Hilbert Group AB’s Directed Share Issue: A Strategic Gambit for Profitability in 2025

Hilbert Group AB (publ) (NASDAQ: HILB B), a Swedish quantitative investment firm specializing in digital asset markets, has announced plans to raise SEK 20 million through a directed share issue. This move aims to fund its ambitious growth strategy, which includes expanding its institutional-grade crypto services and launching a groundbreaking decentralized trading platform. However, the decision comes amid mixed financial results and a highly volatile industry. Let’s dissect the implications for investors.

Financial Health: Growth vs. Operational Struggles

Hilbert’s 2024 financials highlight a stark contrast between revenue growth and persistent losses:
- Revenue surged 370% year-over-year to SEK 112.98 million, driven by new ventures like the Xapo Byzantine BTC Credit Fund and the acquisition of Liberty Road Capital.
- Operating losses (EBIT) narrowed slightly to SEK -45.16 million, but cash flow from operations remained negative, worsening to SEK -36.65 million.

The company’s 2025 priorities—achieving cash flow positivity, enhancing COIN360’s revenue streams, and launching its A360 protocol—rely heavily on the proceeds from this share issue.

The Directed Share Issue: Structure and Subscribers

The SEK 20 million directed share issue (announced in late 2024) involves issuing 4.44 million B-shares at SEK 4.50 per share, a 10% discount to the pre-issue closing price. Key details include:
- Subscribers:
- Norwegian investors, including Alden AS (new investor, SEK 4 million) and existing shareholders like Molcap/Qvist Holding (SEK 3.2 million).
- Board member Frode Foss-Skiftesvik, who subscribed SEK 1 million alongside another investor—requiring approval at an extraordinary general meeting (EGM) due to regulatory constraints.
- Dilution: Shareholders face a 6.8% dilution of equity and a 3.2% dilution of voting rights.

The funds will not be used to raise new capital but to cover operating expenses while Hilbert transitions to profitability, which management targets for Q2 2025.

Strategic Use of Proceeds: Betting on Institutional Crypto Solutions

The directed share issue directly supports Hilbert’s three pillars of growth:
1. Xapo Byzantine BTC Credit Fund:
- Manages 3,250 BTC (≈$130 million) with a 4.02% yield.
- Aims to scale to $2 billion in assets under management (AUM) by 2025 via partnerships with Xapo Bank’s corporate platform.

1. COIN360 Platform Expansion:

2. A revamped version launched in December 2024, with subscription-based features targeting $10 million in 2025 revenue.

3. A360 Protocol:

4. A decentralized platform for trading tokenized real-world assets (RWAs) like pre-IPO shares of OpenAI and SpaceX.
5. Integrates with Galactica’s compliance infrastructure, positioning Hilbert as a leader in regulated DeFi.

Risks and Challenges

• Cash Flow Sustainability: Negative operating cash flow remains a red flag. Hilbert’s path to profitability hinges on rapid scaling of AUM and COIN360’s monetization.
• Regulatory Uncertainty: The A360 protocol’s success depends on navigating global crypto regulations, particularly in tokenized securities.
• Competitive Landscape: Rivals like Grayscale and Fidelity are entrenched in institutional crypto asset management, leaving little room for error.

Conclusion: A High-Reward, High-Risk Play

Hilbert Group’s directed share issue is a critical step toward funding its $2 billion AUM target and Syntetika platform launch, which could redefine its revenue streams. However, its operating cash flow deficit and reliance on unproven initiatives like A360 pose significant risks.

Investors should weigh the following:
- Upside: If Hilbert achieves its Q2 2025 profitability goal, its 370% revenue growth trajectory and strategic partnerships (e.g., Xapo, Galactica) could drive exponential value.
- Downside: Persistent cash flow issues or regulatory setbacks could amplify losses.

The SEK 20 million raise buys Hilbert time to execute—but execution must follow swiftly. For now, the stock’s valuation hinges on whether its quantitative trading edge and institutional-grade services can outpace the crypto sector’s volatility.

Institutional investors seeking exposure to regulated blockchain innovation may find Hilbert an intriguing, albeit volatile, play. For others, proceed with caution: the path to profitability is narrow, and the stakes are high.