Summary Bullish shares have soared post-IPO but remain highly volatile and disconnected from underlying business fundamentals. Core exchange revenues are modest, with profitability driven mainly by volatile fair value gains on crypto holdings, not recurring operations. The valuation is extremely stretched, with a $10 billion market cap despite annualized revenues near $200 million and ongoing adjusted losses. Despite crypto adoption trends, I see little fundamental appeal at current prices given competitive risks, regulatory uncertainty, and a lack of sustainable profits. Shares of Bullish ( BLSH ) have been trading as the name suggests post its public offering. However, after a monstrous opening, shares trade down 40% from their highs, but still roughly double the official IPO price, and all that after just two trading days. This shows the degree of volatility as investors love everything to do with crypto these days, and while the company has a real strategy and business as an exchange for such assets, valuations are very hard to rhyme with the current extent of these operations here. Driving Adoption Of Digital Assets & Technology Bullish has a mission to provide mission-critical products and services that aid institutions in growing their businesses and drive adoption of stablecoins, digital assets, and blockchain technology. The company is a crypto exchange that offers a global order book, promises of a non-conflicted business model, provides predictable liquidity with tight spreads, while offering a broad set of institutional products and features. The company offers trading in spot, futures, clearing, and margins, offering such products in over 100 pairs, with average trading volumes well above $2 billion in the first quarter of the year. This has been driven by volatile trading in crypto assets, with bitcoin trading averaging $37 billion in 2024 and Ethereum average daily volumes standing at $19 billion that same year. The company was started by CEO Tom Farley in 2020 on the belief that institutions are only now really considering crypto after some consumers have embarked on the technology and cryptocurrencies in recent years. This follows continued adoption of crypto, including a framework around regulation, laying down a runway for greater adoption. The company has been founded under the vision that it should provide an institutional-grade global exchange that offers optimized execution through customizable compliance-first infrastructure. In 2023, the company announced the acquisition of CoinDesk to further expand its offering with news, insights, and alike. Valuation and IPO Thoughts Bullish aimed to sell 30 million shares in a preliminary price range between $32 and $33 per share, with final pricing set at $37 per share. This means that gross proceeds from the offering topped $1.1 billion, excluding the green shoe option. With just over 146 million shares outstanding, the company is awarded a $5.4 billion equity valuation at the offer price. This valuation includes the $1.1 billion in gross proceeds from the offering as well as a roughly half a billion in net debt load pre-IPO, for an operating asset valuation around $5 billion at the offer price. This valuation is a bit hard to relate to the performance of the actual business. Digital asset sales, some kind of gross revenue metric reported, more than doubled to $250 billion in 2024, up around 115% to be more precise. The P&L seems to suggest that net trading revenues came in at $97 million after accounting for the purchase of such assets. The company furthermore recognized $62 million in other revenues as well as a $207 million net benefit from a positive change in the fair value of digital assets, after this amount was much bigger (both upwards and downwards) in the two forgoing years. After accounting for various cost items, the company reported net earnings of about $79 million to common equity holders. Fair to say, without the positive change in the fair value of the assets held, the company would have reported losses. The first quarter results for 2025 are very interesting, as digital asset sales of $80 billion were virtually at par compared to the same year before, with net trading revenues reported at just $26 million. Driven by a combined $329 million decline in the fair value of digital and financial assets, the company reported a net loss of $344 million to common equity holders of the group. It is fair to say that absent the volatile line item relating to swings in the fair value of assets, the business would still post losses. Preliminary second quarter digital asset sales are seen at nearly $59 billion, up meaningfully but not spectacularly from a near $50 billion number in the second quarter of 2024. Net earnings are seen at around $110 million, aided by a combined positive change in the fair value of digital and financial assets of more than $150 million. This comes as the company holds over 24,000 Bitcoin and over 12,000 Ethereum on its books as of the second quarter, with crypto prices at large trading near highs. So basically we have wildly fluctuating earnings numbers, largely driven by changes in the fair value of assets, with non-IFRS revenues for the second quarter only seen at around $57 million, EBITDA seen at $7 million, and adjusted losses seen at around $6 million on the bottom line. Of course, the roughly $5 billion valuation was only a valid observation at the offer price. Shares trade at $70 after two days of trading, with operating assets trading near a $10 billion valuation here. These are mind-boggling numbers in relation to the non-IFRS metrics, which reveal revenues trending at just $200 million per annum, while losses are reported and growth recently is not spectacular. Even more shocking to consider is that trading at $70, shares are actually trading a long way from the high around $118 on the first day of trading! Concluding Thoughts Frankly, the net revenues from the exchange function are very limited, around $100 million per annum on $250 billion worth of trading volume, indicating an implicit cut of just 4 basis points in relation to underlying trading volumes. This is very competitive and one of the key reasons why the company has seen such great success as it has taken quite some market share. The biggest risk of all this, of course, has to do with adoption of crypto assets, evolution of blockchain technology, and competition from other exchanges and options across the system. However, the financials reveal that outside trading alternatives, this is really a business that holds inventory and has typically made money as a result, having riding the wave in bitcoin assets higher, but that is not a recurring revenue model, of course. Other risks include, of course, changes in the regulatory environment, pricing, and specific risks to trading in such assets, as well as cyber threats, credit risks, and counterparty risk, with the latter being somewhat ironic as these new technologies were designed to avoid such counterparty risks. From a fundamental point of view, I am very hard-pressed to see any appeal here, especially if we filter out the volatility in the value of assets held on the balance sheet. On the positive is, of course, a trend towards more adoption of such trading and ownership, including that of the GENIUS Act, the fact that cryptocurrencies trade near all-time highs here, and increased adoption among institutional investors. However, that is not enough of a bullish reason for me to jump on the craze, even as some air has already been coming out of the shares.
