GLOBAL BLOCKCHAIN (OTCMKTS:BLKCF) Is A Very Risky Penny Stock

Today, we need to talk about an over-hyped business profile in the blockchain universe; GLOBAL BLOCKCHAIN (OTCMKTS:BLKCF). We had a look at the financials of the company and saw that it has made no revenue in the last two years. We cannot believe that market participants believe that such a business can have a market capitalization of $35 million.But, that's not all.The company seems to be pushing up the share price only by releasing large amount of news to the market. You know how this works; the larger the amount of press releases, the higher the demand for the stock, and the higher the price.Well, we don't want to say how this whole story usually ends.Have a look at how the trading volume increased as a result of the announcements and the share price appreciation.From almost no volume before October 2017, the market commenced to see trading volumes close to 1.0 million per day.Additionally, the share price went from below $0.5 to close to $2.5, which, we believe, is an unsustainable growth pace.Have a look at it before we provide more details about this name: 1 year chart for BLKCFBitcoin BusinessBLKCF was founded on February 12, 2010. It used to operate in the biotechnology sector until it changed its name and business activity. At the moment, it is intended to be an investment company "providing investors access to a basket of holdings within the blockchain space."The most significant asset is an agreement to acquire 49.9 per-cent interest in CoinStream Mining Corp. The business intention is as follows:

"Employ the streaming model, providing strategic upfront capital and an additional payment upon delivery of the cryptocurrency, to select proven, best-in-class operators and operations, in exchange for a stream of future cryptocurrency production, at a fixed price." Source

The deal was announced on November 7, 2017 and we believe that it was the reason for the share price spike.The following expected figures were noted in the press release. CoinStream Mining Corp is expected to provide following over the next 5 years:

• A total of 2,500 bitcoins per annum at a fixed cost of US$1,000 per bitcoin payable at the time of delivery.

• In the event that the price of bitcoin trades above $15,000, the fixed cost payment would rise to US$1,500.

• In the instance where the network hashrate rises above certain predetermined levels for a sustained period of time, the fixed cost payment would be adjusted upward.

The company will receive 12,500 bitcoins, which was said to represent CAD$112,500,000 when the announcement was made.What will the company provide?BLKCF was said to finance the project with $10 million, which will be used to pay for capital expenditures. The company will also retain 50% of the ongoing value of the equipment.Shidan Gouran, President of Global Blockchain, was quoted:

"Coinstream is answering the call from those who seek to fully leverage the regularly forecasted potential parabolic price growth of the mainstay cryptocurrencies, from a net long bias, contracted and derisked against the need to maintain operations, and secured by the value of the operating equipment which represents the majority of the CAPEX allocation." Source

Once the business is ongoing, the company expects to spin out its mining business.What's the main issue? - Where is the money?In the press release, it was noted that Global Blockchain will be paying with stock; 3.8 million common shares. We believe that the shareholders will not appreciate this fact. The company is going to dilute their stakes with this transaction.But, that is not all.At the bottom of the press release, we could read the following, which, we believe, many market participants did not notice:

"The agreement remains subject to various conditions precedent including that Global Blockchain raise not less than US$30,000,000 at which point they would make a commitment to fund US$10,000,000." Source

If the company does not obtain $30 million, the deal is over. It means that all the value that the company seems to have obtained thanks to this agreement will vanish.Now comes the interesting fact. In the last financial situation reported, the company noted that it had cash of $490,258. This means that the company does not have the $10 million necessary to pay for the capital expenditures required.What's the company doing to look for the financing?Canaccord Genuity Corp. is helping the company sell 15,700,000 units to obtain a total gross proceeds of $40,035,000. The units were defined in the following way. Please note that warrants, which are dilutive securities, are included in the deal:

"Each Unit shall consist of one common share of the Company (a "Common Share") and one common share purchase warrant (a "Warrant"). Each Warrant shall entitle the holder thereof to acquire one Common Share at a price of $3.50 for a period of 24 months following the Closing Date." Source

There is more.The closing date of the offering was scheduled to be on or about November 30, 2017. The company needs to release if Canaccord Genuity Corp. was able to sell all the units.So, here goes our take. The company did not disclose yet the amount of money collected. If it is not able to raise the money, the share price will collapse. We believe that the company is not the best choice, as the payoff is, in our opinion, the following:

• Little money is collected: the share price will go down.
• The money is collected: the share price will stay where it is or will increase very little.

ConclusionCurrently trading with a market cap of $35 million, BLKCF is a name with which longs need to be careful with. With a book value per share of $0.03, the share price seems to be very overvalued. We cannot expect what will happen next, but the upside seems limited from here.We will be updating our subscribers as soon as we know more. For the latest updates on BLKCF, sign up below!Image courtesy of GotCredit via FlickrDisclosure: We have no position in BLKCF and have not been compensated for this article.