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Nicole Benjamin: Hey, everybody. It's Nicole Benjamin, your host here at Seeking Alpha to bring to you another episode of our series Portfolio Pulse, where, as the name suggests, we are keeping a pulse to all the big financial moves happening in the market. Now for today's episode, joining us is none other than Joe Parrish. Thank you, Joe, so much for joining us today.

Joe Parrish: Yeah. Thanks for having me today, Nicole.

NB: Absolutely. So for everybody that's listening in, I want to dive into your background. I see you've been on the Seeking Alpha platform since 2023. Tell us a little bit about that. How you got on? What your investment philosophy is? Things like that.

JP: I mean, lot of it goes back to when I first got interested in investing. That was back in 2020. And it really came from a place of wanting to have some control of my financial future because I think if you're like any millennial or Gen Z, there's a lot of life and career advice you've gotten maybe from elders that were with good intentions, but reality has gone a different direction. And so, if you want to make sure you have as much control of that as possible, you have to be in charge of your own finances and understand how the instruments that make that possible work. So, that's what got my interest.

I eventually, my interest led to actually some experience in the field. I did a year at Fidelity as a registered advisory rep and worked on 401(k)s there, but I wanted some more freedom and autonomy to continue to operate in the field. So, first chance I got once I had enough saved, I began what led me to Seeking Alpha.

NB: Well, that's wonderful. Now, I want to dive in. Like you in your most recent article, are talking about all things Galaxy, and you described Galaxy as a bet on three very different businesses. That's trading, tokenization, and then data centers. So, in your opinion, why is this triple threat strategy a risk rather than a strength right now?

JP: Yeah. I think that's a good question because I think to a lot of folks, it sounds like an advantage. I would say, it really comes down to, you have three execution risks rather than three obvious synergies. So, I don't think Galaxy is necessarily an obvious leader in any of those three focuses. And so that means that, management is going to have its attention divided a bit, and it may come at the expense of neglecting one over the other if they try to bolster any of those or make any of them stronger, right?

And it puts them in a position of, not only having to compete for customers, but also for capital. That they're at a phase where they still need to raise a lot. And so, there's a lot that can go wrong. Obviously, they're focusing on things where there's potential upside in growth. But there is a bit of a revolving door in terms of making everything work. If there's ever a delay or a setback, I think that's where risk can materialize.

NB: That makes sense to me. So, I guess some critics are arguing that calling the Helios project small overlooks its massive scale in North America. So, why do you believe the high costs of running these centers outweighs the revenue they just started making?

JP: Sure. I think it's important to note that, when we talk about small, right, in an investing sense, it's in terms of what are you as a shareholder getting from it? So, it's small in the sense of, is that everything Galaxy's doing? Like I could make a pure play bet on data centers. And so, if we look at like their recent contract with CoreWeave, right, they started getting revenue from that just in April. A lot of people saw that as a big win because it's CoreWeave. Well, that also naturally raises the question, why not just invest in shares of CoreWeave if you want to play the data center future? And I think if you look at the two of them, CoreWeave has a lot more flexibility in its ability to raise capital. And even then, it's not necessarily an easy job for CoreWeave to do that.

Both companies are coming out of a situation where they're pivoting from crypto mining, which wasn't quite as lucrative and the AI demand is a way to salvage those assets and make them a bit more immediately productive and cash generative than they were before. Right? So, even with a leader like CoreWeave, right, and you can see the opportunity, it's a bit tricky. And so, part of me is thinking, okay, they have these more capital light areas of the business, but what's going to happen with this part that definitely has some upside, but it's consuming a lot of capital. And I think shareholders at least should be thinking about that before or potential shareholders before they take a position.

NB: So, I see here in your article, you mentioned Securitize is winning major contracts. In a world where Wall Street is just picky about compliance, does Galaxy have the resume to really steal market share from leaders like Ondo and Securitize?

JP: I think if we're looking at resume, no. The importance of compliance, I think, becomes clear if we look at two very recent deals in this space. One involves Securitize, the other involves Bullish. So, Securitize announced a partnership with Computershare. Bullish said that they're going to acquire Equiniti. Why does this matter? Well, those are the two largest transfer agents in the world. They cover over 90% of the stocks in the S&P 500. And so, it gives them direct access to the issuers. So, securitizing bullish tokens, those aren't just going to be tokens. Those are going to be the real stocks.

I mean, that's just the straightforward way of looking at it. And so, you're saying players stake claims very quickly in this space, and it puts them first in-line for any other tokenization services that are downstream. So, there's a lot of opportunity here, but is Galaxy the one making the trends? No, I would say you see Securitize and Bullish doing this. Maybe Galaxy can benefit from those, and that's still good in a sense. But if we're talking about meaningfully taking market share and being in a position to hold anything they might take and getting as much upside as possible, I think it's a bit more of an open question, and open questions are a reason for caution.

NB: Now, you also gave Galaxy a Hold rating, but the Seeking Alpha Quant system gave it a Strong rating. So, with the recent price surge, which makes momentum favorable, what is causing some hesitation on your end? And is there anything that could potentially tip the scales for you and change your stance?

JP: Yeah. There are a few things. First of all I think it's fair to know it's not like there aren't positives here. Right? These are all segments with some growth potential, some catalysts that could be coming around. But I think for me, it really comes down to the fact that with Galaxy, most of their revenue is from their crypto trading business. And there's a little bit of recent stuff from the, again, the contract with Helios. But realistically, I think if we could see their other segments see revenue increases enough that their earnings can help self-fund some of these capital projects in the data centers, that would significantly de-risk the business. I'd feel a lot better about it at that point.

NB: Now that I'm thinking about it, to grow big data centers, you need big cash. And with Galaxy's $11 billion valuation, how worried should investors be about share dilution when it comes to growing?

JP: Right. Yeah. I mean, that's always a concern, especially with companies in these spaces, especially in the data center side. I think the $11 billion valuation, it's tempting for management, right? Because you can get a pretty good amount of cash per share without diluting too much. And that's good. It doesn't come with bankruptcy risk, but it does mean that there'd be some dilution. A lot of the convertible debt is being used as well, which is basically dilution. So, it's going to be tempting, I think. And the issue there, of course, is that depends on the power of beliefs. What if that belief goes away even for a moment, especially at the moment that Galaxy needs the capital?

NB: Now, one more question for you before we get out of here. What would you like to see from Galaxy in the next year or two?

JP: So, I would want to see more deals related to their data center business. I want to see more contracts coming in, more letters of interest, more signs that today's capital investments are going to lead to revenue in the future. And I want to see them, actually, I think clarity is going to be a big bottleneck. I want to see some clear path to here's how we monetize the tokenization opportunity, because again, people are seeking claims in that fast. I think of the three segments, it's the one that would be the least capital intensive and with potential for upside. If they miss that, I think a lot of the upside case for Galaxy gets a lot weaker.

NB: Alright. Well, we'll leave it right there. Thank you so much, Joe, for joining us today. And for everybody listening in, go ahead, hit the follow button on Joe's page, click his article, see if Galaxy might be right for your portfolio, and we'll see you here next time.