At the beginning, the three major Bitcoin mining companies in the US have “dark history”, but they have never done Bitcoin?
With the acceleration of the cryptocurrency bull market, the Bitcoin mining stocks listed on the US stock market have also fallen into madness. The three typical benchmarks of RIOT, BTBT and MARA have all increased by more than 10 times, and the daily increase of more than 30%+ has even become the norm. Among them, MARA once again announced the purchase of 80,000 Ant S19 and S19 Pro futures in the past December, which will make its total future installed capacity exceeds 103,000.
Although mining companies are wealthy and have strong expectations for making money under the current currency prices, if you take a deep look, you can see that these listed companies operate almost the same way, and it is not an exaggeration to say that they have a lot of dark history.
RIOT-the veteran of the last bull market
Riot Blockchain was originally called Venaxis. This is a biotechnology company that has made many attempts in the biological field, but its performance has not improved. Before getting involved in the blockchain business, its maximum revenue was only about US$2 million, which came from royalties on intellectual property rights. Later, Venaxis acquired BiOptix, a drug development company, and renamed the listed company BiOptix.
After another failed attempt at a new business in the biological field, the company appointed a new CEO. This CEO has no experience in the field of biotechnology, and his speciality is investment mergers and acquisitions. At the time of the 17-year cryptocurrency bull market, this company started a series of capital operations. The first is to change its name to Riot Blockchain, and then change the registration place to Nevada, which does not impose taxes on blockchain companies. At the same time, it also acquired a Canadian blockchain payment company and purchased several cryptocurrency mining machines.
After this operation, Riot rose more than 14 times in 2017, and its stock price reached a maximum of 46.2 US dollars. However, in the following years, RIOT’s stock price has been declining, with a maximum retracement of more than 98%. Since entering the bull market in the second half of 2020, RIOT’s stock price has once again exceeded US$20 and its market value has exceeded US$1.3 billion.
Because of the cutting of leeks, the stock was sprayed by foreign media in the last bull market: “How can a biotech stock double in less than three weeks and gain more than 500% in 90 days? Maybe a dog food producer Kibbles and Bits can also be renamed Kibbles and Bitcoin, and tax filing company H&R Block can also be renamed H&R Blockchain so that its market value can jump to three digits.”
Currently, RIOT has more than 7,040 mining machines with a total computing power of 566 PH/s in operation. The 15,600 Ant S19 Pro ordered earlier will be delivered from January to June this year. According to the latest information released by RIOT on December 21, 2020, the company has purchased another 3000 S19 Pro and 12000 S19j Pro, and the estimated delivery time is May-October 2021.
Concerning MARA’s electricity cost, purchase cost, and S19/S19 Pro machine residual value, RIOT can be estimated to be around US$1.249 billion.
MARA-an old player of crazy business transformation
MARA was established in 2010. At that time, the company was called American Strategic Minerals Corporation, which focused on the exploration of uranium and vanadium but did not make any achievements. Later, the company invested in California real estate in 2012, and the real estate business was again blocked a year later. Stopped and transformed into the intellectual property licensing industry, and at the same time changed its name to Marathon Patent Group. Inc. Later, in November 2017, the company tried to merge with the cryptocurrency mining company Global Bit Venture to transform cryptocurrency miners again.
During the stock market crash in March 2020, MARA once fell to a minimum of US$0.35, with a market value of less than US$30 million, but only 9 months later, it rose to a maximum of US$16.77, with a market value of more than US$1 billion. If the currency price continues to rise, then MARA stock price can reach 35 US dollars, which means that MARA may become a super bull stock with a growth rate of hundreds of times within a year.
After MARA’s crazy capital operation and purchase of mining machines, it may even become the largest miner in the United States this year. It will build its own mining pool and also donate to Bitcoin developers. Overseas media generally compare this with Bitmain’s cancellation of donations, and MARA’s industry status continues to rise.
How to calculate the reasonable valuation of MARA
MARA has been purchasing new mining machines since May 2020. As of September of that year, the company had only 2060 mining machines in operation. It is expected that 23560 mining machines will be deployed before the end of the second quarter of 2021, with a total computing power of 2.6 EH/s. By December 2020, MARA has purchased 10,000 Ant S19j Pro and 70,000 Ant S19 in two times. The estimated delivery time of S19j Pro is August-September 2021, and the delivery time of S19 is July-12, 2021. This makes MARA’s total computing power reach 10.36 EH/s.
The financial report shows that MARA’s electricity and operating costs are at $0.034/KW.h (approximately equivalent to an electricity fee of 2 Mao2, which is equivalent to the domestic electricity price during the wet period). The purchase cost of the S19/S19 Pro before December last year should be 14,000 Between -20000RMB/set, here can be calculated at 2000-2300 US dollars/set.
Considering the current currency price of 36,000 U.S. dollars, the domestic spot/quasi-spot quotations of S19 and S19Pro have reached 45,000-55,000 yuan/unit, so the residual value of the machine after Bitcoin reaches 100,000 U.S. dollars can be calculated as 140 U.S. dollars/T (equivalent to At S19=85,000 yuan/unit, S9 also reached this price in the last round of Bitcoin bull market), the following valuation can be obtained, which is about 1.619 billion US dollars.
BTBT-Chinese currency circle moves to U.S. stocks
BTBT is a Chinese concept stock established in 2015. It was previously named Dianniu Finance. It once claimed to be the “first auto loan stock in China”. Its business scope includes: providing loans to borrowers who use cars as guarantees, and auto financing leasing Wait. The cleaning and rectification of the P2P industry in the past two years has caused Dianniu Finance’s net loss to continue to expand. In 19 years, the company was filed for investigation on suspicion of non-absorption.
In September 2020, Dianniu Finance was acquired for $10 and then focused on the Bitcoin mining business. The trader behind it is the domestic currency circle KOL Yuhong. Beginning in October 2020, BTBT has risen from the lowest point after the acquisition of US$3.56 to US$33, which is a nearly 10-fold increase, exceeding the increase of Bitcoin in the same period.
However, BTBT has recently been sued by short-selling agencies and investors. Although the stock price has little impact, BTBT announced on February 3 that the chairman of the board of directors, CEO and CSO (Yuhong) have resigned and will hire multiple legal advisers from the United States. Executives, suspected to be in response to this incident.
It can be seen that whether it is RIOT, MARA or BTBT, these stocks are strongly related to the price of BTC, and business revenue and profits also come from Bitcoin mining. If it is just because it is linked to the bulls and bears of the cryptocurrency market, no matter what form such stocks take, it seems understandable, but the risk of retail investors is still very strong.
Also, although Bitcoin cannot be completely anonymous, its concealment is very strong. How many mining machines a listed company has can be audited, but how many coins are actually mined, sold at an average price and converted into U.S. dollars, ordinary investors have no way of seeing the whole picture. Searching the entire network, I haven’t seen these companies have announced their deposit addresses, so the cash out time and cash amount are even less known. There may be a potential performance storm in the future.
For example, this type of company can take advantage of the market boom and keep issuing announcements saying how many new machines the company has purchased, how much computing power it has, and how much bitcoin income it generates each month. While releasing the benefits, the stock price increases by 10 times. 20 times, or even 30 times, and then the management can take the opportunity to cash out at a high level.
After the bear market comes, the company can make another announcement saying that because it buys mining machines at a high price and sells coins at a low price, it will cause a loss. Searching the entire network, I have never seen the company announce its deposit address, so the cash out time and cash amount are even less known.
In addition to the three small-cap stocks listed on the Nasdaq mentioned above, there is also a company called BITFY that trades on the pink sheet market. It has also adopted the routine of transforming cryptocurrency mining and then cutting leeks. The company was formerly Natural Resource Holdings Limited, and its main business was the exploration of iron, gold, silver, zinc and lead mines in Canada and the United States. The company transformed its blockchain mining business through name change + reverse merger. After the company completed the merger and acquisition transaction in April 2018, the cryptocurrency market immediately fell into a bear market, and the stock price fell from a maximum of $15.10 to a minimum of $2.56 and has now ceased trading.
Affected by these three Bitcoin mining companies, a large number of “failed” Chinese concept stocks are also filling in Bitcoin mining assets, such as 500.com, the old game company Jiucheng, SOS for loan transformation, and the latest China Global Shipping. This is just the beginning. Follow-up Shenma, Bitmain, etc. will be listed. They are the top players in the mining industry and their market value may be very amazing.
However, we must also be aware that there may be two major risks for the “renamed stocks” that have a major turn in their main business:
1. Cross-bank transformation means that the company’s management capabilities or intentions are in doubt;
2. Entering into a new field with regulatory risks, the company’s operations are cyclical, and the uncertainty of investment increases.
However, for a risky subject, the game space for returns is naturally huge. Investors are more to do a good job of risk control, grasp the point of stop profit and stop loss.