped by 40% to £54.5 million. Overall, the fair value of Molten's entire portfolio fell by 16% year-on-year to £1.4 billion.
It's important to note that the fair value of investments is typically calculated based on the price that an investor could fetch upon selling their stake at the time of assessment. Other elements considered include the company's performance, publicly available information, etc. These factors give a more accurate picture than the valuations shared with investors during fundraising rounds.
It appears that other venture companies have reached similar conclusions regarding the fair value of crypto startups. Investors are preferring to keep their distance from the crypto sector, which is tainted by scandals, market downturns, and regulatory uncertainties. Venture capitalists spend months examining a company and its founders before deciding whether to invest.
Global Venture Capital Investments in the Crypto Sector Source
In the first quarter of this year, private financing for cryptocurrency firms sank to a three-year low, according to PitchBook research. Investment amounts fell by 80% to $2.4 billion, a stark contrast to the record-breaking $12 billion venture capitalists poured into the sector during Q1 of 2022. This downturn is not only linked to the rising interest rates but also to the bankruptcy of Silicon Valley Bank, known for its support of venture capital-backed startups.
Nonetheless, PitchBook's data isn't entirely bleak. The worst may be behind us, as February and March saw an uptick in venture investments in cryptocurrency compared to the previous month. Venture capitalists still display interest and continue investing in data analytics companies, developer platforms, and infrastructure startups. This optimistic view is echoed by a recent analysis from Cointelegraph.
So, how did Paris-based Ledger react to Molten Ventures' new report? Representatives maintained that the crypto wallet's market valuation has remained virtually unchanged over the past year. The bulk of the latest investment round, which amounted to €100 million or $109 million, was raised by Ledger in its first close in March. This led to a company valuation of €1.3 billion.
Revolut, on the other hand, has chosen to remain silent on the matter. Complicating their situation, Revolut's auditor, BDO LLP, was unable to verify 75% of the £636 million ($765 million) in revenue the fintech company reported for 2021. Put simply, there is no adequate guarantee for the $477 million in revenue Revolut claims to have generated from subscriptions, cards, foreign currency transactions, and so on.
The company's IT systems weren't designed in such a way that would allow for IT or business process controls to be effectively tested throughout the year,” BDO clarified.
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