Unlisted tech investor Blockchain Global is to receive 15 per cent of its new partner, Genetic Technologies, in return for turning the breast cancer business into a blockchain bargain.
If a non-binding agreement goes ahead, Blockchain Global will be on the hook to turn Genetic Technologies’ (ASX:GTG) genetic testing platform into a blockchain-based database for big pharma, researchers and the public.
Blockchain technology, which provides an encrypted, public ledger of transactions, is best known as the basis of cryptocurrencies such as bitcoin. But it has many other potential applications such as enforcing digital contracts, securing public records or regulating online voting.
Blockchain Global is already an investor in other ASX blockchain plays such as DigitalX (ASX:DCC) and First Growth Funds (ASX:FGF).
It has also proposed projects to develop blockchain solutions to combat drug counterfeiting and build a blockchain biotech business accelerator.
Genetic Technologies chairman Paul Kasian — who is also a director of Blockchain Global — told Stockhead that rather than do a binding deal they chose to give the market early documents to keep investors informed of the board’s strategic thinking.
The plan is to dampen some of the speculation that’s been in the company’s share price since December.
(The document achieved that, sending Genetic Technologies down 12.5 per cent by 1pm AEDT on Friday to 1.4c.)
Mr Kasian doesn’t anticipate any problems from the ASX over possible change of business activity queries.
The board’s blockchain-biotech love child
All of Genetic Technologies new directors and Mr Kasian are associated with Blockchain Global.
Samuel Lee is the CEO and founder, while Mr Kasian sits on the board. Peter Rubenstein and Jerzy Muchnicki are shareholders of Blockchain Global and and are long term investors in Genetic Technologies, Mr Kasian says.
Mr Lee and Mr Rubenstein are on the board of crypto consultant DigitalX (ASX:DCC).
The company had about $7.6 million in the bank at the end of December, but is raising $4.2 million from sophisticated investors now.
Mr Kasian says they are raising money now in order to be able to afford blockchain deals when they arise, and to ensure they have a 12 month financial runway.
A high price?
Blockchain Global’s share payment, worth about 15 per cent after the cap raise dilution, is subject to some hurdles.
The 486 million shares will be paid out in thirds after Genetic does a blockchain deal and its share price trades above 2.5c, then 3c, then 3.5c.
When asked whether these hurdles were low, given how connected to potential projects Blockchain Global is and the way blockchain and crypto share prices have surged over the last few months, Mr Kasian said they believe the froth has come out of the sector.
“Now that people have realised that cryptocurrencies can go both ways, I think there was a lot of mania that has washed out of the market,” he said.
“Genetic Technologies’ share price is about 1.5c and prior to this it was about 0.8c. So on average it trades at 1.5c. To get to 2.5c we’re saying the project from BCG has added value… That’s the market judging that BCG’s projects have added value.”
He said that moving Genetic Technologies market cap, currently $39 million, two thirds higher would be much harder than with a penny stock worth $1 million.
Further, because the company is traded on the Nasdaq and ASX any speculation on one tends to be averaged out through as people buy on exchange and sell on the other.