A Fintech Flub Exposes Risk of Cryptocurrency Hype
(Bloomberg Opinion) -- Hype is never far away from cryptocurrencies. Punters taking public transport or navigating social media are bombarded daily with enticing advertising and billboards dangling the next big coin, while self-proclaimed experts and gurus offer hot investing tips before the inevitable tired disclaimer: “Please do your own research.”
But when London-listed fintech company Mode Global Holdings Plc announced it would expand its Bitcoin cashback program to more than 40 online U.K. retailers this week — name-checking Ocado Group Plc, Homebase and Walgreen Boots Alliance Inc. — the hype seemed rather more deserved. Shares soared as much as 15%, the most in more than five months, on excitement that crypto was marching ever-onward into consumer hands.
Deserved, that is, until Mode’s “clarification statement” released on Friday sent its shares back down 14%. The firm explained that “certain specific brands” mentioned the day earlier had since pulled out of the program, which aims to convert cash rewards for shoppers into Bitcoin in return for a fee starting next year.
The word “clarification” here looks like a very expensive understatement. It suggests that the very act of publicizing the name of affiliated cashback partners, whether intentional or accidental, was enough to spook some partners into pulling out — a pretty terrible look. “Some brands don’t want to be associated to Crypto despite approving us through the affiliate process,” Chairman Jonathan Rowland tweeted. “We can’t control that unfortunately.”
Worse, the response of Boots, one of the brands named, appeared to rule out any involvement with Mode’s program in the first place: “We have not been directly approached by Mode and they have used our name without permission in their press release and marketing materials,” the company said via email. Ocado, meanwhile, said it had “never had any direct affiliation” with Mode.
This kind of mess is not a regular occurrence in the stock market, and shouldn’t become one. Yes, the boom-and-bust cycles of crypto have seen some very out-there moves by listed firms in the past — such as when the U.S. company Long Island Ice Tea Corp. renamed itself Long Blockchain Corp. before regulators eventually moved to delist its shares. But it’s not often big brands find themselves playing an unwanted role in other listed firms’ PR. At the very least, Mode and its partners need to uncover where the due-diligence chain may have broken down, whether through overconfidence or oversight.
As for Mode’s investors, who understandably had little reason to imagine a “clarifying” statement was round the corner, it may be time to re-think how much faith to place in announcements relating to cryptocurrencies — however banal a venture like retailer cashback might be.
It might have been better to look past the 10 unicorn emojis posted by Rowland alongside the initial announcement on Thursday, and focus on what we know about Bitcoin adoption by consumers. The recent loss posted by U.S. fintech Bakkt, which offers crypto rewards for Starbucks customers, indicates buying small items with volatile digital tokens isn’t exactly spreading like wildfire. And while Mode is registered as an e-money institution in the U.K. under the name Greyfoxx, and as a U.K. crypto-asset firm under the name Fibermode, it’s not exactly a household name — and has recently moved to wind down an interest-paying product called “Bitcoin Jar”.
Pumped-up crypto press releases are a menace to the trust — and money — investors place in the stock market. As the experts say, do your research.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.
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