Since our first write up on Blockmate Ventures Inc. (MATE.V)(MATEF) about a month ago, the stock has performed fairly well, increasing nearly 50% from $0.075 to $0.11 in Canada. However, we think this is a drop in the bucket compared to its potential both in the near term based on fundamental value and long term upon successful execution of the Hivello business model. The stock reached as high as $0.165, but has mostly bounced around the $0.10 to $0.12 mark. Shares have churned and we think the temporarily stalled price is due to in-the-money warrants being exercised. While frustrating for short term sentiment, in the long term this means little and we think presents a last-minute buying opportunity before the train leaves the station. If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1017 followers on here as well as 120 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.
We are not going to rehash every little detail about Blockmate and Hivello, so we recommend you read these three posts as primers if you haven't already:
https://value-trades.blogspot.com/2024/11/the-cheapest-crypto-stock-you-never-heard-of.html
https://value-trades.blogspot.com/2024/11/blockmate-hivello-is-billion-dollar-idea.html
Recent insider filings have shown evidence of in-the-money derivatives being exercised, as one insider has exercised his options then sold the shares on the open market. The CFO is the lone seller and is described on the company website as holding officer positions in a number of companies. His decisions have little to do with how he feels about the individual company's future, since his time is split between many and is likely focused on CFO line of duties such as the current state of the books. Rather than growth potential of the business. As the CFO, he may have been influenced by the desire to increase the company's cash balance while simultaneously improving his own financial situation. So in our view, it's much more good news than bad. Neither CEO Justin Rosenberg nor President and "face" of the company Domenic Carosa have sold any shares. Carosa's last activity was a wave of open market buying six months ago at 3-4 cents. This open market buying is a very good signal for buyers, though it remains to be seen if he would do it at prices that are three times higher. If he did, we would consider that to be a surprise bullish catalyst. He already owns approximately 20 million shares, warrants and options. He owns enough.
Now with the commentary about insider activity out of the way, we want to focus next on the near term fundamental value. Despite the move over the last month, Blockmate is still unambiguously undervalued compared to its stake in Hivello. Hivello is undertaking a $3.5 million raise at a $30 million U.S. valuation. Blockmate owns slightly over half of Hivello. The value of that holding translates to a little over $0.20 CAD per share while the stock trades barely over half of that. Even considering dilution from all 34.5 million warrants, MATE's per share value of its Hivello holding plus $2.6 million in cash from the warrants would be $0.18. We think that the closing of the financing would be the bullish catalyst needed to at least bring it up to the $0.20 level. TSXV investment holding companies tend to trade below their NAV, but that is usually due to them holding some illiquid mining and exploration stocks. Stocks like MicroStrategy (MSTR) demonstrate that crypto stocks can often trade at a premium to their crypto holdings. Although the Hivello coin won't be owned by Blockmate or its Hivello subsidiary, it will be used as currency to drive user growth and value to the Hivello platform. So we expect the valuation of the token and the platform to be linked and highly correlated.
The token's success will be driven by hype and usage of Hivello, which will in turn drive users to the platform as an increasing token price increases compensation. For those reading this who don't yet know, Hivello is a DePIN aggregation tool that allows users to share their computing power and resources for things like storage, VPN services or improving AI models. DePIN tokens are the method for which to compensate users for lending out their computer resources. Carosa has used analogies such as AirBnB for your computer or SETI's amateur scientist projects to help explain the concept. After nearly three weeks of trying out the beta, this is our earnings so far when using a 10-year old laptop with limited resources available for crypto mining:
In terms of USDT, the coins mined haven't yet reached $1.00. But the wild card is the 5,000 points. Those points will convert to Hivello coin, and the company estimates that a full month's worth of points will translate to $10-$15 worth of Hivello per active node. This is to ensure that every user sees a minimum of $20 in passive income when using Hivello. Management expects that upper end equipment should get users up to $200 to $300 per month. However, a DePIN mining bro - who is obviously more motived to pump DePIN initiatives than he is to pump TSXV stocks - has claimed to make $227 per day using Hivello:
Whether this is true or an attempt to push DePIN as a better get rich quick scheme than any YouTube video about Temu dropshipping, the relative numbers are what is most important, assuming all DePINs are equally inflated. Out of these 15 options, Hivello is listed second in earnings potential only to Grass, with the top 3 choices choices being head and shoulders above the next 12. If this user is having this level of success with the beta model, imagine what can happen when Hivello is up at full capacity. The mere mention of Hivello by some crypto geek shows that it's being taken seriously in the industry and not just some ploy to remove money from Canadian gamblers through a TSXV listing.
The alleged experience of this one user aside, assume the typical earnings for medium grade equipment is $100 per node per month. That might not be much to people living in the west, but that is not the target market here. Management plans an aggressive expansion campaign in Africa, Asia and other developing areas where these few dollars a month represent a significant improvement in someone's standard of living. Management is hopeful to secure third party computer rental programs so that people without ownership of equipment can still benefit from Hivello. The company could then onboard users at a large rate using these rental programs. This leads us back to the positive feedback loop on the value of the token, the incentive for users to use Hivello and the value of the stock we mentioned above. If Hivello is popular, the value of the coin will go up. That $20 we expect from passively using Hivello could turn out to be worth a lot more. If that's the case, our experience and the experience of other early adopters will spread through word-of-mouth. More people join, the demand for the token increases due to the project gaining traction and the cycle starts all over again.
Demonstrating this effect, here is another post on TikTok from that same crypto bro:
Notice that $GRASS was the top performing DePIN project for November, up 317%. Grass was the only earner higher than Hivello in the previous graphic. So there is reason to believe that the Hivello token can follow a similar path. That hype would almost certainly translate over to the stock. This is why we believe a $0.50 target is achievable in the near term. The Hivello token is slated to launch in Q1, with a target valuation of $45 million U.S. That compares quite favorably to the stock at $0.50. So that's why we think the stock can reach there upon successful launch of the token and the full public release. With the amount of hype of Hivello being generated *in the industry* just from the beta launch (note: NOT just hype in the stock like most pump and dumps, in fact the opposite, anti-hype, as MATE is trading below fundamental value), Hivello is bound to gain some level of traction that should push the stock towards $0.50. The only thing we can see stopping this from happening is if the launch of the token and/or full release of the platform is delayed beyond Q1. And even then, that's a delay in the timing, not a question if it will happen or not. A complete blowup of the platform and token would have to occur, and considering Carosa's CV, we think that is highly unlikely.
A move from $0.11 to $0.50 is 355% upside which is already good enough. But for those who want to wait for a retirement stock and make 45 times their money, we think MATE offers a reasonably good possibility of that. In a world where Bluesky Digital Assets Corp. (BTC.CN) (BTCWF) can move from $0.05 to $1.00 on literally nothing, we can't rule out that MATE could run from $0.11 to $5.00 in a timeline of weeks or months on significant enough hype and early success. But chances of that are slim, and the company will have to have significant levels of success in the business over time to make it happen. However, the unicorn potential is there. We say $5 because it's reasonable to expect some dilution beyond warrants during that time. An assumption of 200 million shares leaves a 50 million share cushion from today's fully diluted total, as well as clean math to a billion dollar market cap at a $5.00 stock price. We also have to mention that partnerships with the right projects could accelerate hype and/or revenue growth at any time. For instance, the partnership with XYO. XYO is being hyped as the next Tesla and Elon Musk connection. If that goes down as planned, Hivello and MATE will almost certainly get positive run-off. But consider these possibilities as a bonus, rather than central to your investment in MATE or Hivello.
Some simple math demonstrates how $5.00 through fundamental performance can happen. Assuming $100 per month in earnings per user and 20% revenue share, that's a $20 per month ARPU. 750,000 active users leads to $15 million in monthly revenue, or $180 million annually. An 8x revenue multiple leads to a $1.44 billion valuation U.S. or $2 billion CAD, half of which goes to MATE. Considering that the company has already mentioned 30,000 users on the platform and have a target market in Africa and Asia that would likely exceed two billion people, 750,000 active users seems very achievable. In order to make this come true, Hivello must:
- Have a successful token launch and ensure that HVLO's valuation remains strong.
- Ensure that Hivello can handle increased traffic from a growing user base.
- Effective marketing of Hivello, while also relying heavily on word of mouth.
- Increase the variety of DePIN tokens available on the platform.
- Make sure users reach the estimated $20 to $300 per month in revenue.
- Ensure its AI models result in optimal use of each user's spare computing resources.
If these things are all met as promised, it should be only a matter of time before Hivello and then Blockmate achieve unicorn status. In the meantime, shareholders can be reasonably sure of a $0.20 floor price occurring in the near term. With $0.50 reasonably likely heading into Q1 on the hype of the token and full platform launch acting as catalysts.
Disclosure: We are long MATE.V
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