The Coinbase direct listing is coming, and it’s expected to be a doozy.

The leading crypto exchange will begin trading on the Nasdaq next week, and one can imagine that the timing of this decision was an indication of how confident management was in the company’s Q1 results and guide for 2021 yesterday afternoon. The report serves as a fundamental checkpoint for the space as a whole.

And boy howdy: Ring the bell. Talk about a blowout report.

Coinbase released performance data yesterday afternoon showing historic bombshell results, with revenue climbing more than 800% year-over-year to an estimated $1.8 billion. Net income posted a sick climb to between $730-$800 million from $32 million a year earlier.

According to Renaissance, COIN’s volume-weighted average price of roughly $344/share in the private secondary market implies a market value of $85B based on 249M shares outstanding ahead of this blowout report.

We would expect that to balloon well north of $100 billion after the results.

The Spotlight

That places a brighter spotlight on other stocks in the space, including ISW Holdings (OTCMKTS:ISWH).

While it is an OTC stock, ISWH is particularly interesting precisely because it hasn’t been taken as seriously by “the crowd” as other names in the space, such as MicroStrategy Incorporated (NASDAQ:MSTR), Riot Blockchain Inc (NASDAQ:RIOT), Canaan Inc – ADR (NASDAQ:CAN), HIVE Blockchain Technologies Ltd (OTCMKTS:HVBTF), Sos Ltd – ADR (NYSE:SOS), and Marathon Patent Group Inc (NASDAQ:MARA).

However, that could change.

The reason for the ISWH undervaluation, despite its strategic establishment of strong market positioning, may be tied to concerns about the type of dilution that one often sees in OTC stocks addicted to toxic convertible note financing.

However, as we learned this morning, the company is taking powerful steps to eradicate that risk, paying off almost all of its convertible debt in one fell swoop after reducing outstanding and authorized shares.

The Backdrop

First off, it’s important to note that ISW Holdings (OTCMKTS:ISWH) isn’t a pretender in the crypto space.

While there has been a rash of new “crypto stocks” in the wake of the breakout in the price of Bitcoin late last year, ISWH moved into the space in early 2019, stepping up its exposure in May of last year through its landmark partnership with Bit5ive.

When Bitcoin was still at $10k/coin, ISWH was engaged in a long-term strategy to drive shareholder value in the space with its POD5IVE strategy. Based on publicly available information, the strategy appears to be building toward a best-case result.

The company’s segment subsidiary is Proceso, which produces the POD5IVE mining pod, a fully self-contained high-PUE mining solution designed, assembled, and installed in partnership with Bit5ive at the Bit5ive 100 MW renewable energy cryptocurrency mining facility in Pennsylvania.

It has since tripled its fleet of mining pods. Each pod is powered by 280 mining rigs and is capable of driving roughly $2.9 million in annualized revenues (at current cryptocurrency price levels).

ISW Holdings continues to build out its own mining capacity, with plans to bring multiple additional pods online this year. However, data from pod mining operations is also being collected for the purpose of marketing the POD5IVE datacenter to other businesses and individuals interested in a self-contained industry-leading cryptocurrency mining solution.

The Achilles Heel

For any early-stage company that has yet to establish a major platform for funding capital expansion and investing in wider operations, the terms of capital are a defining item. For most on the OTC, the game ends with a death spiral sparked by an addiction to convertible debt.

It’s extremely difficult to climb out of that abyss and surface in a world where creditors are willing to cancel debt for face value capital and shares and join forces with the company towards growth, which is what happens with viable companies on the major listed exchanges in most instances. That’s the big difference: penny stocks have to accept worse terms on new capital.

And that makes a broad kind of sense: Less established companies have no negotiating leverage at the table.

Hence, it is particularly interesting to see this morning’s announcement from ISWH: The Company has signed an agreement with GPL Ventures to eliminate over $2.4 million in convertible promissory notes. The Agreement covers all convertible debt held by GPL and represents more than 92% of the Company’s outstanding convertible debt obligations.

“This is a huge step,” commented Alonzo Pierce, President and Chairman of ISW Holdings. “We are making good on our anti-dilution pledge announced last year and taking strong action to reduce or completely eliminate toxic debt and dilution risk from the equation for our shareholders. This enormous step prevents millions of shares from coming onto the market. We were able to take this step as a direct result of strong operational performance and a significantly improved outlook ahead.”

According to the company’s release, ISWH continues to move forward with the commitments made in its anti-dilution initiative announced in December 2020.

Since that announcement, the Company has reduced outstanding shares by nearly 25%, reduced authorized shares by 88% down to 60 million, and eliminated over $3.4 million (or 94%) of outstanding convertible debt. In other words, the dilution monkey is being cast off the company’s back in a single game-changing move that could have important implications for how the stock trades relative to its peers in the crypto space.