The OLB Group, Inc. (NASDAQ:OLB): Undervalued Fintech and Bitcoin Play Poised for a Turnaround

Published on September 24, 2024 | Ticker: OLB

The OLB Group, Inc. (NASDAQ:OLB) is a diversified fintech company that provides integrated financial and transaction processing services to merchants across the United States. Despite facing some challenges in 2023, the company is well-positioned for a turnaround in 2024 as it focuses on its core fintech business and the spin-off of its Bitcoin mining subsidiary.

Business Overview

The OLB Group operates through two main business segments: Fintech Services and Bitcoin Mining. The Fintech Services segment, which accounts for the majority of the company's revenue, provides an integrated suite of merchant payment processing services and related proprietary software. Through its eVance, Securus365, and CrowdPay subsidiaries, OLB offers credit and debit card-based internet payment processing solutions, crowdfunding platforms, and other financial services to small and mid-sized merchants.

The company's Bitcoin Mining segment, operated through its DMINT subsidiary, began mining Bitcoin in 2021 and has since deployed over 1,000 mining rigs. OLB plans to spin off DMINT as a standalone entity in 2024, which it believes will unlock significant value for shareholders.

Financials

For the full year 2023, OLB reported revenue of $30.6 million, a slight increase from $30.4 million in 2022. However, the company's net loss widened to $23.2 million, or $0.65 per share, compared to a net loss of $8.2 million, or $0.56 per share, in the prior year.

The increase in net loss was primarily due to a $12.9 million impairment charge related to the company's acquisition of the FFS Data Corporation merchant portfolio in 2021, as well as higher legal expenses, salaries, and other operating costs. The FFS portfolio was shut down in early 2024 due to ongoing litigation, leading to the impairment.

On a quarterly basis, OLB's revenue declined significantly in the fourth quarter of 2023 as the company wound down the FFS portfolio. For the three months ended March 31, 2024, the company reported revenue of $3.5 million, down from $6.6 million in the same period a year earlier. The net loss for the quarter was $2.4 million, or $0.14 per share, compared to a net loss of $2.6 million, or $0.17 per share, in the first quarter of 2023.

Liquidity

As of March 31, 2024, OLB had cash of $3.3 million and negative working capital of $5.8 million. The company has an at-the-market equity program in place that allows it to raise up to $15 million in additional capital, which it plans to utilize as needed.

In addition, OLB's CEO, Ronny Yakov, has made payments on behalf of the company totaling $182,150 as of March 31, 2024, and the company owes him $194,828 in non-interest-bearing, on-demand debt. The company also has $449,917 in accrued preferred stock dividends owed to Yakov.

Outlook

Despite the challenges faced in 2023, OLB's management remains optimistic about the company's future prospects. The company is focused on stabilizing its core fintech business and completing the spin-off of its Bitcoin mining subsidiary, DMINT, which it believes will unlock significant value for shareholders.

The spin-off of DMINT is expected to be completed by the second quarter of 2024, at which point OLB shareholders will receive a pro-rata dividend of the new standalone entity. An independent valuation has estimated DMINT's value at $29 million, which is more than the current market capitalization of the entire OLB Group.

Additionally, OLB is making progress in its Bodega distribution business, which it acquired in 2023. The company currently has around 1,800 Bodega locations selling its products and services, and it plans to expand this network and add new services such as prepaid cards and mobile wallet reloads.

Risks and Challenges

OLB faces several risks and challenges, including the ongoing litigation with FFS Data Corporation and Clear Fork Bank related to the acquisition of the FFS merchant portfolio. The company is currently in the discovery phase of these legal proceedings, with trials expected in late 2024 or early 2025.

The company also faces risks related to its Bitcoin mining operations, including the volatility of Bitcoin prices and the potential for increased competition and regulatory changes in the cryptocurrency space. The spin-off of DMINT is intended to help mitigate these risks and allow the company to focus on its core fintech business.

Conclusion

Despite the challenges faced in 2023, OLB Group appears to be undervalued relative to the potential value of its fintech business and the upcoming spin-off of its Bitcoin mining subsidiary. The company's focus on stabilizing its core operations, expanding its Bodega distribution network, and unlocking the value of DMINT could lead to a significant turnaround in 2024 and beyond. Investors should closely monitor the company's progress on these initiatives and the resolution of the ongoing legal disputes.

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