After the US SEC (Securities and Exchanges Commission) announced that it’s starting an investigation, the stock value of Longfin (fintech firm) has dropped below 30%.
According to a report, on 2nd April, Longfin divulged the investigation in a public 10-K filing to the Securities and Exchanges Commission. Longfin is among the NASDAQ-listed fintech companies and its market cap shot-up above 1,000 percent in last December, within only 2-days.
Investigation By SEC
On 5th March, Longfin was informed by the Division of Enforcement of SEC that they will be investigating transactions in the company’s shares and also demanded the documents related to its IPO and acquisition of Ziddu.com. Ziddu.com is a firm that focuses on smart contracts and micro-lending via blockchain technology.
In the 10-K filing, Longfin showed that its aim is to cooperate with the SEC investigations. The document says:
“We are in the process of responding to this document request and will cooperate with the SEC in connection with its investigation. While the SEC is trying to determine whether there have been any violations of the federal securities laws, the investigation does not mean that the SEC has concluded that anyone has violated the law.”
What does Venkat Meenavalli have to say about it?
CEO of Longfin, Venkat Meenavalli also acknowledged this gigantic spike in stock value last December, as he stated:
“This market cap is not justified. I valued my IPO pricing at $5.” He also added:
“We are a profitable company… We have nothing to do with this euphoric mania.”
The stock value plunged really quick after an adverse tweet was posted by a well-known short-seller, Andrew Left’s Citron Research and news that the FTSE Russell was considering to eradicate Longfin from its benchmark Russell indexes due to inadequate free-floating shares.
As for the negative view of Citron, Meenavalli said:
“We are going to take legal action after we file the 10-K” and added, “The company is a profitable company, making revenue.”
Also, at the beginning of this year, the SEC reported that it’s going to start an investigation on companies that are using public enthusiasm and blockchain technology to deploy their stock prices.