Bitmine Immersion Gains Major New Supporter

Summary Bitmine Immersion surged after announcing major Ethereum-focused capital raises, but shares have dropped significantly from their peak.

The company now holds around $1 billion in Ethereum, yet trades at a hefty premium to its crypto holdings and modest operating business.

Cathie Wood’s Ark Invest made a bold initial purchase in three of its ETFs, signaling institutional confidence in the crypto strategy.

Over the last month, Bitmine Immersion Technologies ( BMNR ) has seen one of the craziest moves you may ever see in the market.

With shares trading under $5 in late June, the crypto network company announced a $250 million private placement to advance its treasury strategy on Ethereum.

Shares surged several times over to a peak of more than $161, then have lost roughly three quarters of their value since that high.

On Monday, the name gained a major new supporter, one that has been a crypto bull for some time.

Bitmine Immersion, the company Like many out there, I had never heard of this small cap company until that late June rally.

The company describes itself as a "Bitcoin and Ethereum Network Company with a focus on the accumulation of Crypto for long term investment, whether acquired by our Bitcoin mining operations or from the proceeds of capital raising transactions." The company's mining business is located in low cost areas in Trinidad as well as Texas.

If we look at the most recent 10-Q filing , the company had less than $5 million in total revenues in the nine month period ending on May 31st.

During that same time, operations lost over $2.2 million, but the company did have positive cash flow of more than $1.3 million.

At the end of that quarter, Bitmine Immersion had less than $1.5 million in cash on the balance sheet, against almost $1.9 million in loans to a related party.

Major crypto move and valuation The private placement mentioned above was the first major capital move to advance its crypto holding strategy.

On July 9th, the company announced a $2 billion at-the-market sales program to further this strategy, taking advantage of the massive run in shares.

As of Monday's close, the entire business was only worth about $2 billion, and we don't yet know how many shares have been sold under the latest program or at what price.

We did receive an update on the company's holdings on Monday, detailed in this 8-k filing : As of July 17th at 3:45am ET, the company’s ETH holdings 1 total 300,657 at $3,461.89 per ETH (Bloomberg). 1. 60,000 ETH, representing approximately $200MM notional value of Ethereum, are held through in-the-money options.

This amount is backed 1:1 with approximately $200MM of unencumbered cash.

Given all of the increased crypto investment we've seen from this company in recent weeks, it seems like at least several hundred million dollars worth of stock have been sold lately.

That means that reported share counts like the 51.61 million one seen on Yahoo! Finance may actually be fairly conservative now, so the company's actual market cap may be quite a bit north of $2 billion at this point.

Regardless of whether you say the company's market cap now is $2 billion or even $2.5 billion, that's a crazy premium at the moment with its Ethereum holdings just around $1 billion.

A small company like this with only around $7 million or so of annual run-rate revenue, even at a crazy growth valuation like 30 times sales, would only be valued at roughly $200 million.

Just like we've seen with Strategy ( MSTR ), investors are willing to pay a premium for a crypto holding company, where they may not be able to hold a crypto exchange traded fund or the actual cryptocurrency itself.

Here comes Cathie Wood When you see a major rally in a small name like this, it's often interesting to see if the buying is done by a ton of retail investors or perhaps some large institutions.

Well, on Monday, Cathie Wood and Ark Invest, who have been major crypto supporters over the years, made a major move here.

The following graphic shows the three purchases they made, in the Ark Innovation ETF ( ARKK ), the Ark Next Generation Internet ETF ( ARKW ), and the Ark Fintech Innovation ETF ( ARKF ).

Ark Invest BMNR Buys (Ark Invest Trades E-mail) That's over 4.4 million shares purchased in total, which is worth around $160 million at the day's closing price.

I've tracked Ark Invest's moves for over 5 years now, and it's not often that when they add a new name to an ETF, they instantly give it a roughly 1.5% weight in the respective fund.

A lot of times you see small buys equal to say 20 or 30 basis points and then the position is gradually built up over time.

As a result, this is a major vote of confidence in Bitmine Immersion, and I'll be watching to see if more shares are accumulated moving forward.

Final thoughts and recommendation: After a dramatic surge and then falling back to earth, Bitmine Immersion picked up a major supporter on Monday.

After announcing that its Ethereum holdings were now around $1 billion, Cathie Wood and Ark Invest made a significant investment in the crypto mining and holding company.

It wouldn't surprise me if Ark buys more in the coming weeks, as it seems likely that Bitmine will continue to sell shares so it can accumulate more crypto assets.

With Bitmine shares trading at a large premium to their crypto holdings, I'm going to rate the name as a hold for now.

Like I've stated with Strategy in recent months, your view of a company like this is based off your stance on Ethereum here.

Current investors are going to face a lot of dilution moving forward, but if crypto prices continue to soar, these holding companies will see their shares rise over time.

If you want less volatility, however, you're probably better off in an ETF or holding the actual crypto..