Abaxx Technologies: The Game is Afoot
With Abaxx launching their FDT pilots this year, their technological advancements are setting Abaxx to have an edge which would allow them to compete directly with the current crude benchmarks and possibly overthrow them. At the same time this puts them in a position for a hostile takeover and possible bidding war however unlikely of a success it may be.
Before we get into it, if you are new to Abaxx, check out my write up from earlier in the year:
Contract Progress
Since that report, Abaxx has launched their gold contract which has been gaining significant traction along with their LNG contracts. In the past week they traded 1,800 lots of their LNG contract which comes out to around 5.5 cargoes of LNG being traded on a physically settled LNG benchmark contract. This represents over $150 million in notional value.
On the gold side we don’t have all the data but they recently had in a single day 2,379 lots of gold which is over $250 million notional of gold value being traded on their exchange.
Access to the US Market
It is important to be reminded that all of these significant achievements has been achieved by Abaxx without direct access to the US market via an FBOT. One of the biggest banks in the LNG sectors doesn’t even allow their clients in trading until the FBOT process has been completed. With Abaxx having started the application some time ago, it is expected to get approval any moment now. CFTC just on Thursday re-confirmed their position that all companies in a equivalent regulatory environment such as Abaxx are eligible for direct access to the US once the application has been approved.
Technological Advancements
Abaxx has announced their technological improvements for futures contracts is nearing completion and have already planned two pilots for their Full Digital Title (FDT) technology. The first pilot is in Gold and the second will closely follow for tokenized Money Market Funds (MMF). They are expected to finish those pilots by the end of the year with one of the pilots being done possibly as soon as September.
Success of the pilots with industry backing showing FDT has legal finality will be the next step for Abaxx’s transformation and give a multi year head start compared to the competition. It would also enable Abaxx to tackle onboarding $42 trillion worth of assets to their platform.
Abaxx will be the only company on earth to be able to launch new futures contracts with advanced functionality brought to you by their FDT technology. Full Digital Title will enable anyone in the Abaxx ecosystem to settle their trades in real time with 24/7 availability and legal finality backed by a strong rule of law in Singapore.
All of this (and so much more) could be unleashed onto the market by the start of next year. The purpose of this isn’t to go into the tech advantages though so I would urge you to read their investor reports, latest investor call, or Abaxx CEO’s (Josh Crumb) posts here on X.
The Game is Afoot
Every trader that Abaxx pulls to their LNG contract is one less trader using the competitor’s platform. How long will the JKM contract continue to exist as Abaxx spins up a benchmark LNG contract right next door? How long until their competitor starts to recognize that the Abaxx LNG contract with their technological advancements sucks up all the LNG trading liquidity causing hundreds of millions in losses in both income and market cap?
I ask these questions to help you understand that Abaxx with their FDT technology will start to cause real monetary losses to these giants with hundreds of billions in MC while operating on a small $25 million dollar budget.
The FBOT will be transformational for Abaxx has they will have full regulatory clearance to begin accessing the US markets and further weaken their competitors positions.
While Abaxx is starting to form the next generation futures trading platform though we can be thankful as shareholders that their competitors are focusing on the important things.
Such as one’s recent partnership to create gambling event contracts. The thing commodity traders have all been asking for (sarcasm) while also fighting off competitors from trying to take a bite out of their U.S Treasury Futures markets.
Brent Crude Contract Competitor
I have laid the foundation for you to understand that Abaxx is having real success with their platform and in less than 6 months they are about to leapfrog the competition in terms of technological abilities with full connectivity while one of their competitors is focusing on creating gambling platforms.
I am not blind to not see that eventually their competition will need to respond. Maybe they try a buyout or they try to release their own technology, either way they will respond.
Until then Abaxx is in a unique position. They will have FDT unlocking margin efficiencies and offering many benefits their competitors do not and cannot. At the same time they have been onboarding all their competitors customers wanting to trade their benchmark Gold/LNG contracts. Abaxx is in the best position to strike and for that reason I think it would make sense at this point for Abaxx to launch a directly competing WTI and Brent futures contracts using their technological leverage they have for some time. I would go as far to say launching competing contracts in all the top futures markets.
It would be a difficult task for Abaxx but if the conditions are right, they have a real chance as Abaxx will soon have enough connections through their LNG/Gold contracts to start strong competition with their technology. Maybe I am wrong and their FDT tech is not enough to convince traders to use Abaxx. But if it is, we could see a sharp shift in terms of their competitors future outlooks.
If they are able to convince traders to use their improved platform, I would also expect they have a little goodwill to continue improving and building out their platform even if their competitors respond.
I compare it to getting a new better paying job offer. A competitor is offering you 50% raise to come join them and currently you feel undervalued at your current company. When you accept the job and tell your employer you are quitting, they may come back and offer 75% to 100% raise to stay. While it is better on paper, there is a little resentment that was built as they could have offered it sooner. You also know it’s likely only good until they can figure out ways to replace you for leaving.
Likewise, Abaxx is offering traders improved tools and technology to use their platform. If it’s good enough to switch and overcome the initial illiquidity in the contracts, the competition would need to offer significantly more benefits for those traders to switch back. Something that is unlikely for several years if at all.
I also believe the transfer of liquidity might move fairly fast if Abaxx tech is as good as they say it is. We are seeing how quickly gold is gaining traction as it is a mature industry with existing competing futures contract (just not as good as Abaxx's). Brent/WTI are mature contracts with large amount of traders. If Abaxx can provide initial liquidity with their partners, it would draw in traders wanting to arbitrage the prices. Eventually the liquidity pools grows enough for commodity producers to make a switch and take advantage of Abaxx tech.
Difficult Spot
Remember the market is forward looking. How will investors view these giants if they start to haemorrhage liquidity to the much smaller Abaxx? How will investors view Abaxx if they may very will be successful with a Brent Crude competitor as they have had with their LNG and Gold?
As Abaxx continues to gain success, their market cap will continue to push higher and higher while competitors may start to fall to account for this. Every day they wait is another day for Abaxx to prove further success. With each day going by, Abaxx cost of capital decreases allowing them to expand extremely quick to compete even quicker with minimal dilution. The game is afoot for Abaxx and I am sure they understand the importance of using this momentum and tech advantage.
On the other hand it is extremely risky for a buyout offer. Shares are tightly held by a dedicated retail investor base (who funny enough all wear the same hats) along with several institutions knowing what Abaxx is trying to achieve. Those buying at these levels have a strong understanding of Abaxx’s potential and won’t accept even a 100% premium to the current share price. As such they would be required to offer upwards of 200% or even more.
The problem is though, a 200% premium to the current valuation would only further validate what Abaxx has been building and would also likely trigger competing bids from other companies or from other competitors driving the price higher and higher. If one of the main companies were to get ahold of Abaxx tech, they could more easily steal liquidity from the competitor. On the other hand a larger company wanting to break into the futures market and a larger war chest might see this as a unique opportunity.
Summary
Abaxx getting full access to the US markets could pose a significant risk to incumbents. Abaxx has already been building strong relationships across all continents and that is starting to pay off with their quickly rising Gold/LNG contracts with Abaxx set to launch 10 more contracts by the end of the year.
If Abaxx pilots prove to be successful and get the backing from significant investors and approval from regulators, they are in a very strong position to not only tackle new contracts but challenge incumbent's golden gooses such as the Brent or WTI crude oil contracts.
At this point, Abaxx needs to move fast by raising enough money (through possible uplist) to build a strong team and take advantage of this momentum and technological advantage they have before a competitor can respond.
We will likely see the remaining 4 months of the year to be among the most fast paced and exciting time for Abaxx given all of their initiatives on the go. Success in these 4 months will lay the foundation and setup Abaxx possibly be a $100+ billion company.
Disclosure
The author of this report holds positions in Abaxx Technologies, which is mentioned within this analysis. These holdings represent the author’s personal investments and may reflect biases in the evaluation presented.
This report is for informational purposes only and should not be construed as investment advice. The analysis and opinions expressed herein are solely those of the author and were not influenced by any outside party. The author has not received any compensation, monetary or otherwise, for the preparation or publication of this report.
Projections and valuations are based on assumptions that are subject to market risks, uncertainties, and changes in circumstances. Past performance is not indicative of future results. Investors should conduct their own research and consult with a financial advisor before making investment decisions.
