Metalpha: A High-Risk, High-Reward Turnaround Story Trading At A Deep Discount

Metalpha Technology Holding Limited (NASDAQ:MATH) has done something unique: it has successfully executed a corporate restructuring that has completely overhauled the business model, moving the core business from one sector to another. In doing so, it has evolved from an ugly duckling to a profitable swan. Having been a stock market underperformer, drastically lagging the broader market, it has led the market by astronomical, triple-digit returns year-to-date (YTD). This analysis will show that this recent surge is the product of a sustainable growth trajectory. Although significant regulatory and execution risks remain, the company's strategic restructuring, profitable growth, and deep valuation discount suggest the rally has a fundamental foundation with room to run. The stock earns a “Strong Buy” rating.

Metalpha is not one of the market’s winners. Since its IPO in late 2017, the stock has declined by 54.99% compared to a rise of 161.23% for the SPDR S&P 500 ETF (SPY) and 150.47% for the iShares Russell 3000 ETF (IWV). As the company does not pay any dividends, the total degree of underperformance is actually much wider, with the SPY generating total returns of 196.83% and the IWV generating total returns of 181.40%.

However, in the YTD, this stock market underperformance has turned around, and the company’s total returns are 170.43%, compared to 15.62% for the SPY and 15.17% for the IWV. The question for investors is whether this move is justified, and if so, whether there is still room to run.

Like many Chinese companies operating in the Hong Kong Special Administrative Region (SAR) and seeking to get around the ownership and capital flow regulations of the People’s Republic of China (PRC), Metalpha is a holding company domiciled in the Cayman Islands and operating through its subsidiaries in the British Virgin Islands, Panama, and Hong Kong. As of the firm’s fiscal year (FY) 2025 20-F, the bulk of the firm’s revenue is earned in Hong Kong.

This means that investing in the company exposes investors to Hong Kong’s legal system, which management describes as embodying “uncertainties which could limit the legal protections available to us.” One reason for these uncertainties seems to be a consequence of the newness of crypto regulation in the SAR, given that management also says,

“Hong Kong laws and regulations related to the cryptocurrency business is still under development and subject to significant changes, and any potential changes in the legal and regulatory landscape may adversely affect our business financial condition and future expansion.”

In addition, the Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) are continually refining their stance on digital assets. So there remains the possibility of a regulatory shift in which there are stricter capital requirements, leverage on derivative products is limited, or certain instruments are banned outright, which would force Metalpha to overhaul its core product offerings, raising its compliance costs and perhaps throwing the company back into loss-making territory. This regulatory uncertainty does not only apply to Hong Kong. As the company moves into new jurisdictions such as Switzerland and the Middle East, it becomes exposed to a complex, multi-regulatory web. Success in one regulatory jurisdiction does not guarantee success in another.

Metalpha has a complicated history. Metalpha began its public life as Dragon Victory International Limited, offering “reward-based crowdfunding platform in the PRC” and “quality incubation services.” It also operated a supply chain management services division serving auto repair shops and auto parts suppliers. As the crowdfunding platform and incubation services segment deteriorated, and PRC regulations tightened, revenues shrank and losses widened, and the company exited the market around fiscal year 2019, remaining with the supply chain management platform services until 2023. The company introduced digital asset-focused wealth management services in December 2021, and in late 2022, it completed a transformational restructuring, buying an existing crypto business, Antalpha Technologies Limited, and repositioning itself as a digital asset wealth management and derivatives trading firm. The shift seems to have been driven by an opportunistic strategic deal with Antalpha and related investors, and the faster-growing revenue opportunities in crypto derivatives, OTC and asset-management products, and as part of a deliberate corporate rebranding to capture that market. That pivot changed the company from a drifting, declining, loss-making business into a fast growing and profitable business. It is the reason why the stock market’s ugly duckling became a beautiful swan.

In order to mitigate its geographic and regulatory risks, Metalpha is actively pursuing a strategy of diversification through strategic partnerships. Its partnership with the Swiss crypto bank, AMINA Bank AG, to offer solutions such as Principal Fund I, is an example of this strategy. The move adds credibility and access in a stable, mature regulatory environment. It also allows Metalpha to tap into a new European clientele, reducing its singular reliance on Hong Kong. Similarly, the collaboration with Abu Dhabi investment firm, Gewan Holding and Standard Chartered PLC's Zodia Markets to form the joint venture, ZMG7 LLC, enables it to access the dynamic Middle Eastern market. These partnerships, as a whole, show Metalpha pursuing avenues of growth outside Hong Kong, and through firms that have a stellar reputation, bolstering confidence in Metalpha's own offerings. Metalpha's historical connection to Bitmaster through the Antalpha acquisition also provides a foundational advantage, and has allowed it to raise $5 million for its LSQ Investment Fund SPC – Next Generation Fund I SP, which supports the underlying economics of its structured products.

The effect of the corporate restructuring was to immediately return the company to growth in FY 2023, after seeing revenues decline from FY 2018: revenue accelerated to $5.7 million in FY 2023 from $122,711 the FY prior. In addition, the loss-making stabilised, narrowing in FY 2024 and ending in FY 2025 when Metalpha returned to profitability, after six years of loss-making. The importance of the return to profitability cannot be overstated. Even in FY 2024, the company’s auditors, Onestop Assurance PAC, wrote that,

“The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company had a loss of USD3.7 million for the year ended March 31, 2024, and cash used in operating activities of US$11.6 million and accumulated deficits of US$43.9 million as of March 31, 2024. This raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.”

The return to profitability gave the company new life. In a year in which profitless companies have beaten profitable companies, it is easy to forget that, in the long run, markets reward firms earning and growing profits.

In FY 2025, income from wealth management services rose to $44.57 million, a 165.86% improvement from FY 2024, while net income rose to $15.89 million, up from a net loss of $3.68 million in the prior FY. Said Adrian Wang, the company’s CEO, remarked that,

Currently, Metalpha has a price/earnings (P/E) multiple of 7.05, a significant discount from Seeking Alpha's sector median of 12.83 and the 10.16 average of Seeking Alpha’s peer group: Consumer Portfolio Services, Inc. (CPSS), Mogo Inc. (MOGO), and Medallion Financial Corp. (MFIN). If we use the sector and peer group PEs, we can get a target price for the company, assuming that as Metalpha’s business expands, its valuation will converge on sector and peer group averages. Holding diluted earnings per share (EPS) constant, that leads us to a target price of $3.53, or a 14.18% share price appreciation. That seems easily achievable by the firm, given current momentum.

P/E Multiple Source

Metalpha's evolution from a struggling Chinese crowdfunding platform to a profitable digital asset wealth manager is a remarkable corporate reinvention. The strategic acquisition and rebranding have unequivocally returned the company to growth and, most importantly, to profitability, silencing the prior going-concern warnings. Although the path forward is fraught with regulatory uncertainty across Hong Kong and new international markets, the company is proactively mitigating these risks through credible global partnerships.

The firm trades at a significant discount to both its sector and a relevant peer group, indicating that Metalpha's current price does not appear to fully reflect its dramatic turnaround and growth prospects. The analysis suggests a plausible share price appreciation to $3.53, representing a 14.18% upside from current levels. For investors with a tolerance for the inherent risks of the crypto sector and complex international structures, Metalpha represents a high-risk, high-reward opportunity. The ugly duckling has indeed transformed.

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