Earnings call transcript: Horizon Kinetics Q2 2025 sees revenue growth, stock rises

Horizon Kinetics Holding Corp (HKHC) reported its second-quarter earnings for 2025, showing significant revenue growth and a notable rise in stock price. The company achieved revenues of $19.8 million, a substantial increase from $11.4 million in the same quarter of 2024. Despite a net loss per share of $0.06, the company’s stock price increased by 1.18%, closing at $38.45. The positive market reaction contrasts with the earnings per share (EPS) forecast, which had anticipated a loss of $0.56 per share. According to InvestingPro data, HKHC maintains strong financial health with an overall score of "GOOD" and has delivered an impressive 63% return over the past year.

Key Takeaways

• Horizon Kinetics’ Q2 revenues grew by 73.7% year-over-year.
• The company launched new ETFs, including the Japan Owner Operator ETF.
• Stock price rose 1.18% despite reporting a net loss per share.
• No third-party debt and limited long-term liabilities strengthen financial position.

Company Performance

Horizon Kinetics demonstrated robust performance in Q2 2025, with revenues reaching $19.8 million, up from $11.4 million in the previous year. This growth highlights the company’s successful expansion efforts, particularly in the ETF market. The company also reported a year-to-date operating income of $9.1 million, more than doubling from $3.9 million in the previous year. InvestingPro analysis reveals the company trades at a P/E ratio of 14.14 and maintains minimal debt with a debt-to-equity ratio of just 0.02, suggesting strong financial discipline. Two key InvestingPro Tips highlight the company’s solid balance sheet and high liquidity position, with several more insights available to subscribers.

Financial Highlights

• Revenue: $19.8 million, up from $11.4 million in Q2 2024
• Operating Income: $4.5 million, up from $1.5 million in Q2 2024
• Net Loss per Share: $0.06 for the quarter
• Dividend: 7.1 cents per share, a 27% increase from Q1

Earnings vs. Forecast

Horizon Kinetics reported a net loss of $0.06 per share, better than the anticipated loss of $0.56. This performance marks a significant improvement compared to forecasts, contributing to positive investor sentiment. The revenue figure of $19.8 million also surpassed expectations, further boosting the stock.

Market Reaction

Following the earnings release, Horizon Kinetics’ stock price increased by 1.18%, closing at $38.45. This rise reflects investor confidence in the company’s growth trajectory and strategic initiatives. The stock has fluctuated within a 52-week range of $19.52 to $53, indicating potential for further growth.

Outlook & Guidance

Looking forward, Horizon Kinetics plans to continue developing its ETF products and expand its cryptocurrency investments. The company aims to maintain an earnings payout of over 50% to shareholders while retaining capital for new ventures. Future revenue forecasts for fiscal years 2025 and 2026 stand at $64.33 million and $69.15 million, respectively. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to subscribers, which provides detailed analysis of HKHC and 1,400+ other US stocks.

Executive Commentary

CEO Murray Stahl expressed optimism about the cryptocurrency market, stating, "I personally believe in the not too distant future—maybe five to six years now, cryptocurrency is going to be the biggest asset class." He also emphasized the company’s strategy of retaining some capital for growth opportunities, saying, "We’re not a company that needs to retain tremendous amounts of cash, but we’d like to retain some."

Risks and Challenges

• Market Volatility: Fluctuations in the stock market could impact investment performance.
• Regulatory Changes: Potential changes in financial regulations could affect operations.
• Competitive Pressure: Increased competition in the ETF and cryptocurrency markets.
• Economic Conditions: Global economic downturns could impact revenue growth.

Q&A

During the earnings call, analysts inquired about the company’s dividend policy and its relationship with FRMO. Executives provided insights into the performance of TPL stock and discussed strategies related to Sandbox AQ and cryptocurrency investments.

Full transcript - Horizon Kinetics Holding Corp (HKHC) Q2 2025:

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Good afternoon. Thank you for joining the Horizon Kinetics second quarter results call. My name is Mark Herndon, chief financial officer, and we’re pleased to have have you with us to cover our results for the second quarter. First, a reminder that today’s presentation may include forward looking statements. Relevance on forward looking statements involve certain risks and uncertainties, including, but not limited to, uncertainty about the future security valuations or our performance.

During the course of today’s call, words such as expect, anticipate, believe, intend may be used in our discussion of our goals and events in the future. Management cannot provide any assurance that future results will be as described in our forward looking statements. Furthermore, the statements made on this call apply as of today. The information on this call should not be construed to be a recommendation to purchase or sell any security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or guarantee of future results.

It should be assumed that any of the security transactions referenced today have been or will prove to be profitable or that future investment decisions will be profitable or equal or exceed past performance of the investments. We encourage you to read our filings with the SEC on our Form 10 ks as well as our other filings, which describe the risks and uncertainties associated with managing our business. The company does not assume any obligation to update any forward looking statements made today. These filings can also be found at the OTC Markets website, press releases or other information is at our corporate website at www.hkholdingco.com. Today’s discussion will be led by Murray Stahl, Horizon Kinetics chairman and chief executive officer.

I will also be available to answer applicable questions and will moderate the questions. If you would like to ask a question today, you will need to be logged in to the GoToMeeting platform. For those of you that are on a telephone connection, you will be in listen only mode. And, again, for those of you that are on the GoToMeeting platform, you can submit the questions via the chat function, and you should direct those questions to the presenters where I will summarize and relay as best as I can so that we can address as many questions as possible. Okay.

So with that, we wanted to start just as a reminder that our form 10 q that we recently filed is an update of our annual filing on 10 k and continues our required GAAP presentation that includes certain proprietary funds as consolidated entities. And our press release continues to present both our GAAP presentation as well as a supplement that presents our financial statements excluding those funds, which is essentially the adviser only presentation of our results. Consistent with what we have previously reported, this is a presentational matter that does not impact the company’s earnings that are available to HKHC shareholders or the shareholders’ equity of HKHC. The consolidated presentation does result in higher total assets as we have included the investment assets of those funds we consolidate on our balance sheet, as well as a line item called redeemable non controlling interests. That line item essentially represents our client’s account balances that are supported by those assets of those funds, which you’ll see identified in the financial statements as consolidated investment products.

Another notable difference is the treatment of management fees charged to those consolidated investment products. Under GAAP, those revenues are eliminated for consolidation since that fund is presented within the within the financial statements. It is akin to an intercompany transaction. However, the economic benefit resulting to the HKHC shareholders remains, and that economic benefit is reflected through a smaller allocation of investment returns of the consolidated investment products to the redeemable non controlling interest than they would have otherwise received. You can also see the impact of those items in a table within the MD and A section of our 10 Q filing.

Our results for the quarter included continue to be favorable for the HKHC shareholders. The company recorded revenues of $19,800,000 for the quarter, a meaningful increase from the $11,400,000 in the 2024. The year to date period was similarly higher with $39,600,000 of revenues thus far in 2025. These increases are primarily the result of an overall increase in the AUM across the portfolio of investment products and client accounts as compared to early twenty twenty four. At the advisor only level, as seen in the press release supplement, operating income was $4,500,000 for the second quarter, up from $1,500,000 in the prior year, and the year to date period was similar with $9,100,000 of operating income as compared to $3,900,000 in the prior year.

Overall, our net loss was $06 per share for the quarter and net income for the year to date period of 66¢ per share. These are comparatively lower than February, which was a 78¢ per share and $3.05 for the year to date period of both net income. Excuse me. During those periods, the company benefited by significantly higher investment returns, and we should note for you that you may see or we may see volatility from quarter to quarter as a result of unrealized gains or losses in various holdings held by the company, including digital assets, which is primarily Bitcoin. From a balance sheet perspective, the company continues to have substantial cash and investments, including amounts outside of our consolidated investment products, and we have no third party debt.

Our long term liabilities are limited to various long term office space leases. And then I would also like to note just the company’s board declared a 7.1¢ per share dividend in the second quarter, which reflects a 27% increase from q one’s dividend. This dividend will be paid on September 15 for shareholders of record as of August 21. And so that with that, I will like to turn it over to Murray Stahl for some opening comments as well.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Okay. Well, thank you, and thank you all for attending. So let’s begin with a look at the financial statements. I think it’s easy to see the difference between the company and the required consolidated if you look at page 18. So page 18 shows you what the eliminations are and shows you what the consolidated investment products are.

So if you work backwards, you get to something called consolidated company entities. You might recall throughout our history, we never consolidate. We’re just required to consolidate. There’s really three aspects of Horizon that you may wanna think about, and you can see them all on page 18. The first thing is there is the more customary investment management business.

There is returns or sometimes negative returns from our proprietary capital, and then there’s performance fees. So you wanna see in the clearest way possible the the disaggregation of them, I would turn my attention to page 18. So on page 18, you’ll say for six months, you’ll see for the six months, we had over $43,000,000 of total revenue. And when you subtract out the expenses, our operating income was slightly over $9,000,000. I, myself, would call attention to goodwill.

So when we, years ago, consolidated all our products into one company, we needed to put some goodwill in the books, and there are various goodwill tests. And sometimes, we actually, need to lower the goodwill because the goodwill doesn’t last forever. So you’ll see a $900,000,000 goodwill impairment. So the heart and soul of the business in that sense is $900,000,000 of impairment goodwill added to the $9,000,000 the $900,000 of goodwill impairment added to the $9,000,000 of operating income for a total of 9.9, almost $10,000,000, which is historically high for us as a company. We’ll do everything we can to improve it.

The second thing is the returns on our proprietary capital. In this particular quarter, it haven’t been negative. And most quarters, it’s positive. You’re not gonna have a positive quarter in every interval. We should work that way.

We should actually work that way. Unfortunately, it doesn’t work that way. And then the last thing which you can’t see is there are performance fees. The performance fees happen episodically. And generally speaking, we assess those performance fees or some exceptions.

We assess those performance fees at year end. So you really can’t tell what’s happening, with regard to performance fees unless it’s year end or if there are some realizations, which happen from time to time. Now subsequent to quarter, we had a number of really interesting events that’s worthwhile mentioning, and I’ll go through those. And then I’ll go to your questions and answers. So we have a long standing investment in in some funds related to Miami International Holdings.

It’s a private company, and you might be aware that about a week ago, the company launched initial public offering. That’s a transformative transaction, and it’s a, I would say, a seminal event. The company itself, my x, is what we refer to it, and that’s incidentally its signal. It’s doing splendidly, and it’s worth paying attention to. And if things go as they continue to go, no guarantee of that, of course, it’ll have some very positive implications for income.

Another, interesting development is Consensus Mining, which was a private company until, I think, about two weeks ago, and it began trading on OTC Markets under the symbol CMSG. And that’s an important event because that’s a vehicle by which we are growing our cryptocurrency business. So you can see what the value is there. You can’t see it in the financial statements right now, but in the future, you’ll probably be able to see some things in there, which we didn’t mention in the first quarter. But we’re gonna mention now is we have a new private fund called Global Exchange Holdings, which we created in partnership with a Canadian company known as Urbana.

Urbana is actually we don’t talk about it much. It’s very worthwhile paying attention to. If you look at their track record for almost not quite, almost a quarter century, you’ll be hard pressed to find a fund with a better record. So it’s a really great company. We’re delighted to be working with them on this project.

Global Exchange Holdings is a money management proxy. It’s it’s going to buy private exchanges as well as publicly traded exchanges. Exchanges are really interesting really interesting investments in itself. I don’t have time to go into why exchanges are such great investments because We’re to talk about Horizon and not about exchanges, but I’ll say this. As you most of you probably know, I spent decades trying to convince people to be long term investors.

Haven’t convinced one person yet. They all wanna trade. So if you buy an exchange, you’re getting you’re getting the benefit of that. Sorry to be a little facetious bad, but there’s a lot of truth in the facetious nature of that comment. Exchanges are just rig are just fabulous businesses, high returns in equity, very stable returns in equity, and a lot of free cash flow.

So I have high hopes for global exchange holdings. There’s also an ETF that we launched a couple years ago called Blockchain Development. That’s probably something around 80% exchanges, and that fund is doing reasonably well. Its ticker symbol is BCDF, if you care to look at. Another thing we did during the quarter is we launched in May another ETF, and this ETF is known as Japan owner operator ETF.

So I’ll describe it a little bit. This fund, incidentally, since May, this is August, we now have well over $11,000,000 in assets under management, which is not bad for an ETF that just started. I have very high hopes for this fund. It turns out that the Japanese market is very unique among markets in world, not merely because of valuations. There are a lot of low valuations in Japan as a residue of what’s deflation that overtook Japan over the course of almost three decades.

But another thing that’s really interesting about Japanese market, there is a category of entrepreneurs that manage companies that I refer to as owner operator. What that means is the people who manage the company, who who govern the company, are also the biggest shareholders. And that bit of sociology, if you put the bulk of your net worth into something and you’re in control of it within a free enterprise society, that generally has fabulous results. And the alternative, which is what happens to most companies in most nations in the world, is called agent operators. The agent operators are compensated very well, but they don’t own a lot of the company.

They might be granted stock, but the object is to ultimately sell the stock. They don’t pass it on to the generations. They don’t live with it over decades. In any event, Japan Open Operator is a very, very different kind of fund. I enjoy talking about it, so I commend that fund to your attention.

Its symbol is j a p n. And one last thing, I decided I can’t tell you what it is, but I’ve decided we’re launch yet another ETF. It’s in development at the moment. Can’t tell you what it’s gonna be, but when we launch it, it’ll it’ll be it’s the seventh ETF that we created in Horizon Connect. So as you can see, we’ve been very busy with a lot of different things, and we hope to continue that process in the, future.

So that’s a thumbnail sketch of what’s happening, and maybe the best thing to do right now is to address the areas that you’re interested in. So we’ll take whatever questions are on your minds. If you could facilitate that, Mark, and just read Yep. Read the questions as they’re submitted, I’ll be delighted to answer them.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Alright. That’d be great. And let me reiterate to our attendees on the GoToMeeting platform that you just go to the I think there might be a chat sec button or a questions button. If you just direct those to the organizers and presenters, I’ll I’ll get them addressed. We don’t have any unique questions there yet, but I have had a handful that have been submitted via email previously.

So I’ll start with a standard one that you’ve heard before and asking if we could reiterate our dividend policy.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Okay. Dividend policy is we’re paying out, generally speaking, well over half of the earnings per quarter to the shareholders. We don’t have a target ratio that we probably should have a target ratio. You might recall, we thought about having a target ratio, when we started, we didn’t have a target ratio because at the end of last year, you might recall, we had a very substantial performance fee. And we required, as a company in this format, to pay the taxes on that performance fee before we actually realized the performance fee.

In other words, the taxes were due on December 15. So we didn’t really or we barely had enough cash to pay the taxes. Now we never lacked liquidity. We could have sold investments and paid taxes, but we really don’t wanna sell investments just to pay taxes. And then in doing so, realize another gain which will invoke even more taxes.

So we just say we’re going to pay out over half the earnings. This is not a company that needs to retain tremendous amounts of cash, but we’d like to retain some. And the reason we’d like to retain some is each of the things which I mentioned in terms of new products, like global change holdings and Japan owner operator ETF and whatever ETF we have in development, it’s gonna require an investment on our part. Now we could take it from our own capital and just sell something and fund a new venture, but if it’s a good investment and it’s gonna grow over time, why sell it and pay a tax just to fund something else? So we retain some capital.

But other than that, I think you’ll find that we’re paying out well over 50% of the earnings, normally speaking. Okay.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Another question we’ve had come in via email is, again, similar. We have this question about the relationship with FRMO, and if I may just lay it out there for those who are not familiar, FRMO, like, the the entity has an a contract or a revenue sharing arrangement with FRMO where where that entity has the the right to 4.2% of the revenues of HK, and that’s been in existence for a number of years, and that’s discussed in the form 10 q. So the question was just to clarify the revenue participation arrangement for the, from my perspective, the answer is that you’ll you’ll see that described in the six. You’ll see the expense related to that transaction as a component of our, selling, distribution, and marketing expenses. There is no balance sheet impact of that, amount other than just the quarterly accrual and settlement process related to that right.

But I I’d I’d use that as as a launching off point too to see if you would like to comment any further about our relationship with FRM, though.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Yes. I’ll give you a lot more relationship. I’ll give you a lot more information about their relationship. So to begin with, let’s talk about how this even came to be. So, historically, Horizon and Kinnex were two different firms, basically owned by the same group of people.

The ownerships were slightly different, but they weren’t radically different. So Horizon focused on primarily wealthy individual asset management. Kinetics focused on funds and institutions. So Horizon had no mutual funds, for example. Cannex had mutual funds.

Horizon, because of its subchapter s status, was taxed at a really high rate. And we felt, this is in our private days, that it might be better if some of the revenue went to a c corp rather than stayed in an s corp. So we basically took control of a c corp known as FRMO. So, essentially, Horizon, this is long before there was a merger with Kinetics, was through various transactions I won’t describe unless you wanna know what they are and what motivated them. Some of the revenue in Horizon was going to FRMO.

Kinetics was separate. Now I wanna merge the companies. So people raised the idea that, well, wouldn’t it be better if we took this revenue back? But, yeah, you you can take the revenue back, but you gotta take it back through some degree. There’s gotta be some compensation.

So to make it easier and not have a different revenue share arrangement on each individual product, the idea was we just translate everything into a gross revenue share. This is all in in connection with the 02/2010, I believe it was, merger between Horizon and Kinex. So a 100% of the revenue was going to the combined Horizon Kinetics. And to compensate FROM for its, seeding its rights, they got this revenue share, which is a little bit less than 5% of the revenue. That’s how that’s how it came to be.

That’s the relationship, and it stayed that way. Now it requires or it required at the time a balance sheet entry. In other words, it had to be valued. Trouble with valuing is how do you value something that’s gonna continue for a very prolonged period of time at a rate that is unpredictable at the time we did the merger? So we did the best we could to value it as an ongoing royalty based on the revenue stream that existed at the time.

This is fifteen years later, and we’re a different circumstance. I don’t think it makes a lot of sense to reassess it every quarter. It’s just gonna be confusing to people. And as far as I can determine, Mark, you might wanna correct me if I air on this, there’s no accounting reason to so called market to market every quarter.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: That that’s correct.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: On the account to do that. So it was what it was at the time. We made a good faith effort, and the world is probably different today. And if we’re doing the merger today and it didn’t exist, we might come up with a different value, but that’s entirely speculative. And that’s that’s the origin of it.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Yeah. Then I’ll I’ll add the the I think the technical term was and this is related to the the FRO side of the equation. It’s it’s an indefinite lived intangible asset. Right? So and you’d measure you’d never you’d only change the value sort sort of to the downside if there was a a circumstance where revenues were going down.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: If they were impaired for some reason that we we could we could document or determine. If they go up and, intangible assets, we want them to go up as much as possible, but intangible assets are never correct me if I’m wrong. They’re never written up no matter how favorable the circumstances.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Yeah. That’s great. Okay. No. I’ve had another couple questions come in on a another frequently asked question around TPL, and I’m gonna put in a cup couple different parts.

So one is just commenting on the recent performance in terms of the market share price, which has been down a little bit. And then more specifically, if you would comment on the large concentrated position and if you would otherwise sell some but are weary of triggering capital gains taxes, have we evaluated the new ETF rules which would allow you to diversify without triggering taxes?

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Okay. There’s a lot of questions here. So let’s just say, can I comment on the form? I’ve owned the stock for forty years, and it might be new to you, but I had to tell you this happens all the time. So I’ve lost track of how many times this has happened to lots of my stocks.

Now you probably don’t believe that, so I’ll just advise you at the time at the time of your leisure to undertake the following exercise. Go to a library. Get The Wall Street Journal for any day in the last hundred and twenty five years. Pick any day you want. And you’ll scope to stock tables, and you’ll see hundreds, usually, it’s thousands of stocks listed.

And to the left, you’ll see a column fifty two week high and low. And if you look at that column in any day, in any year, you will see normal range between high and low. Normal and nothing extraordinary. It’s about a 100%. I know that’s hard to believe, but take a look, and you’ll see it.

The natural inclination is think, well, if the stock goes down, there must be something horrifically wrong with it. And if it goes up, there must be something very wonderful happening. And all I can tell you is it’s just normal volatility. And I know it’s hard to ignore, but I’ll just tell you this. The company is doing splendidly.

So I’m just gonna leave it at that because I’m not the spokesperson for TBL. I’ll let the company speak for itself as opposed to diversification. The concept of diversification is a real is a really important one, and it’s a good idea for people to be diversified. The question is, who gets to do diversification? Should diversification be done by the client, or should diversification be done by the manager?

Now I can have a big position in security a, and another manager might have a big position in security b, and so on and so forth. And you could find 10 or 15 or 20 managers, and the client can engage 10 or 15 or 20 managers, and they would be diversified. That’s one way of doing it. And I think the sensible way of doing it for reasons I’ll explain momentarily. Alternative b.

The other way of doing it is to say, well, when given security does very well, I’d like to have a diversified secured portfolio at all times. I will sell it, always being mindful of tax consequences. So I’ll take advantage of the tax benefits if there are any of ETFs or some other type of incidentality to always be diversified. And the problem is, and we have to be realistic about this, no one can be an expert in anything. So you’re putting the burden of diversification on the manager.

What you’re basically saying is the the manager has to be well versed in all of the economic sectors, in all the industries. And speaking only for this manager, I can tell you this manager is not well versed in each and every industry. And as a general observation, I don’t think there’s any manager that’s well versed in each and every industry. So if you want the manager to make use to the best purposes of what information and talent what little information and talent that that manager has, it seems to me that it’s more reasonable to run with an undiversified portfolio, which reflects the strengths and knowledge base of that manager and put the burden of diversification where I think it should be on the client, which brings us to longer term investing, which is what we excel in, I think. So I hope that’s adequate and fulsome answer to it.

But if I missed anything, you can remind me, Mark, and I’ll opine further.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Okay. Sticking with the investment themes, we got another question about a company called Sandbox AQ. And for those that are not aware, in April, Sandbox AQ raised a preferred equity round with various investors that that included Horizon Kinetics, which we participated in via one of our investment products that was made available to our clients. So with that as a backdrop, the question was, can you comment about the strategic importance or recent performance of that company? Well,

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: it’s not publicly traded, so you’re talking about performance in terms of stock price. It’s a private company, so stock price doesn’t change, at least in so far as what we carry. In any event, let’s just say this. What it intends to do is it is developing what’s called large quantitative models. There’s two kinds of approaches to what people refer to as artificial intelligence, which which should actually be called AGI, artificial generative intelligence.

But, anyway,

Mark Herndon, Chief Financial Officer, Horizon Kinetics: one

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: approach deals with using language. The other approach deals with quantitative models. So a good example of such is why is it this is a question that an LQM, a large quantitative model, would look to solve. Why is it that a given drug is effective in a given person with an illness and is not effective, indeed, is counterproductive in another person with the exact same illness, maybe even the exact same age and the exact same or as close to exact physical circumstances. And the answer the short answer is we don’t know.

Why don’t we know? We don’t know is because we can’t we’re not able to study the human physiology at the molecular level. Why can’t we study the human physiology at the molecular level? Because we don’t have the mathematical skills to take all the data that we now theoretically could get. We could, in principle, study the human body at the molecular level, but that requires, dealing with hundreds of trillions of data points, hundreds of trillions of them per millisecond.

A millisecond is a millionth of a second. So you can imagine how complex that would be. That’s an example of what Sandbox is trying to do. But it’s not merely medicine. Although, you could spend your life just doing medicine, a tremendous market.

But it’s material science. Like, for example, we don’t simply use engineered aluminum in aircraft. Now we use composites. How do the composites behave in different temperatures, at different stress points, etcetera, etcetera, etcetera, that has to be studied at the molecular level. And that requires similarly large quantitative models.

That’s basically what the company is trying to do. So and if successful, it’s obviously going to be very rewarding. Company is just starting out, so we’ll have to see what happens. We’ve only been invested for a brief period of time, but for everything I can determine, looks like it’s going very well.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Okay. Turning to another topic that’s close. Consensus mining has been brought up in a couple of questions. You mentioned it earlier. The our investor is interested to hear how you see consensus growing in the future and its impact on Horizon.

And will cryptocurrency mining and adjacent businesses be greater or greater focus in the future, or will it be complementary to the existing asset management business?

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Well, I would like to make it a greater focus, especially since my personal belief can’t guarantee this is going to happen. It’s my personal belief in the not too distant future not too distant future maybe five to six years now, cryptocurrency is going to be the biggest asset class. There is. So if you wanna be manager of assets, I think you’re gonna have to develop an expertise in cryptocurrency. So I think we’ve done that, and it requires a longer term focus just because of what it is.

Requires longer term focus. So I think as a firm, we have that longer term focus. So, basically so the consensus mining was designed to be a corporation. So but but we have equipment. If we just question that we had coins, we could always it could be a fund.

We could accommodate client withdrawals or client additions. But it’s a corporation. We are actually literally creating crypto. So how can we accommodate client contributions or client withdrawals? We had to turn it we had to turn it into a business, and, therefore, it’s a corporation.

Nevertheless, we wanted to give clients liquidity, and we accomplished that. May not be as liquid yet as some would like, but it’s now saleable. And for those who like it, somebody can purchase it. So I personally I’m biased, of course, but I personally think it’s a great product, and I’ll just say this about It’s not really a product. It’s a company.

In the last four years, we’ve managed to grow a lot the crypto held per share. Now the company’s done that too, but we’ve done it without raising any capital, I e, not issuing a single share. And most of the cash we raised, initial public offering, we still have it. So we’ve been able to replace our mining equipment to new and better generations equipment also for our internal cash flow, at the same time, grow our crypto. To the best of my knowledge, I don’t think anybody else has been able to do that.

So, hopefully, people will be suitably impressed in due course. So I’ll just leave it at that.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Okay. And I don’t wanna turn this into a consensus call, but they there’s a there’s another question on that topic, and they sort of addressed it just there, which deals just thematically with the amount of cash that’s held at at consensus and and you comment on, you know, why is it, you know, quote, unquote, so high at at consensus?

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Well, there’s a lot of reasons for that. One reason is there is a genre of company that’s out there called the treasury company. And for reasons that you’ll come to understand momentarily, it is the practice of companies just to take the bulk of their cash, in some cases, more than all of their cash, and buy the crypto. And they end up trading at a premium to net asset value. When they trade at premium to asset value, the companies turn around and issue yet more crypto, which, at least to date, has delighted the investors.

To me, it doesn’t make any sense. Maybe I’m wrong. The reason it doesn’t make any sense to yours truly is it may be antidilutive if you trade net asset value to the existing shareholders. It’s quite dilutive to new shareholders. So, obviously, you can’t do that forever.

So it’s important to show that we can grow our crypto. And by the way, grow it at a higher rate than the treasury company is doing, if you don’t mind the positive comment on our own behalf. It’s important to do that by showing that we didn’t use the cash. Secondarily, the world of crypto, especially crypto mining, is a new field. We make use of certain types of equipment, and, yeah, the major risk that we face is that there is some technological breakthrough in crypto mining that we didn’t anticipate.

So we sell all our cash. I mean, we actually we we have to see. We deploy all our cash or the bulk of our cash or the bulk of our cash, and there happens to be a new and similar development in the equipment used to mine crypto. We’ll have no cash left to reorient ourselves. We’ll have no alternative but issue more shares and glue to everybody, and therefore reverse all the progress we’ve made in building the crypto share, which, by the way, has happened to the other cryptocurrency mining companies, and we don’t want it to happen to us.

So it’s there for contingencies that we hope will never happen. And but they could happen, and we have to be ready for that. And we’re able to grow without making use of it. I personally think it’s a virtue. If we deployed it all in more crypto, it’s not gonna help us to degree one thinks.

We will we grew our crypto at a higher rate than we would’ve had we deploy matter of fact, won’t go back. We can’t do it here. Won’t go back and calculate. Had we deployed all our assets or bulk of our cash in the beginning, we would have faced considerable obsolescence of equipment, and we would have written off a lot of it. So it was the right thing to do.

This is not the venue to establish that, but I’m pretty confident that can be established with certainty. So I’ll just leave it at that rather than turn into consensus mining league.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Okay. That sounds good. I I will note there was a question about the ticker symbol, so I’ll reiterate that the ticker for Consensus Mining is CMSG. They can be found at the OTC, markets. So moving away from from that topic, another email question that come in previously, and it’s a bit mechanical, ask asking us to explain when we record and make income tax payments.

I’ll I’ll address it. And then from a cash perspective, we’re gonna make quarterly estimated payments throughout the year, you know, as the the various dates that are defined by the IRS. And we but what you may be seeing in the financial statements, and sometimes this causes some confusion, is we’ll have meaningful movements in what’s called deferred taxes, which relate to, you know, future taxes that may or may not be payable on unrealized gains and losses of investments, typically. So we have a substantial amount of that. So when we have a significant move in the fair value of an investment item of of some type, that’s usually partially offset by what would be payable in taxes if it was realized during that period.

So over a long period of time, you know, you you’re the company’s effective tax rate. Usually, any company’s effective tax rate usually filters down to federal and and state net of the federal benefit. But from any period to period, the the deferred taxes are gonna go up and down relative to some unrealized gain movements there. So that was it on taxes. I mean, obviously, our our our approach would be to the extent we can defer a strategy and defer taxes to a later time.

That’s a that’s a normal practice to take. I just well, I’ll pause here for a second. I don’t see any other questions in our broadcast. If you have a question, now is the time to put that in there our chat for us. And I do not have any other comments that came in via email.

And so I think that that may bring us to a close. Murray, if you’d like to have any closing statements?

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Okay. All I’d like to say then is thanks so much for your support and your attendance to this meeting. Of course, we’re gonna reprise this in thirty days. And know what always happens is when you include a meeting, an hour later, you always think of something you should have asked but you didn’t ask. Don’t hesitate to contact us, and we will get you an answer.

There’s really no questions that are off limits, and look forward to doing this in thirty to ninety days. So till then, I’ll just sign off and say good afternoon.

Mark Herndon, Chief Financial Officer, Horizon Kinetics: Okay. Thank you.

Murray Stahl, Chairman and Chief Executive Officer, Horizon Kinetics: Thanks, everybody. Bye

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.