Galaxy Digital's Terra Exposure Unfounded, Analyst Insists

Galaxy Digital's exposure to LUNA tokens has sparked investor concerns, leading to a 40% plunge in its shares this week. However, BTIG analyst Mark Palmer believes these concerns are unwarranted, indicating that Galaxy likely sold most of its LUNA position during the first quarter of 2022, benefiting from the token's appreciation in 2021. Despite the recent decline in LUNA's value, BTIG maintains a buy rating on Galaxy, highlighting its share buyback authorization as a positive signal in current market conditions.

Galaxy Digital's Terra Exposure Deemed 'Unwarranted,' Analyst Asserts

Austin, TX, May 6, 2022 - Amidst concerns surrounding Galaxy Digital's potential losses related to its exposure to Terra's LUNA token, BTIG equity research analyst Mark Palmer has dismissed such concerns as "clearly unwarranted."

In a note to clients on Thursday, Palmer downplayed the impact of Terra's collapse on Galaxy, citing the company's recent disclosures. According to Galaxy's management discussion and analysis for the quarter ending March 31, the bulk of its $355 million in realized digital asset gains stemmed from LUNA sales.

Palmer emphasized that Galaxy's prior disclosure of holding $407.6 million in LUNA as of December 31 suggests that the company "appears to have sold all or most of its position at a healthy gain during the first quarter of 2022." This is supported by the strong appreciation of LUNA throughout 2021.

Despite the recent market volatility and LUNA's collapse, BTIG has maintained its "buy" rating on Galaxy with a price target of C$37 ($28).

"Galaxy's business model is not reliant on the success of any single digital asset or blockchain project," Palmer wrote. "Furthermore, the company has a strong balance sheet and a proven track record of weathering market downturns."

Galaxy's management has also taken proactive steps to mitigate potential risks. Earlier this week, the company announced that its board had approved a share repurchase program, allowing it to buy back up to 10% of its outstanding shares.

"This indicates that Galaxy management is confident in the company's long-term prospects," Palmer added. "We believe that the current market sell-off presents a buying opportunity for investors who are looking for exposure to the digital asset space."

Galaxy Digital did not immediately respond to a request for comment on Palmer's analysis.