Exploring the IR use-cases for blockchain
In 2008 Satoshi Nakamoto – an anonymous individual or group of people writing under a pseudonym – published a white paper about a ‘peer-to-peer electronic cash system’: Bitcoin. Just 13 years later, Bitcoin’s market cap exceeds $1 tn (as of early May 2021) and Coinbase, the world’s largest cryptocurrency exchange, is a public company with a listing valuation of $65 bn.
The growth of cryptocurrencies and blockchain technology, which provides the infrastructure for most cryptocurrencies, has been explosive in such a short space of time. Blockchain and distributed ledger technology (DLT) has the potential to be transformative in many parts of society – healthcare, voting, banking, insurance, retail – or so the evangelists say.
At IR Magazine, we’ve watched the growth of blockchain technology and cryptocurrencies with interest, but questioned whether any of these technologies would likely affect investor relations professionals any time soon. Most people we speak to say it’s unlikely for some time. Given the nature of the work, the IR profession tends to be late to adopt new technologies, looking for proof of concept, regulatory compliance and reassurances of technical security before trialing speculative technologies.
Even so, the last few years have seen pilots of proxy voting on blockchain, distribution of dividends as securitized tokens and public firms integrating cryptocurrencies into their equity stories in several ways – either by enabling the use of cryptocurrency to make transactions (Visa, PayPal, Microsoft, Tesla, AT&T, Overstock and more), or by buying cryptocurrency as a capital-allocation decision.
Institutional money is taking note, too. Private fund managers at Morgan Stanley and Goldman Sachs will now offer Bitcoin and other digital assets to its private wealth clients, while ETF providers are getting the regulatory sign-off required to launch Bitcoin ETFs.
In this article, we’ll look at some of the ways this new generation of technology could affect investor relations professionals in the future, and check out the ways in which it’s already coming into play.
Companies already integrating cryptocurrency and blockchain technology
A growing list of public companies are increasing their integration of blockchain technology and cryptocurrencies. The word ‘blockchain’ has been mentioned 1,734 times in public company event transcripts during the last five years, according to Sentieo data provided to IR Magazine. The first mention of blockchain at a public company event was in November 2014, with mentions peaking in 2018 and 2019, though they have since decreased. Mentions of blockchain have appeared most frequently in transcripts associated with Broadridge Financial, Mastercard, Overstock and IBM.
Transcripts with mentions of blockchain
‘Bitcoin’ doesn’t have as many mentions during the same time period, even though its first mention was earlier, in September 2013. There have been 568 mentions of Bitcoin during the last five years, and the peaks have roughly correlated with peaks in the price of Bitcoin: mentions increase during Bitcoin’s run-up to a price of $19,000 in late 2017, and spike again during Bitcoin’s rise to exceed $60,000 for the first time.
Transcripts with mentions of Bitcoin vs Bitcoin price
As noted earlier, many of these mentions are from companies that have moved to integrate Bitcoin or cryptocurrency into their business model – with customers of PayPal, Square, Visa and Mastercard all being able to buy and use the currency.
Goldman Sachs ran a test earlier this year to examine the returns of companies that have integrated Bitcoin into some aspect of their business models. The 19 companies that were subject to the screen outperformed the S&P 500 by 34 percentage points, boasting a 46 percent return, compared with the 12 percent return of the S&P 500 during the same period.
‘On average, these stocks have dramatically outperformed the S&P 500 during the last several months alongside the surge in the price of Bitcoin,’ write Goldman Sachs strategists including Ben Snider and David Kostin. ‘An equal-weighted portfolio of the stocks has demonstrated roughly 60 percent correlation with Bitcoin and the Bloomberg Galaxy Crypto Index during the last several months.’
This is an extract of an article that was published in the Summer 2021 issue of IR Magazine. Click here to read the full article.