CoinShares International — Both profit engines delivering solid results

CoinShares International (OMX: CS)

Last close As at 20/04/2024

SEK58.40

0.40 (0.69%)

Market capitalisation

SEK3,951m

More on this equity

Research: Financials

CoinShares International — Both profit engines delivering solid results

CoinShares International (CS) maintains its stable development in 2023, posting an adjusted EBITDA of £9.9m in Q323 (£6.4m in Q322). This is despite the £3.0m loss on principal investments, arising primarily from provisions recognised by FlowBank (in which CS holds a 28.3% stake). Both the asset management business and capital markets activities were solid contributors to the Q323 results, with the former posting £10.7m in fees and the latter £9.3m in gains and income. In September 2023, CS officially launched its Hedge Fund Solutions (active asset management business), with its initial strategies active since the end of Q323 and discussions with potential investors across the globe ongoing.

Milosz Papst

Written by

Milosz Papst

Director, Financials

pile of coins on technology financial graph background.

Financials

CoinShares International

Both profit engines delivering solid results

Q323 results

Financials

15 November 2023

Price

SEK40.00

Market cap

SEK2,721m

SEK13.1518/£

US$1.2459/£

Total equity at end-Q323

£224.2m

Shares in issue

68.0m

Free float

29.4%

Code

CS

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.5

(22.9)

62.6

Rel (local)

(0.3)

(22.1)

61.8

52-week high/low

SEK55.90

SEK19.00

Business description

CoinShares International develops innovative infrastructure, financial products and services for the digital asset class. It manages and provides liquidity for exchange traded products and undertakes proprietary trading in digital assets.

Next events

Q423 results

13 February 2024

Analyst

Milosz Papst

+44 (0)20 3077 5700

CoinShares International is a research client of Edison Investment Research Limited

CoinShares International (CS) maintains its stable development in 2023, posting an adjusted EBITDA of £9.9m in Q323 (£6.4m in Q322). This is despite the £3.0m loss on principal investments, arising primarily from provisions recognised by FlowBank (in which CS holds a 28.3% stake). Both the asset management business and capital markets activities were solid contributors to the Q323 results, with the former posting £10.7m in fees and the latter £9.3m in gains and income. In September 2023, CS officially launched its Hedge Fund Solutions (active asset management business), with its initial strategies active since the end of Q323 and discussions with potential investors across the globe ongoing.

Year
end

Revenue
(£m)

Other gains and
income (£m)

Adjusted EBITDA* (£m)

Adjusted EPS (£)

DPS
(£)

P/E
(x)

Yield
(%)

12/21

80.8

70.9

121.1

1.62

0.0

1.8

N/A

12/22

51.5

(19.6)

(6.5)

0.04

0.0

74.4

N/A

12/23e

41.4

31.5

40.9

0.40

0.0

7.4

N/A

12/24e

54.3

40.5

55.4

0.65

0.0

4.6

N/A

Note: *Sum of revenue, other gains and income (income and gains from capital markets infrastructure and gains on principal investments) less administrative expenses excluding D&A.

Ether staking and fixed income driving CSCM

The capital market infrastructure segment’s (CSCM’s) Q323 gains and income came primarily from Ether staking rewards (£4.9m), as well as fixed income activities (£3.4m). This was supplemented by gains on delta neutral strategies (£0.8m), mostly trading in CME futures, as well as a minor income from liquidity provisioning (£0.2m). CS’s asset management fees were largely generated on XBT Provider products (£9.6m), which saw US$30.8m net outflows in Q323 (US$87.5m ytd), relatively moderate compared to its end-September 2023 AUM of c £1.3bn and the net outflows in 2021 and 2022. CoinShares Physical contributed £0.6m of fees and saw minor net inflows of US$6.7m in Q323 (vs US$40m in H123).

Approval of spot Bitcoin ETF in the US coming soon?

We note that, after the reporting date, digital asset prices went up significantly (with the bitcoin price up c 32% in Q423 so far), fuelled by hopes that a spot Bitcoin ETF could be approved by the US Securities and Exchange Commission (SEC) soon. A catalyst for this has been the recent court win of Grayscale, the largest digital asset manager globally, which had filed an application to convert its Bitcoin Trust into a spot ETF. A judge in the US Court of Appeals for the DC circuit ordered that the SEC’s denial of Grayscale’s application be reviewed. We note that several high-profile asset managers also have spot Bitcoin ETF applications that are pending review, including BlackRock, Fidelity and WisdomTree, among others.

Valuation: Still trading below book value

Despite more than doubling year to date, CS’s share price is still well below our fair value estimate in our base case scenario of SEK83.6 (broadly unchanged vs SEK85.0 previously). Using a more cautious scenario with digital asset price growth of only 2% pa, we value CS at SEK40.6 (vs SEK40.0 previously).

Powered by its two core divisions in Q323

Following a robust H123, CS continued to generate good results in Q323, with an adjusted EBITDA of £9.9m compared to £6.4m in Q322 (see Exhibit 1). Asset management generated fees of £10.7m, broadly stable compared to both Q322 and Q223, while CSCM posted £9.3m gains (vs £4.5m in Q322 and £10.0m in Q223).

Some drag on performance came from CS’s principal investments (a £3.0m loss in Q323 vs marginal losses of £0.1m and £0.2m in Q322 and Q223, respectively), which is primarily the result of the c £5.0m loss attributable to its stake in Swiss-based online neo bank FlowBank. This loss resulted from significant provisions FlowBank made in its FY22 accounts ‘to meet potential challenges and guarantee the stability of its future operations’, according to the company’s press statement from 18 October 2023. That said, CS highlighted that FlowBank has reported positive cash flow in 2023 year to date (CS accounts for FlowBank as an associate). We note that FlowBank completed a funding round in Q123 at a pre-money valuation that is 2.5x CS’s initial investment cost (£8.7m), which would value CS’s stake in FlowBank at around £21.8m (close to the fair value recognised in CS’s books at end-September 2023 of £22.8m). The FlowBank loss was partly offset by the revaluation of CS’s stakes in digital asset custodian Komainu (£1.5m) and Kingdom Trust (£1.2m), an independent qualified custodian operating US retirement account provider Choice.

CS’s approach to operating expenses remains prudent, with £6.9m administrative expenses excluding D&A in Q323 versus £8.3m in Q322, resulting in an EBITDA margin of 58.2% (vs 42.6% in Q322). CS’s total comprehensive income of £14.4m in Q323 benefited from foreign exchange tailwinds stemming from the depreciation of sterling against the US dollar (the currency translation differences arise mostly from the accrued XBT Provider fees, which are hedged to US dollars).

Exhibit 1: Q323 results highlights

£m, unless otherwise stated

Q323

Q322

change y-o-y

Q223

change q-o-q

Revenue, of which:

10.7

10.8

-1.0%

10.7

0.1%

XBT Provider

9.6

9.1

4.8%

9.8

-2.1%

CoinShares Physical

0.6

0.6

-9.5%

0.5

15.3%

Equities platform

0.4

0.4

-5.3%

0.3

8.2%

Other

0.2

0.2

-16.5%

0.1

125.0%

Capital market infrastructure income/gains, of which:

9.3

4.5

108.3%

10.0

-6.7%

Liquidity provisioning

0.2

0.4

-59.0%

0.2

-13.2%

Delta Neutral Trading Strategies

0.8

0.3

147.1%

2.0

-59.9%

Fixed income activities

3.4

1.2

192.0%

3.0

12.4%

DeFi

4.9

1.5

216.1%

6.0

-18.4%

Other

0.1

1.1

NM

(1.1)

NM

Principal investment gains/(losses)

(3.0)

(0.1)

NM

(0.2)

NM

Administrative expenses excluding D&A

(6.9)

(8.3)

-16.9%

(7.5)

-8.3%

Adjusted EBITDA

9.9

6.4

53.0%

12.8

-23.2%

Adjusted EBITDA margin

58.2%

42.6%

15.6pp

62.8%

-4.6pp

Depreciation and amortisation

(1.0)

(0.8)

13.4%

(1.1)

-15.6%

Finance expense

(2.0)

(0.9)

130.1%

(1.5)

27.5%

Income taxes

(0.2)

(0.3)

-26.4%

(0.1)

71.8%

Net income

6.7

4.5

50.6%

10.0

-32.9%

Currency translation differences

7.7

15.5

-50.5%

(4.8)

-261.1%

Total comprehensive income

14.4

20.0

-27.8%

5.3

172.2%

Source: CoinShares International data

Asset management: Fee income stable q-o-q and y-o-y

CS’s fee income continues to be driven primarily by the earlier XBT Provider product range (£9.6m in Q323) offering synthetic backing from a combination of physical digital assets and derivatives. CoinShares Physical, its more modern, physically backed exchange traded products (ETPs), generated £0.6m fees in Q323, followed by £0.4m from the blockchain equities platform. XBT Provider products experienced moderate net outflows of US$30.8m in Q323, bringing the year-to-date net outflows to US$87.5m (vs net outflows in 2021 and 2022 of US$1,173m and US$446m, respectively). A further c US$8m in net outflows was recorded post balance sheet date to 10 November 2023.

As discussed in our August update note, we conservatively expect further net outflows from this product suite in the coming years (US$120m in 2023 and US$391m in 2024, vs US$158m and US$424m, respectively, assumed previously) given its synthetic backing and high management fee of 2.5%. That said, we note the sustained interest among Nordic investors in these products (with some possible drivers being strong brand and pricing in Swedish krona), which CS is building upon, as illustrated by its recent first direct-to-consumer campaign in Sweden. CS’s management believes that it can move the XBT Provider towards a net inflow position using cost-efficient strategies.

Exhibit 2: XBT Provider weekly net outflows (US$m)

Source: CoinShares International data

Given the muted activity and sentiment in the digital asset markets in Q323 (illustrated by the c 9% decline in the crypto market’s total market cap in Q323), CoinShares Physical recorded a mere US$6.7m net inflows during the quarter (US$53.8m ytd), with the US$10.5m net inflows into altcoin ETPs offsetting the US$3.8m net outflows from the Bitcoin ETP. Post reporting date, there was a pick-up in net inflows with c U$38m collected to 10 November 2023, according to CS’s Digital Asset Fund Flows Weekly report. We assume c US$110m and US$300m net inflows into the CoinShares Physical platform in 2023 and 2024, respectively (vs c US$120m and US$300m, respectively, assumed previously). On top of strategic partnerships with broker platforms (which so far have been the main driver of inflows into CoinShares Physical ETPs), CS also plans to embark on direct-to-customer campaigns in Germany.

CS’s blockchain equities ETF experienced c US$6.8m of net inflows in the first nine months of 2023 (US$11.4m so far this year to 10 November 2023). As a result, CS’s total AUM reached £1.98bn at end-September 2023 (vs £2.14bn at end-June 2023 and £1.44bn at end-2022), see Exhibit 3.

Exhibit 3: CS’s assets under management (£m)

Source: CoinShares International data

CSCM: Benefiting from Ethereum’s shift to proof-of-stake

Despite the low volatility and spot volumes in the digital asset markets, CSCM delivered solid £9.3m gains and income in Q323, mostly driven by Ether staking rewards (£4.9m, received in exchange for providing Ether as collateral to secure the Ethereum network), as well as CS’s fixed income activities (£3.4m, which includes digital asset lending and interest on balances with brokers and treasury bills). This was supplemented by £0.8m gains on delta neutral trading strategies, mostly from trading in CME futures. CS’s liquidity provisioning income was modest at £0.2m due to the limited in- and outflows from XBT Provider products.

We note that the current Ether staking yield stands at c 4.56% pa, according to CoinDesk’s Composite Ether Staking Rate. This compares with 4.23% at end-September 2023 and 4.80% at end-2022. The yield is influenced by several factors, most notably the proportion of Ether being staked (which has been steadily growing, supported by recent network upgrades including The Merge and Shapella) and activity on the Ethereum network (which has been more modest recently given muted digital asset markets). CS’s management expects the yield to go down further to around 3.5% by end-2024, which will be a function of a continued increase in the percentage of Ether being staked (reducing the rewards from the consensus layer), partly offset by a pick-up in network activity (ie supporting rewards from the execution layer), with one of the potential drivers for the latter being growth in layer-2 network activity (for an explanation of layer-2 solutions, see our earlier thematic blockchain report). We have factored in the 3.5% staking yield in our FY24 forecasts.

Exhibit 4: CS’s capital market infrastructure gains (£m)

Source: CoinShares International data

Forecast and valuation revisions

We have applied minor positive changes to our asset management fee and CSCM gains/income forecasts (see Exhibit 5). We have marginally lowered our adjusted EBITDA forecast for FY23, mostly due to the loss recognised in Q323 on CS’s investment in FlowBank. At the same time, we have raised our FY24 and FY25 EBITDA forecasts by 5.8% and 6.9%, respectively. Our total comprehensive income forecast for FY23 is up by 29% due to the positive foreign exchange effects in Q323 as described above, while the FY24 and FY25 estimates are up broadly in line with the adjusted EBITDA forecast revisions in absolute terms.

Our CS fair value estimate (derived from our discounted cash flow model) is marginally down to SEK83.6 per share (vs SEK85.0 previously), mostly because we assume a lower cash inflow from the cash release of XBT Provider fees, given the relatively limited redemptions recently. Using a more cautious scenario with digital asset price growth of only 2% pa, we value CS at SEK40.6 (vs SEK40.0 previously).

Exhibit 5: Summary of forecast revisions

£m, unless otherwise stated

FY22

FY23e

FY24e

FY25e

Actual

Old

New

diff (%)

Old

New

diff (%)

Old

New

diff (%)

Revenue, of which:

51.5

40.9

41.4

1.3

53.2

54.3

2.1

77.2

80.2

4.0

XBT Provider

46.0

36.6

36.6

0.2

41.5

41.8

0.7

55.9

56.9

1.9

CoinShares Physical and other*

2.3

2.5

2.9

15.0

9.1

10.3

14.0

17.4

20.0

14.7

Block index

1.9

1.4

1.4

(2.0)

1.9

1.6

(17.7)

2.7

2.1

(22.5)

B2C

0.9

0.0

0.0

N/A

0.0

0.0

N/A

0.0

0.0

N/A

Capital market infrastructure income/gains, of which:

(17.4)

35.1

35.1

0.2

39.4

40.5

2.8

42.5

43.7

2.8

Liquidity provisioning

4.5

1.6

0.7

(58.4)

4.2

3.0

(27.0)

3.9

5.0

28.2

Delta Neutral Trading Strategies

2.6

7.3

5.4

(25.6)

6.6

7.4

11.3

9.8

8.8

(9.5)

Fixed income activities

5.0

9.9

11.8

19.3

9.9

11.2

13.3

9.4

10.7

13.3

DeFi

13.9

18.0

18.8

4.8

18.7

18.8

0.7

19.4

19.2

(1.2)

Other

(43.3)

(1.8)

(1.6)

(6.5)

0.0

0.0

N/A

0.0

0.0

N/A

Principal investment gains/(losses)

(4.9)

(1.2)

(3.6)

203.9

0.0

0.0

N/A

0.0

0.0

N/A

Administrative expenses excluding D&A

(35.3)

(32.6)

(31.6)

(3.1)

(39.6)

(38.9)

(1.9)

(48.9)

(48.4)

(1.1)

Adjusted EBITDA

(6.5)

41.8

40.9

(2.2)

52.3

55.4

5.8

69.6

74.3

6.9

Total comprehensive income

3.0

21.4

27.6

29.0

41.1

44.4

8.1

57.9

62.1

7.4

Source: CoinShares data, Edison Investment Research. Note: *Includes fees from CoinShares Physical and Invesco.

Exhibit 6: Financial summary

Year ending 31 December,
£’000s unless otherwise stated

FY18

FY19

FY20

FY21

FY22

FY23e

FY24e

FY25e

FY26e

FY27e

Income Statement

 

 

 

 

 

 

 

 

 

 

Revenues

10,549

11,331

18,389

80,755

51,484

41,441

54,273

80,203

99,035

104,931

Administrative expenses

(10,927)

(9,284)

(14,312)

(32,059)

(38,166)

(34,602)

(41,900)

(51,413)

(60,070)

(65,957)

Other operating income

4,811

529

607

14,665

16,599

14,000

14,700

15,435

16,207

17,017

Profit/(loss) on financial instruments

519,988

(64,553)

(1,398,436)

(2,483,773)

2,001,602

(990,228)

(1,115,076)

(1,933,512)

(697,285)

(702,633)

Realised gain/(loss) on investments

(1,074)

(405)

942

5,287

(2,800)

3,021

0

0

0

0

Adj EBITDA

12,993

11,171

22,113

121,059

(6,521)

40,896

55,373

74,330

81,277

83,926

EBIT

523,347

(62,382)

(1,392,810)

(2,415,125)

506,719

34,370

42,389

61,407

68,227

70,746

Finance income

693

931

3,793

10,905

12,964

10,131

9,936

9,875

10,002

10,131

Finance expense

(148)

(404)

(1,191)

(7,045)

(6,373)

(6,826)

(7,148)

(8,107)

(7,997)

(9,122)

Pre-tax profit

523,892

(61,855)

(1,390,208)

(2,411,265)

513,310

37,675

45,176

63,174

70,232

71,756

Income taxes

(230)

(269)

(401)

(1,056)

(500)

(580)

(777)

(1,030)

(1,131)

(1,154)

Net income

523,662

(62,124)

(1,390,610)

(2,412,322)

512,810

37,095

44,399

62,144

69,101

70,601

Total comprehensive income

14,407

8,914

18,419

113,443

3,046

27,595

44,399

62,144

69,101

70,601

Adjusted EPS (diluted, £)

N/A

N/A

0.28

1.62

0.04

0.40

0.65

0.91

1.01

1.04

DPS (£)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Balance Sheet

 

 

 

 

 

Property, plant and equipment

214

376

223

510

1,936

1,200

534

(61)

(583)

(1,028)

Digital assets

N/A

N/A

N/A

N/A

112

112

112

112

112

112

Intangible assets

0

7

20

19,781

11,992

11,119

10,246

9,373

8,500

7,627

Investments

6,158

5,585

3,626

24,501

45,020

41,494

41,494

41,494

41,494

41,494

Long term receivables and other

15

323

329

581

1,360

1,360

1,360

1,360

1,360

1,360

Non-current assets

6,387

6,290

4,199

45,372

60,420

55,285

53,746

52,278

50,884

49,565

Trade and other receivables

9,350

27,011

62,274

1,075,971

199,045

598,145

839,812

1,218,758

1,390,640

1,591,122

Digital assets

217,521

427,524

1,826,695

2,736,481

868,944

1,621,782

2,452,828

3,860,338

4,391,216

5,066,266

Cash at bank

32,897

2,350

2,266

11,088

26,565

12,962

32,757

41,789

86,230

182,335

Amounts due from brokers

N/A

39,405

66,518

118,976

233,507

161,963

241,099

386,459

440,810

513,073

Current assets

259,767

496,290

1,957,752

3,942,516

1,328,061

2,394,851

3,566,496

5,507,344

6,308,896

7,352,795

Total assets

266,154

502,580

1,961,951

3,987,888

1,388,480

2,450,136

3,620,242

5,559,622

6,359,779

7,402,361

Share capital

2,214

2,215

31

34

34

34

34

34

34

34

Share premium

111

111

2,387

30,781

30,781

30,781

30,781

30,781

30,781

30,781

Other reserves

104,322

168,813

1,209,630

667,846

(22,500)

(32,000)

(32,000)

(32,000)

(32,000)

(32,000)

Retained earnings

(68,003)

(125,795)

(1,155,551)

(497,727)

195,644

232,739

277,139

339,283

408,384

478,985

Total equity

38,644

45,343

56,497

200,934

203,959

231,554

275,954

338,098

407,199

477,800

Trade payables and other liabilities

227,469

419,340

1,792,936

3,491,612

1,025,734

2,016,479

3,118,203

4,998,194

5,701,134

6,635,730

Amounts due to brokers

N/A

37,631

112,121

292,708

135,385

178,701

202,683

199,928

228,045

265,429

Lease liabilities

0

0

0

0

581

581

581

581

581

581

Current tax liabilities

42

266

398

2,635

236

236

236

236

236

236

Current liabilities

227,510

457,237

1,905,454

3,786,955

1,161,937

2,195,998

3,321,704

5,198,940

5,929,997

6,901,977

Non-current liabilities

0

0

0

0

22,584

22,584

22,584

22,584

22,584

22,584

Total equity and liabilities

266,154

502,580

1,961,951

3,987,888

1,388,480

2,450,136

3,620,242

5,559,622

6,359,779

7,402,361

Ratios

 

 

 

 

 

Adj. EBITDA margin

52.1%

54.0%

62.8%

85.3%

-19.1%

53.4%

58.5%

60.0%

58.2%

56.5%

Adj. net margin

59.4%

38.4%

47.6%

79.9%

8.9%

36.0%

46.9%

50.1%

49.5%

47.5%

Source: Company data, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by CoinShares International and prepared and issued by Edison, in consideration of a fee payable by CoinShares International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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This report has been commissioned by CoinShares International and prepared and issued by Edison, in consideration of a fee payable by CoinShares International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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