Why won’t Galaxy Digital buy back shares?

Galaxy Digital is often seen as a bellwether for the overall crypto industry.

Not only does the company have mining, lending, trading, and banking services, but it is also very active in the venture capital ecosystem as well as has more than 4,000 BTC on its balance sheet.

Operating across the entire crypto spectrum, people pay attention to when the company and its CEO Mike Novogratz talk.

But, as a public company trading under the symbol GLXY, investors are also paying attention to how the company is thinking about its own share price, which is down more than 85% from it's all-time high in November, 2021.

But while Mike Novogratz has consistently expressed that he believes Galaxy’s shares are undervalued and has once again been given approval by the Toronto stock exchange to repurchase shares, the company hasn’t pulled the trigger.

Let’s take a look at how we got here.

Galaxy Digital’s 2022 Buybacks

On May 11, 2022, Galaxy Digital announced the intention to buy back 10.6 million shares (10% of the company’s public float).

By October 24, 2022, 10,596,720 ordinary shares were purchased by the company at an average price of C$6.65. So, over the course of 6 months, the company spent more than C$70 million on share buybacks.

Flash forward to today and the company has lost more than 15% of their investment. The only problem is that even if the company wanted to purchase more shares earlier this year, they couldn't.

You see, Canada, where the company is headquartered, has different rules around stock buybacks than in the United States. In Canada companies have to get approval to buyback shares, wait certain amounts of time between buybacks, not be too much of the share volume, etc…

So if one were to assume that the company still felt the shares were undervalued, they were required to wait until around May of 2023 to begin buying back more shares.

That’s why, on March 28, 2023 during the company’s Q4 earnings call, it was telling when Mike Novogratz stated:

And as expected that came on May 26, 2023 when the company once again announced approval to repurchase up to 10,056,193 ordinary shares (another 10% of the company's public float).

So, when Galaxy’s Q2 earnings were released on August 8th investors jumped to see how many shares the company had bought back in the quarter.

But, over the quarter, not a single share was repurchased…odd.

Now, the company has a full year to buy back the shares, so one can argue that they are just waiting for a better price to begin buying. And sure, that could be true, but remember that Mike Novogratz only 5 months ago, when shares were trading at $4.19 CAD, stated that he would be ready to deploy capital (“hear me loud and clear”).

And although the stock is trading at C$5.31 today, they easily could have made a purchase on June 16 when the price was C$4.15 – 4 cents lower than Mike’s earnings call three months earlier.

Not only that, but here is CEO Mike Novogratz on July 26 recommending that investors buy his stock as one of the best ways to play crypto.

So if he’s so confident in suggesting buying GLXY shares to others, why isn’t he pulling the trigger on his own company?

There are a few potential reasons.

He believes he could get in at a better price

While this is certainly possible, for all the reasons we explained above, it does go against at least what Novogratz is saying publicly. By all measures he is indicating that he expects the stock price to materially appreciate in the near future.

Furthermore, Galaxy Digital’s President and Chief Investment Officer made a large insider trade of 100,000 shares at C$3.58 in late 2022. If the CIO is making a purchase at that price, one could almost consider it a floor in the price.

The company is gearing up for a large acquisition

For those that have been paying attention to Galaxy Digital over the past few years, you’ll remember that the company terminated their deal to buy BitGo for $1.2 billion.

Since then though, the company has made two under the radar acquisitions to boost the mining arm of their business.

The first was to acquire the Helios bitcoin mining facility from Argo Blockchain for ~$65 million.

The second was the $44 million acquisition of the institutional self-custody platform GK8 in a bankruptcy auction.

And as reported by the Block in March, Chris Ferraro while speaking at the JMP Securities Technology Conference stated:

At the end of the day, we don’t know why Galaxy isn’t buying back its stock. The reason could be innocuous, or as the press likes to say these days, a “nothing burger.”

But it could also be something more. It could be Galaxy Digital gearing up for a splashy announcement.