Galaxy posts Q2 results, reporting uptick in trading and banking activity despite slump in net income

Source: The Block 2020-08-17

Quick Take

Galaxy reported $38 million in comprehensive income for the second quarter of 2020 relative to $113 million in Q2 2019.
The firm said it saw an uptick in trading in its OTC business, reporting $1 billion in volume.
Its investment banking business also made progress, but it is preparing for the exit of its lead, Ian Taylor.
The firm has also begun exploring decentralized finance.

Mike Novogratz's Galaxy Digital posted financials for the second quarter of the year Friday, posting comprehensive net income figures that fall short of the year prior despite progress in trading and investment banking.

Galaxy, which bills itself as a merchant bank for the digital asset world, trades on Canada's Toronto Stock Exchange after recently joining from the country's venture exchange. The firm reported comprehensive net income of $38 million, compared to $113.8 million during the same period last year. Still, it is an improvement from last quarter during which period the firm lost $27 million. Wall Street responded positively with Galaxy's stock closing up 7% today.

"The current quarter gain was largely a result of realized gain on digital assets, i.e. cryptocurrencies which trade continuously in the market," the firm said.

In the report, the firm noted several positive developments, highlighting over $1 billion in volumes traded through its over-the-counter (OTC) trading desk. The firm said it experienced "an increase in actively trading counter-parties and trading volumes relative to the first quarter of 2020 despite seeing some near-historic low volatility in the space."

More recently, Galaxy told The Block that OTC volumes have reached near-record levels as volatility in large-cap cryptos has made a big comeback as prices climbed at the end of July. As for the firm's less talked about advisory and investment banking business, Galaxy said it has continued to make "meaningful progress toward its strategic goal of becoming the leading corporate finance and strategic advisory firm in the blockchain technology and digital assets sectors." Indeed, the firm commenced a "financing assignment in the mining space" in the second quarter, and could benefit from a wave of merger and acquisition activity that pundits are expecting to sweep the crypto market.

On the personnel front, the unit will have to adjust to the exit of its lead, Ian Taylor, who is set to depart from the firm, according to the Q2 report. Taylor was brought into the firm in 2018 following a nearly 20-year career at Goldman Sachs. Previously, he was the bank's head of real estate, lodging and gaming equity capital markets for the Americas.

"Galaxy Digital expects to transition the leadership of its Investment Banking business in the fourth quarter of 2020 when Ian Taylor, current Head of Investment Banking, intends to depart," the firm said. "The Company has commenced an executive search process."

Earnings call

In an earning's call, CEO Mike Novogratz added some more color to the results, adding that it was experiencing a shift alongside the broader digital asset market.

"And since then I think the markets recognized the shift in the overall space and the shift in our company. And so, I'm going to leave it there and pass to Chris. But I would tell you I'm bullish, I'm optimistic. I think Bitcoin has a long way to go. I think DeFi is just getting started. I think the rest of the projects have new energy in them. And so that's what I want you to take for my messages today, one of positive energy and excitement."

As for decentralized finance (DeFi), Galaxy Digital president Chris Ferraro said the firm has been "spending a lot of time on DeFi from a protocol level."

"Look we’ve done the work. We understand all the projects. We have them rank orders as to what we think is — interesting what we think is not," said Ferraro. He contrasted Galaxy's approach with other non-regulated, smaller competitors, saying the lack of clear KYC/AML procedures in the space remains a problem for Galaxy.

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investment

Revenue

DeFi

Cryptocurrency

Galaxy posts Q2 results, reporting uptick in trading and banking activity despite slump in net income

Quick Take

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