What’s Shrinking Faster Than Bitcoin?
At least one answer to that question is Bit Mining Co., Ltd. (New York Stock Exchange:BTCMMore), one of many cryptocurrency companies minted in China during the boom times of the last two years. When Bitcoin was at its peak. Of course, the exact opposite is now true, casting doubt on the future of many of these companies. Among that group, BIT mining is one of the most endangered.
On Monday, the company announced the latest step in its fight for survival. Announcing changes At an American Depository Share (ADS) ratio equivalent to a 10:1 reverse stock split. The move was relatively technical and designed to bring the stock above $1 to avoid delisting based on the New York Stock Exchange’s requirement that all stocks trade above $1. It has been.
Based on Monday’s closing price, the reverse split effective December 23 will lift BIT Mining’s share price to $2.33 and remove the threat of delisting – at least for now. Shares fell 6% in after-hours trading after the announcement, indicating investors weren’t particularly impressed. The company is now valued at just under $25 million, a fraction of what it was a year ago.
The bigger story, of course, is the crash of Bitcoin and other cryptocurrencies this year. Bitcoin reflects a larger group, down about 64% this year. The crash has dragged down several major companies so far, including his high-profile FTX bankruptcy (FTX-USD) last month.
A much larger sector of smaller companies like BIT Mining faces big challenges as well. Many of them were miners with a business model that relied on high cryptocurrency prices. At current prices, many of these business models no longer work, and as a result, most of these companies were in the red and had to shut down many of their operations.
The biggest problem for BIT Mining and many of its peers right now is simply survival. BIT Mining has been working hard at the forefront of it, with the sale of his 50.1% stake in the Lottery Interactive Unit for HK$78 million ($10 million), bringing him a combined $2,000 in July and August. $100,000 raised and new shares heavily discounted.
Frankly, I’m surprised the company was able to find a buyer for a new equity issue, as Bitmining could very easily go out of business and make those shares worthless.
A look at the company’s cash holdings shows how dire the situation is. He had $12.5 million in cash and cash equivalents at the end of September, according to the company, about half of his $22.6 million three months ago. Third quarter earnings report Released last month. But add in July and his $20 million he raised in the third quarter of August, and the company blew about $30 million in those three months.
You don’t need to be a rocket scientist to understand that BIT Mining’s remaining cash at the end of September is not enough to cover its costs through the end of the year at current burn rates.
mining equipment manufacturer
BIT Mining is a fairly old timer in the Chinese corporate business scene with over 20 years of history. It’s also a bit of a chameleon, having been in the gambling business since its early days as a third-party online seller of tickets for two national lotteries in China. That business model went up in smoke around 2018 when China officially banned such third-party sales after years of hinting at such a move.
After several years of searching for new business models, the company believed it had finally found a winner in the then-booming cryptocurrency market in late 2020. and temporarily saw its assets and stock price soar. But all those gains have been wiped out in the current crash, as Bitmining’s share price has fallen 96% so far this year, making it the worst performing of any related Chinese corporate group.
In its latest pivot to keep the business going, the company has announced plans to create a cryptocurrency mining machine. Such a business is no better than BIT Mining’s core business of generating revenue through its own cryptocurrency mining business. But in terms of being able to make a profit, the economics still seem to work.A suitable case is Canaan Co., Ltd. (can), which was able to maintain a profit in the third quarter despite declining sales
BIT Mining provided an update on several mining machines under development in its third quarter earnings call. Most of them were developed by the Bee Computing division. The most advanced is the machine used to mine Doge (DOGE USD) and Litecoin (LTC-USDThe company says it plans to mass-produce 3,300 machines in December or January.
The Mining Machine initiative probably explains the recent acceleration in the company’s cash burn rate, as new product development always requires significant R&D spending.
But BIT Mining’s time is clearly ticking, and they’re not just building new machines, they’re looking to find buyers in the current sluggish market. The company’s revenue, largely from its mining operations, fell nearly three-quarters to $97 million in the third quarter from $393 million in the same period last year. Operating costs were similarly reduced, down from $414.2 million the year before to $113.6 million.
The bottom line is that BIT Mining posted a loss of $22.2 million in its most recent quarter, a slight improvement from a loss of $29.6 million a year earlier. But a company running out of cash fast like BIT Mining can hardly afford such losses. That volatility is reflected in its current price-to-sales (P/S) ratio of just 0.01. This pales in comparison to Caanan’s 0.47x and his 0.62x for competing Chinese miners. The9 (NCTY).
Editor’s Note: The summary bullet points for this article were selected by the Seeking Alpha editors.