The move for an ‘undervalued’ bitcoin miner? Perhaps selling the company.
Stronghold Digital Mining’s market value compared to its peers is “hard for us to understand,” CEO says
hlopex/Shutterstock modified by Blockworks
Stronghold Digital Mining executives want you to know they’re not happy about the company’s stock price.
As a result, they are considering selling the bitcoin miner’s assets. Or the company outright.
Such a sale could be among the first deals after the April 19 Bitcoin halving — when per-block mining rewards were reduced from 6.25 BTC to 3.125 BTC. Various industry watchers said they expected mergers and acquisitions (M&A) activity to pick up following the event.
Read more: Bitcoin miner consolidation appears imminent as halving looms
Executives touted the company’s attributes during Stronghold’s Thursday earnings call.
It has 130 megawatts (MW) of energized data center capacity with an installed hash rate of 4.1 exahash per second. Stronghold also owns 750 or so acres of land, as well as the transmission lines that connect its assets to the PJM grid.
Stronghold’s current capacity could expand to more than 400 MW, with a potential focus on supporting the growing segments of AI and machine learning, Stronghold Greg Beard said on the call.
“We own a portfolio of hard assets where every known available comparable valuation is significantly in excess of the public market price of Stronghold today,” Beard noted. “Recognizing this dislocation, we have initiated a process to do something about it.”
The company has hired financial and legal advisors as part of a “formal strategic review process,” the company said in a Thursday news release.
Stronghold is considering “the sale of all or part of the company,” or another transaction that involves some or all of its assets, it added in a statement.
The company’s stock price was $3.16 at 12 pm ET — down 52% year to date.
This price plummet so far this year is more than most of the mining industry’s largest public competitors. Bitcoin mining behemoths Marathon Digital, Riot Platforms and Hut 8 for example, have seen share prices drop between 28% and 35% so far this year.
Core Scientific stock is down just 5%, while CleanSpark is up 44% from the start of 2024.
Read more: How the Bitcoin halving could impact ailing mining stocks
Stronghold tallied net income of $5.8 million during the first quarter, executives said Thursday. It held $8 million in combined cash and bitcoin on its balance sheet, as of April 30, including 26 BTC.
Beard said Stronghold trades at more than a 70% discount on an enterprise value to hash rate capacity basis.
“While factors such as scale and leverage could explain a modest discount, trading at a fraction of our peers’ multiple continues to be hard for us to understand,” he added.
The Stronghold CEO previously told Blockworks that selling the company, or its assets, to an interested industry peer would be “something to consider.”
“Generally speaking, companies that are misunderstood by the public market that have actual attributes and value that can be valued by other public companies…tend to be realized in that way,” Beard said last month.
Read more: Financial trouble for bitcoin miners: A look back, and ahead as the halving looms
Joe Flynn, an analyst at Compass Point Research and Trading, wrote in an April 9 research note that Stronghold’s debt and limited access to capital markets put it in a tough position.
It could potentially reduce expenses and “high overhead” as a small public company by selling its “valuable” infrastructure and access to power, he added.
The Stronghold executives said there is no timetable for when its strategic review process will be complete.
They then abruptly ended Thursday’s earnings call.
Beard said: “Given the sensitivity of the process that we’ve undertaken, we are not going to have a Q&A session today.”
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