Mode Global (LON: MODE) shares actually rose significantly on the announcement that they’re not in crypto any more. We think this is an interesting signal, a sign, of what is to come for many in that line of business. Now, we could be accused of laughing too hard here, even of being a bit mean. But we really do think this is fun, the company’s shares have soared on the announcement that they’re out of business. In fact, reading the announcement properly, they’re not just out of business, they’re bust.
As to what is said by Mode Global: “Due to difficult economic circumstances and the collapse of high profile Crypto businesses like FTX, Mode has decided to cease it's crypto and payment operations and shut down all customer facing activities including it's phone applications. This has been done to maintain cash reserves whilst the Board considers the future of the Group. Mode continues to work with the FCA and partners to return all fiat and crypto deposits to its customers over a winding down process. During Q1 2023 and continuing today, the Mode Board of Directors entered Mode Global Limited into a Company Voluntary Arrangement ("CVA") with it's creditors. This was agreed on the 5th April 2023.”
So, in effect, they’re out of business. It does get worse too, there’re some loan notes out there and they have to agree to a standstill for the continuance of the company. Mode says this will happen which is why they’re still accounting as a going concern.
Mode Global share price from Google Finance
The thing that interests us here is that exiting the crypto business is adding value. Actually being just a shell company that may or may not pick up another business line is to be more valuable than someone with an actual and active - hey, £million revenues - crypto business. And here’s the thing, we think that’s going to be true for an awful lot of people.
Yes, we can all see that trading Bitcoin, ethereum, still makes money for some people. But that wider marketplace of all the things people were going to do with crypto - other than just speculate in it - seems not to be happening. Everyone who tries seems to lose money. Which is, as we all know, the destruction of shareholder value.
We take Mode Global to be one of those canaries in the coal mine. Spending rewards based upon bitcoin? Sure, why not? But if such businesses all start to decide that the crypto game isn’t worth the candle then that wider ecosystem just isn’t going to turn up. Crypto will go back to - perhaps remain - just a market for speculation.
