The Microstrategy of X is coming — Here Is An Interesting One

The Pomp Letter (private feed for [e-mail])

To investors,

A key theme in public markets throughout 2025 will be opportunities for corporations to give investors access to corners of the crypto industry that are otherwise hard to access. As I have written about previously, DeFi Technologies has successfully done this with first-to-market ETPs and Hut 8 has created an energy infrastructure business serving both bitcoin mining and artificial intelligence data centers.

I recently found another business that I think is well-positioned to capitalize on this theme.

I was talking with my friend Eric Jackson, the brains behind EMJ Capital, about ways to express my bullish view on Solana via the public market. He mentioned a company called Sol Strategies (CSE: HODL | OTC: CYFRF) in Canada, but I had never heard of them before.

So I started doing some research.

Sol Strategies is the rebranded name of Cypherpunk Holdings, which was one of the first publicly-traded bitcoin-related companies years ago. Earlier this year Leah Wald, the former CEO of Valkyrie, stepped in as CEO and started buying Solana for the organization’s balance sheet. The company also runs a validator on the Solana network to drive revenue.

The company only rebranded as Sol Strategies in September, which means many people in the market probably don’t realize there has been a strategy shift yet. I love opportunities where a company is implementing a proven strategy (ex: give access to a crypto ecosystem that is otherwise hard to access in public markets) and public market investors haven’t yet realized they can allocate capital to gain this exposure.

Returns are captured when contrarian ideas later become consensus ideas.

Let’s dig into Sol Strategies. The company currently has 130,125 SOL on their balance sheet, which is worth ~ $33 million based on last night’s price of SOL. As the price of Solana increases, the dollar value of the balance sheet will increase. You can think of this similar to Microstrategy’s balance sheet of bitcoin — Sol Strategies is doing it with Solana instead.

This is interesting because Solana has been outperforming bitcoin over the last year.

Although it may not be popular in the bitcoin community, I believe Solana will continue to outperform bitcoin in this bull market. This is why Solana has been my second largest crypto position after bitcoin since December 2023.

Sol Strategies would be interesting if it merely was the Microstrategy of Solana, but the company is going one step further — they also operate validators on the Solana network.

Here is how the company describes their validator activities:

* Sol Strategies locks up SOL tokens in the Solana network to support its transaction validation and enhance security.

* Sol Strategies operates a validator node, responsible for verifying transactions and producing new blacks, which requires significant SOL staking.

* By staking SOL and running the validator, Sol Strategies earn rewards in additional SOL tokens based on our validator’s performance and the total amount staked.

This would be like Microstrategy also mining bitcoin on top of their bitcoin balance sheet. It is important to understand validators and staking because Sol Strategies earns 8.5% on the Solana staked in the validator from their balance sheet. We can estimate the company will earn approximately $2.8 million annualized (in SOL) from the staking revenue driven by balance sheet SOL.

But the company also runs validators for other SOL holders to stake their assets. For these assets, Sol Strategies earns block rewards, as well as a management fee on staking and MeV revenue. In the past 7 days, this revenue was 142.72 SOL (7,421.44 annualized). This suggests the company will receive another $1.9 million in revenue from their external staking management services.

(Note: Anyone can quickly view how much the Sol Strategies validator is earning, as it is publicly available. Using this validator dashboard, you can change the date range to the last 7 days to see the total SOL earned per Epoch (each Epoch is 2 days). According to this dashboard, over the past 7 days, the validator earned the 142.72 SOL I mentioned above.)

If my math is correct, the company will generate another $4.7 million of SOL every year that gets added to their current balance sheet. This number is likely to increase in the coming months because Sol Strategies has been acquiring validators from other companies, such as the recent acquisition of four validators from Cogent Crypto. The Cogent Crypto SOL validator generated 562 SOL in the past week (29,224 annualized). Sol Strategies purchased 78% of this validator, suggesting an additional $5.8 million of SOL from this acquisition alone.

If you take the current market cap of ~ $130 million and subtract the ~ $33 million of SOL on the balance sheet, it appears the company will be trading at less than 10x revenue once the Cogent Crypto acquisition closes — not bad for a company that is growing relatively fast in a sector that is poised to do well in a crypto bull market.

I like the strategy of building the largest balance sheet of Solana in public markets, while also acquiring many validators to continue driving future revenue growth. Add in the fact that I personally believe Solana will continue to do well in this bull market and I think Sol Strategies has a great chance of driving attractive returns.

But I am not just pontificating about this. I am willing to risk my two most precious resources on the opportunity — my time and my reputation.

Last week I agreed to become an advisor to Sol Strategies. My plan is to help the business clearly tell their story to the public market, find and acquire more validators, and capitalize on other Solana-related opportunities that could be accretive to the business over time.

Most people don’t know that Tony Guoga, the former member of the European Parliament, philanthropist, and poker enthusiast, is Chairman of Sol Strategies. He was early to bitcoin and now appears to be early to the first publicly-traded company providing pure-play exposure to the Solana ecosystem.

After spending the first 15 years of my career in the private markets, I am increasingly interested in the public markets. I have written extensively about my work with DeFi Technologies and Hut 8, so it only makes sense to keep this group updated on other companies that I find interesting — Sol Strategies perfectly fits the description of what I am looking for.

Many of you are smarter than me when it comes to analyzing companies, especially in the public market. Please take a look (CSE: HODL | OTC: CYFRF) and then respond with your feedback. I would love to learn from you all.

Hope you all have a great start to your week. I will talk to everyone tomorrow.

-Anthony Pompliano

Founder & CEO, Professional Capital Management

DISCLOSURE: Before I let you go, I want to lay out a few disclosures. It is important to me that you all understand these details.

I personally own Sol Strategies stock. Some people may look at today’s letter as me talking my book, which has a hint of truth to it, but I think of it much more as I have skin-in-the-game and stand to lose money, time, and reputation if I am wrong in my analysis.

Please don’t take today’s letter as investment advice. Do your own research. You all are adults who can think independently and critically. Stocks are wildly volatile, they can go up and down a lot, you can lose your money investing in the market, and nothing I have written here should be used by you to make investment decisions. There is a longer legal disclaimer at the end of the email you can read as well. No one, including me, is right 100% of the time.

Anthony Pompliano Interviews Tether CEO Paolo Ardoino

Paolo Ardoino is the CEO of Tether. This episode was recorded at Crypto Investor Day in New York. In this conversation we discuss, stablecoins, growth metrics, institutional adoption, how investors can benefit from stablecoins, possibility of Tether going public, why bitcoin is the perfect currency, and how stablecoins will impact central banks.

Enjoy!

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

DISCLAIMER: The author of this letter is not a securities dealer or broker, investment adviser or financial adviser, and you should not rely on the information herein as investment advice. The author is a paid advertiser. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on this communication. Pursuant to a 24 month term advisory agreement dated November 25, 2024, the author was compensated by Sol Strategies Inc. for services such as this letter. Examples that the author provides of share price increases pertaining to a particular Issuer from one referenced date to another represent an arbitrarily chosen time period and are no indication whatsoever of future stock prices for that Issuer and are of no predictive value. Stock profiles contained herein are intended to highlight certain companies for your further investigation; they are not stock recommendations or constitute an offer or sale of the referenced securities. The securities issued by the companies profiled should be considered high risk; if you do invest despite these warnings, you may lose your entire investment. Please do your own research before investing, including reading the SEDAR+ filings, press releases, and risk disclosures. It is our policy that information contained in this profile was provided by the company, extracted from SEDAR+ filings, company websites, and other publicly available sources. The author believes the sources and information are accurate and reliable but cannot guarantee it.

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