One of the most high-flying crypto stocks came crashing back to Earth this week after a report argued that it wasn’t rising “for the right reasons.” Today, the company issued a strenuous defense of its business.

In its Tuesday issue, crypto newsletter CoinSnacks outlined an extensive marketing campaign undertaken over the past few months to provide positive coverage for DeFi Technologies (DEFI)—a Toronto-based crypto fund provider that publicly trades on Canada’s Chicago Board Options Exchange (CBOE).

The price of DEFI stock has risen sharply along with other companies that have adopted Bitcoin as their primary treasury reserve asset, following the massive success of MicroStrategy (MSTR), now the top institutional holder of BTC. Amid the excitement, some analysts began waxing bullish on DEFI for fundamental reasons, claiming that it's supremely undervalued.

On the Monday before the report went out, DEFI traded for CAD $3.30, up 202% since May 31. As of Tuesday’s close, the stock had cratered 35% back to CAD $2.24 per share.

The company’s promotional efforts have included a paid email and influencer campaign to put its name in the headlines, CoinSnacks reported to its 50,000 subscribers, as well as endorsements from Anthony Pompliano and Will Clemente—popular crypto investors whose market analysis firm, Reflexivity Research, was acquired by DeFi Technologies in January.

“Between the influencer pumps, getting mentioned on CNBC, the email campaigns, and Pomp pomping, there is now strong evidence that the stock isn’t rallying for the right reasons,” wrote CoinSnacks.

DeFi Technologies responded to the CoinSnacks report in a press release at Wednesday’s open, calling it “defamatory, selective, inaccurate,” and containing “misleading statements” about the company’s practices and financial condition.

In fact, the company speculated that the report may have been commissioned by short-sellers hoping to depress the stock’s price.

DeFi Technologies said it was approached on June 10 by a Canadian investment bank with a bought-deal offer for US $15 million, which it said was an unusually low figure given the newfound strength of the company’s treasury. That same day, DeFi Technologie reported that its treasury alone was worth US $60 million—of which $7.9 million had been converted to Bitcoin.

“The company believes that coordinated efforts of short-sellers and issuance of misleading reports on public companies constitute market manipulation,” DeFi Technologies wrote.

CoinSnacks later replied to DeFi Technologies stating that it had “not currently, nor have we ever been, paid by a short-seller to cover any company,” nor did its team hold a position in DEFI.

By Wednesday’s close, the company’s stock experienced a modest 6% rebound to CAD $2.30 apiece.

The CoinSnacks newsletter did not extensively cover DeFi’s Techology’s recent financial performance, instead referencing its days as a “penny stock” in 2023, when it generated a net loss of CAD $18.9 million across the year.

The company points to its profits so far this year as proof that its stock is a worthwhile investment.

DeFi Technologies says its assets under management have risen massively alongside the broader crypto market this year, which also boosts the rewards earned from its investments in crypto funds. Those include exchange-traded funds for Solana, Bitcoin, and dozens of other assets for which the firm is allowed to stake its holdings and earn yield—earning an average of 7 to 10 percent on the assets it holds.

“Our assets averaged about US $400 million to $450 million in Q1, and in Q2, they’re gonna average US $600 million to $650 million,” Russell Starr, Head of Capital Markets at DeFi Technologies, told Decrypt.

Those same assets under management (AUM) earned the company’s operating business US $10 million in revenue in the first quarter, enough to cover all of its expenses for the entire year, Starr said. Given that its current AUM is now 50% higher, he said DeFi Technologies expects to earn at least US $15 million for each of the following three quarters in pure profit.

Meanwhile, Starr said the firm’s newly launched DeFi Alpha trading desk earned $85 million in the second quarter of 2024 alone. That brings the firm’s net profit for its first six months up to $100 million—over 20 percent of its current $477 million market cap.

For context, other crypto firms like Coinbase and Robinhood currently trade at 30x and 40x their annual profits.

“If you look at that article they wrote, they didn’t talk anything fundamental,” said Starr. “The reason why is because if they took the time to talk about fundamentals, they would have realized very quickly that they have no story.”

Edited by Ryan Ozawa.