Okay, we are ready to welcome our next presentation. Please welcome to the stage Chief Strategy Officer Brian Rudick of Upexi.
Hi, everybody, and thank you very much. Really appreciate you being here. I'm Brian Rudick. I'm the Chief Strategy Officer. Upexi is a leading Solana treasury company. That means that we attempt to raise as much capital in an accretive fashion to buy as much Solana as we can. We have other ways that we can add additional value for shareholders that we'll get into in the presentation. As you can see, Upexi started out and continues to be a consumer brand owner. We currently have one consumer brand, which is an innovative pet supplies product company, where we sell direct to consumer or via third parties like Amazon. That business is roughly $5 million in annually recurring revenue. It's roughly break even, and it is a very small part of our story, as you'll soon see.
That is because in February of last year, we announced our transition to a digital assets company, and specifically in April, we raised $100 million in what was the first large-scale equity raise for an altcoin treasury, meaning anything beyond Bitcoin here in the U.S. We actually quickly began staking our treasury to earn a, at the time, 7% yield to turn it into this productive asset, as well as buying a lot of locked Solana at a discount, which provides for built-in gains for shareholders. We'll talk about what exactly this means in a little bit. We followed it up with a highly accretive $200 million raise in July, putting our total raise at that point to $300 million. Then we announced that we had roughly 2.4 million Solana tokens early this year.
More recently, as I'm sure some folks are aware of, crypto has been in a bit of a bear market. We've really focused on the things that we can control. This is really reducing our expenses and shoring up the balance sheet. I'll provide more details there shortly, but that is a bit of a timeline of our company. Before actually getting into what is basically tantamount to a primer, I'll talk about what differentiates Upexi from peers, because we do have a few other companies that attempt to do these similar things that we do. Number one is management. Our CEO, Allan Marshall, founded XPO Logistics. It's a $22 billion NYSE-listed company, so he's been uber successful.
Previously, our CFO, Andrew, has been a public company CFO for many years. I actually spent most of my time running a long-short book for different hedge funds like Citadel and Millennium covering banks, which is the most analogous thing to a digital asset treasury company prior to their existence. Effectively, we believe we know what we're doing. Number two, we have what we believe is a leading strategy. We try to increase shareholder value as much as possible, but in a very risk-prudent fashion. What this means is we target only a moderate amount of leverage, which we generally believe that leverage is good when you have a positive medium-term view of the asset. As you know, crypto is quite volatile, so you have to make sure you don't get ahead of your skis.
This also means we're not doing any sort of crazy on-chain degen trading like some of our peers who are looping liquid staking tokens, where you're putting some of the treasury at risk. We are also using only qualified custodians and diversifying amongst third-party providers to try to utilize best operational and risk management practices. Effectively, we're trying to increase shareholder value in a risk-prudent fashion, and we think that this benefits us in two ways. First, we think we're well positioned for any market environment that we may come across. Number two, we think this will help to attract investors of all kinds. Number three, we've generally led with innovation. As I mentioned, we did do the first large-scale equity raise for an altcoin treasury.
In July, part of that $200 million raise was actually an in-kind convertible note issuance where we issued a convertible note and we took Solana as consideration. We are going to continue to try to lead with innovation, particularly on the capital market side of things, to stay ahead of peers. Lastly, we're one of the few treasury companies who have demonstrated the ability to create value for shareholders. Last year, we utilized our three value accrual mechanisms to actually increase our Solana per share by 35% by our measure.
To put that in perspective, and this is the whole reason why you would own a treasury company rather than owning the crypto outright, if an investor had bought Solana and staked it themselves in similarly sized and similarly timed investments, they would have had 3% more Solana, and we were able to get investors 35% more Solana. So there are these ways that we can get investors more SOL, and in theory, if we can execute, we can therefore hopefully outperform the base asset. What is all of this? What is a treasury company? Well, it all began with MicroStrategy in August 2020, where MicroStrategy was a slow-growing technology company. They were public, and so they were listed on the Nasdaq, and they were tired of seeing the dollars that they held on balance sheet erode in terms of purchasing power.
They ended up buying Bitcoin, and Bitcoin started to move up. MicroStrategy's stock started to move up too, and in fact, it moved up even more. Pretty soon they accrued a multiple in terms of market cap relative to the value of their Bitcoin. In other words, if they had $100 million worth of Bitcoin, the market might say the company's worth $200 million, so they traded at 2 x. Then they realized that they can monetize that premium multiple via accretive issuance. When you issue equity, when you're trading at 2 x book value, it's tantamount to selling a dollar for two or effectively buying Bitcoin half off. They've just done this over and over again to create free Bitcoin for shareholders.
Actually, until recently in this latest downturn in crypto, it was the best performing stock in the U.S., even outpacing NVIDIA and Tesla and Google. They've just done really, really well, and it's more than just a leverage play because they can do this capital markets flywheel. What you've seen more recently is these historical efforts really focused on Bitcoin, and then when we got a more open SEC, they've moved to cryptocurrencies beyond just Bitcoin. It provides a lot of benefits for shareholders. Number one, you can access cryptocurrency or a proxy, in the form of a familiar equity security. Number two, we'll often trade with a beta to the underlying, which is generally a positive if you think the underlying can go up over the medium term. =
Number three, as I mentioned, we do have additional ways like accretive issuance to add value for shareholders. As far as what is the main components of a treasury company, there's really two. Number one is external visibility. You have to make sure you're as visible as possible so everybody knows about you. That actually increases demand for the stock and helps you command that premium multiple. Number two is actually monetizing that multiple, which is all about issuing equity, issuing convertible notes. Some companies are now issuing pref's. You can see everything that Upexi has done here on both sides of the equation, and I think we've executed quite well and hopefully intend to continue to do so. This is a slide on the way that we can add value for our shareholders. This is what gets me so excited.
Maybe I'll start with staking. This has to do with the way that the cryptocurrency was brought into being and also the consensus mechanism. For Solana, it's a proof of stake network. What that means is you can effectively lock up your tokens for a very short period of time. You're helping to secure the blockchain in a very low risk manner. In exchange for that, you get in-kind yield. We're generating a 5%-6% yield on our treasury, turning it into this productive asset. If we did nothing else, we'd have 5%-6% more SOL in one year. Another one is around locked token purchases, where when Solana came into being, it came with an initial supply of 500 million, and Solana Foundation didn't want all of the SOL just circulating on the open market.
It sold some of that to venture capital funds, and those were subject to vesting schedules. We have a buy and hold strategy only, so it does not really matter if we are buying Solana that is locked, and we can buy that at a nice solid discount. So 36% of our book is locked that, in general, we are buying at a 14%, 15% discount. We are still getting our staking yield. What is really nice about that is we look at it as tantamount to built-in gains for shareholders. If you put that discount into a yield equivalent, we are roughly doubling that staking yield. The last way that we create value is just this intelligent issuance, which we cover in more depth in this slide. Let us continue with that example.
Let us say that we currently have a multiple and we go out there and we issue equity when we are trading above one. The math works out to be that we are effectively, and by definition, increasing our crypto per share when we do issue equity. As I mentioned, we can issue equity either directly via our ATM, we can do a large equity private placement, or we can do convertible notes, which we have done more so on the in-kind version. That will increase our crypto per share, and then as long as that multiple holds, our stock price should move up commensurately, and then you can just continue to do this again and again. MicroStrategy actually did this last year and created $9 billion worth of free Bitcoin using this capital markets arbitrage.
We actually think that we improve on MicroStrategy’s model with staking and discounted locked Solana purchases. Here is a note on valuation. I would actually argue that we should trade at a higher multiple than somebody like MicroStrategy. Number one, I think that we are a smaller company, so if we do a similarly sized, similarly priced raise, it will be more accretive, meaning it will increase crypto per share more. Number two, we are based on a smaller token. SOL is 4% the market cap of Bitcoin. So all else equal, you might think there might be more potential upside. Number three, we do have additional ways to create value, such as staking and discounted locked Solana purchases. Here on the left, you can see that in general, digital asset treasury companies have traded at a premium during crypto bull markets and a discount during bear markets.
We are actually in a bear market right now. I would argue it is a pretty good entry price or entry point where if Solana actually moves up, the value of our treasury should move up commensurately, but also you might see multiple expansion if history is any guide. So multiple ways to win. All in, we look at the investment thesis as Upexi providing crypto exposure in the form of a familiar equity security, but also unlocking significant value using proven capital market strategies. Actually improving on the main model that MicroStrategy used through things like staking and discounted locked Solana purchases, and then capitalizing on crypto secular expansion and Solana as an end game winner. All that said, that is the business and the business model, and the number one determinant of how Upexi does is going to be the performance of Solana. So what is Solana?
Solana is a smart contract blockchain built for performance and mass adoption, is effectively a new computing paradigm. You can think of Bitcoin as a bunch of unrelated computers all around the world that just keep track of who paid what to whom, when, and that is all it is. It is morphed into this store of value because it does not have great computational abilities.
Along came Ethereum, and along came Solana that said, "Instead of having all these computers all around the world simply keep track of who paid what to whom when, let us have them process code." Then they can compare the output of that code to everybody else's, toss the ones that do not match, and then come up to this notion of truth in this decentralized manner, which has all these wonderful use cases and benefits like democratization of value exchange, like removal of intermediaries.
You can think of Solana as a new form of computing. What we like about Solana is really two things. Number one, it is the first second-generation smart contract blockchain, meaning that it has been around long enough to have network effects. It has 5 million daily active users. It also came late enough to where it uses the best technology. Solana processes transactions in parallel, just like our computers or our phones do, so it is hyper-performant enough to support mass adoption. The second thing that we really like about Solana is it is going after what it calls internet capital markets. I like to think of this as trying to reimagine our antiquated financial infrastructure. If you think about it, the global finance is built on technology that was created in the 1970s, like 50+ years ago.
These are things like ACH and the credit card issuer networks. Even fintech is just a front-end wrapper on this antiquated technology. There is no reason why we cannot upgrade these antiquated financial infrastructure with blockchain and internet-based rails. It is happening in a big way, and it is happening on Solana. Things that Solana is focused on, stablecoins. You can create a digital representation of a dollar and send it just about instantly and just about free. You can actually move beyond dollars and tokenize things like equities or artwork or anything you can think of, ideas even. That is happening in a big way where Solana leads with a 97% market share of spot tokenized equities trading volumes. Another big one, which is much more nascent, but has obviously a massive TAM, is just AI agents.
There are some people that think in 10 years, the bulk of economic activity might actually be done by agents. An AI agent just cannot walk into a bank and open up an account. They are going to need this hyper-performant, credibly neutral, permissionless network to transact upon. Guess what? Solana is actually leading in x402 payments. That is a payments protocol for AI agents to use. This just has obviously a massive TAM. What also gets me so excited is that you have so many of the world's leading institutions in both finance and technology building on Solana. You can see here it is all the way from Visa, MasterCard, Western Union, Citi, BlackRock, SocGen. They are settling international remittances. They are tokenizing different things. They are building their own stablecoins. The horse has left the barn.
It's not a six-month thing, but this transition will happen, and it will happen over the next three to five years, is the way that I tend to think about it. This slide is on our treasury. We've got SOL 2.3 million . We think as all the stuff in the last slide comes to fruition, the price of Solana should benefit very materially and therefore, so will our treasury. You can see we've generally increased the treasury over time. Again, roughly a third of that is actually in locked form, where we have these built-in gains for shareholders as the discount moves to par. Then we're generating a 5%-6% staking yield as well. Here's a couple key metrics. Again, last year, we increased our SOL per share by 35%. On valuation, our valuation is actually kind of difficult to tell exactly where we are.
If you assume that our in-kind convertible notes convert at their existing conversion price, we're actually at a discount. If you assume that they don't, we're at a higher valuation, and that's for everybody to make their own determination. But I tend to think that we're at some sort of a discount, which means could be a good entry price if you think we'll move back to one. In fact, we could force ourselves back to one. We could just sell our crypto and repurchase our stock until we got to one. That, by the way, would just be playing things in reverse and would also be accretive to crypto per share if we did that. We did do that during the downturn, not in a big way, but I think we bought back maybe 2 million shares or so.
You can see on the bottom left, this is our credit risk. We view this as moderate relative to the value of our cryptocurrency. We're attempting to work this down a little bit, but it's extremely manageable, and we like having that additional exposure to Solana. Then you can see here in the bottom right, there's really three companies that are Solana treasury companies that have a very material trading volume, and we're fortunate to be one of them. More recently, crypto prices have come back up a little bit in a small way, but on the grand scheme of things since last October, they've been generally down, and we've used this time to really focus on what we can control. We've really tried to push expenses down as low as possible.
We had 59 employees a year ago, now we have 10, and we've guided toward our staking revenue, fully covering our cash expenses on a go-forward basis. Then we've also tried to improve the quality of the balance sheet. So we've raised some equity, we've increased our cash position, we've reduced our debt, we extinguished some of those in-kind convertible notes. Then we renegotiated our credit terms for a lower cost of credit and having to put up less collateral against that as well. So we think we're in a much better position, no matter the market environment that comes in the future. This is a slide on crypto. I've touched on some of it.
The TLDR is crypto is a new form of computing but provides all these really wonderful use cases and benefits that you can't get with other technologies, like removal of intermediaries, like democratization of value exchange. I really do think that crypto is in a secular expansion. Like any technology, it takes decades to reach final form, and it takes decades for users to adopt it. You can think of it like the internet invented in the late 1980s, and it wasn't until the mid-2000s that we actually had the internet as we know it with user-generated content and social networks. But it is happening, and our view is that crypto will trade based on sentiment because it's so nascent, but over time it will follow the fundamentals. You can see here, whether it's crypto users, daily transactions, number of developers, they're generally all up and to the right.
Lastly, I do think that we could potentially be on the precipice of mass adoption, and this is all due to a bunch of corporates actually utilizing this. In some sense, crypto was always held back because the rules were not clear, but we're getting that regulatory clarity because the SEC, the CFTC, they're all writing the rules and updating them for the current environment. So companies are now jumping in in a big way. They're kind of forced to adopt this technology because if they don't, they'll be disintermediated by those who do, and it's the corporations who have access to billions of customers, billions of dollars of capital, top developers, and built-in trust.
I think if they can abstract away the back end and utilize blockchain-based rails, I think first it'll happen in the world of finance, but I think we are on the precipice of onboarding the masses. As long as some of that continues to happen on Solana, we are in a really great position to benefit. Here's one last slide on why Solana. Our view is Bitcoin is the best monetary asset, and Solana is the best high-performance blockchain. It's really that simple. If you look at the potential price appreciation of Solana, it's 4% the market cap of Bitcoin. Solana's actually leading all other blockchains in many of the key metrics, whether it's daily users, number of transactions, application revenue, and in a bunch of different key segments like spot tokenized equities trading, or AI agent transactions.
We went over why Upexi, but again, I think it really boils down to four things, top management, a leading strategy, demonstrated ability to create value, and leading with innovation. So I think we're in a really good position to continue to try to create value for shareholders. With that, I think we got three minutes for questions if anyone has any. Yes.
I saw on the slide, but I missed it. One share equals how many Solana coins effectively?
Yeah. We actually publish and update this every day
Okay
on our website. If you go to upexi.com, it is on there. I think it is like SOL 0.06 , but it is right on. Then you can obviously, when translating that to U.S dollars, multiply it by the price of SOL, which is 105.
Then maybe you could explain the difference between locked and unlocked SOL.
Yeah. It is a great question. The question was to explain the difference between locked and unlocked Solana. Bitcoin and Ethereum were brought into existence via what was called a fair launch, where effectively the only way to get new BTC or new ETH was to participate in the network by mining, solve the mining puzzle, get the block reward, and then that was newly created crypto. Solana and basically every other cryptocurrency was brought into existence via what is called a pre-mine, where you create this initial supply and then you partition off certain amounts for different use cases. In Solana's instance, it created 500 million in terms of an initial supply, and then what it said is, "Hey, we are going to keep X percentage for the foundation to give out to developer grants to attract developers to create applications on Solana.
We are going to keep another percentage to sell to cryptocurrency VCs." This is where the locked comes in. They were selling to VCs to raise money to develop the network and the protocol, and that was the form where you cannot just turn around and sell it on a centralized exchange or use it in DeFi on Solana. We are not doing any of that anyway, but because it is locked, it generally unlocks on a monthly basis ratably until January 2028. We have been able to buy that at nice discounts. You still get the 5%-6% staking yield, and then we are buying these things at $0.85 on the dollar. That then turns into spot Solana worth $1.00 on the dollar. I think time is just about up. With that, thank you very much, everybody, for attending.