Long time reader, first time CEO.CA blog poster.
Thought I’d put together some thoughts on the recent press release (link to PR below), which I viewed as very positive overall. Obviously many were looking for an announcement on regulatory approval from MAS as well as some type of disclosure regarding FCM and Exchange partners. While we didn’t get that yesterday, we did get some really clear indications that significant progress is being made and the exchange launch is moving forward.
Abaxx 2022 Q3 Press Release
Before I go any further, I just wanted to point out that I’m clearly very long and bullish on Abaxx and may suffer from confirmation bias. Please view my analysis under that perspective and feel free to point out areas where I may be getting it wrong, or am overly optimistic. At the end of the day a strong dialogue from both a bearish and bullish perspective (respectfully conveyed) will all make us more informed about upcoming catalysts or potential pitfalls that the company may face in the months ahead.
The first thing that stands out to me is that we know that the FCM onboarding process heading into launch is at least a 6 month process, and per the Q2 operations update press release, that process started in early-to-Mid-August. This is huge, as it means that large institutions have committed significant time, energy, and resources to collaborating with Abaxx on the launch of the exchange. In many ways, in my opinion, this was an enormous de-risking event as it means Abaxx and the FCM partners started an intensive 6 month sprint to launch an upstart commodity exchange in Singapore with several benchmark contracts. This process likely will run through February or March, and we just need to be patient and let it play out with incremental milestones being passed along the way.
In fact just last weekend we received key evidence of this progress when one of the largest Independent Software Vendors “ISV” CQG now offers connectivity to Abaxx Exchange. Let me repeat that again, the Abaxx Exchange is now connected to one of the largest front-end trading software platforms. This means that the back end and front end trading are either complete or very near complete and Exchange Participants using the CQG platform can log in and complete beta testing of the Abaxx contracts. No doubt other ISVs are being added (or have already been added). Below is the link illustrating the link between CQG and Abaxx.
Abaxx Added as a CQG Exchange Partner
Abaxx even hinted in the press release yesterday at who the FCMs and Exchange partners will be, by stating the following:
“Abaxx held its first ever APPEC event and had representation across commercial firms, FCMs, and brokers, especially those that are relevant and will be potential partners with Abaxx with our initial suite of LNG and Carbon futures products.”
Based on the impressive research on the CEO.CA Abaxx board, it was determined that the Abaxx APPEC event included participants from global mining giant BHP, trading powerhouse Trafigura, Malaysian energy producer Petronas, and the DRW trading group among others.
Additionally, while the exchange infrastructure and regulatory approvals are incredibly important, what’s equally important is having highly sought after physical benchmark contracts that participants want to trade. Towards that end, Abaxx announced that they not only have two benchmark contracts in LNG and Carbon being put forward for MAS approval, but will have FOUR tradeable contracts that will likely be available at exchange launch. Three of these contracts are known at this point, which are European LNG, Asian LNG, and Carbon, while the fourth is likely to be related to the LNG contract—possibly even crude oil.
Furthermore, Abaxx has a pipeline developing of additional battery and precious metal contracts which are being advanced to the industry partnership and comment stage. In my opinion these contracts are likely Gold and Nickel, but my guess is that a Copper contract (and other metals) are not far behind.
The disclosure from Abaxx on how they view contracts, which the described as stages 1 through 3, is likely setting the foundation for future disclosures that illustrate the pipeline for contract launch, and ultimately contract cash flow! As we get closer to launch institutions and other investors will start to take a closer look at the cash flow generating potential of these contracts, and quickly realize the explosive FCF growth that can be created by the Abaxx Exchange team as they create new and innovative contracts that meet the needs of a world that’s short on physical metals and energy.
As a final note on contracts, consider the explosive potential for little known Abaxx when they submit an industry white paper to the EU for a physically delivered LNG contract. If that white paper is signed by (i.e., has the backing of) major players in the industry and gets picked up by major news sources all over the world, then what do you think may happen to interest in Abaxx (and by proxy their stock?).
Lastly, in terms of ID++, I have always said that I think the idea has enormous potential, but have valued it at $0.00 until there’s more evidence of commercialization and a path to revenue generation. This press release indicated for the first time that we are likely to get that evidence in the first half of 2023. This is significant in my opinion since everyone is valuing ID++ at $0.00 right now, and thus if the market starts to give the product pipeline that ID++ could spawn a valuation of $100M (just an example) then that would add $1.36 to the share price! As a thought experiment I think investors should ask themselves what they think Josh could raise for ID++ from a group of VCs and what the implied valuation for ID++ would be in that case—I guarantee that the value would be well above $0, and would probably be at least north of $50 to $100M given the potential—and an investor in Abaxx Tech you get all of that as a free lottery ticket while you wait for the Exchange to launch, not a bad deal in my opinion.
As always, the above is just my two cents, please feel free to poke holes in my logic or thesis. #ABXX