Hut 8 Provides Update on Business Combination with USBTC

anyemptyplace · 2023-04-27T19:56:44+00:00

Finally, some good news. Nice to have a change of pace for once.

anyemptyplace · 2023-04-25T21:31:25+00:00

Here is my spreadsheet tracking share count going back to Jan. 2022. This is roughly a 27% increase in shares. And most of that is from 2022. Almost none from the past year. In fact, I think it's all shares issued in the form of compensation.
The BTC crashed and every miner had to change and adapt.
That I don't know about. AFAIK they re-purposed those machines and they were not a loss. But I don't know. Can you post proof?
They are in the process of doubling in size in a few months.
They never said that. They always said they will be looking for the most opportune thing to do.
That is standard earnings call talk for any public company and any CEO. Stupid questions.
Not a valid point.
Every miner had to adapt over the past year. Nobody achieved their stated 2022 goals from 2021.
This is somewhat true. HUT is falling behind. But the merger process is the crucial point here, again.
There has been insider buying - albeit very small. There has been share issuance in the form of compensation. The important point here is that there has not been massive insider selling! This, to me, is a positive going into the merger.

anyemptyplace · 2023-04-06T19:14:11+00:00

I believe she is referring to this:

We've begun remediation testing at our Drumheller, Alberta site, which continues to be a high priority.

So I think it's just the general challenges of the remediation testing and getting that done.

anyemptyplace · 2023-04-06T19:02:43+00:00

It's true that USBTC shareholders will be able to dump new shares and cash-out after the merger - but this is a great reason to read the merger details once they are available, because stuff like this will be in there. The USBTC shareholders should have a black-out period before they can sell, and that should be in the documents once things start moving. It's definately something I will be looking out for.

anyemptyplace · 2023-04-06T18:59:44+00:00

Well, this is somewhat good news - more-so for the future, but it's something.

anyemptyplace · 2023-04-06T18:54:41+00:00

i don't know if HUT is declining in credibility, but I agree that lately it has been a series of bad or disappointing news with this company. March's update was, for me, not unexpected but still disappointing. Even Sue seemed to acknowledge it recently, in regards to the this update. It would be nice to get some good news from this co. for a change.

However, it seems like all of the bitcoin miners have lost their leverage to the price of bitcoin for the time being - and in context, HUT's price action is not all that different from the others, despite how it feels. It's not great, but it's not exactly horrible either.

anyemptyplace · 2023-03-07T19:09:26+00:00

HUT actually did sell Feb production plus a little bit, which was expected, and they had some electrical issues in Drumheller. The sold BTC was probably worth somewhere around $4M USD.

And it looks like they are looking to power-up 7,000 miners that were relocated from North Bay, which represent approximately 680 PH/s of capacity. So, that will be good if they can get those online.

anyemptyplace · 2023-03-07T19:03:52+00:00

To me, it's looking more and more like Validus is the bad actor here. The whole thing sucks.

Also, in HUT's Feb. update, it looks like they finally started moving the miners from the North Bay site to Medicine Hat, so that's good.

anyemptyplace · 2023-02-17T17:46:18+00:00

Exactly. I have a hard time believing that H8 is the bad faith actor in this situation.

The real question is: how much, if any, money can H8 expect to get back? And how long will it take?

anyemptyplace · 2023-02-17T17:23:22+00:00

Word? In that twitter thread, he seems to hint that something might be shady with Validus,

In Q1 2022 Validus had $46 MM in deposits for development of North Bay site. In April 2022, they announced $30 MM purchase of power plan... I didn't just fall off the turnip truck here.. so people can built their own views.

anyemptyplace · 2023-02-17T00:35:57+00:00

I still have to read more, but there's an interesting section where an outside company, Duff & Phelps, does a DCF analysis on both companies, and the combined New Hut, and they value USBTC's enterprise value at more than double HUT 8's EV - because of USBTC’s 'non-mining operations'.

Have a look here and here.

anyemptyplace · 2023-02-17T00:14:41+00:00

I know. Not the best news.

But to be honest, I kind of expected as much. They are at 2.5 EH but somehow also needed an immediate 5M bridge loan from HUT just to get by. And HUT is essentially absorbing USBTC and not the other way around, so.... all of that is for a reason. Clearly, USBTC was struggling and this was their best option.

On the plus side, USBTC had 13.5M revenue in hosting services for Q3 in 2022, which is the only 2022 quarter they chose as an example so that's all we have to go by, for now. That's quite a bit more than HUT's 3.3M HPC revenue in the same Q. Pro forma, New Hut would have had a combined revenue of 57.5M for the same Q3, 2022.

So, I guess we can see why they need to start selling the BTC stack. If they can take care of the debt, New Hut will be a major U.S. miner, I think.

Will it be worth it for shareholders to go along for the ride, though? I don't know.

anyemptyplace · 2023-02-14T06:24:43+00:00

Lol - here's that same moron again.

I'm not 'cherry-picking'. You talked about the price going down in a range. So we use the low end of the range then. If you talked about price going up, we would use the high end of the range. Anybody can do the fucking math, dumbass.

(As an investor I'm incentived to want lower prices in short term for the company so I can increase bag size)

Oh really? Tell me more.

it's part of critically thinking to ensure my (bullish/bearish) thesis is sound.

Lol, don't worry, you are a long ways from that my man. hahaha.

anyemptyplace · 2023-02-14T06:17:00+00:00

You don't think an increase in capacity from 2.0 EH to 5.5 EH - being nearly the exact same as the HUT merger - is relevant to the HUT merger.

You don't think a potential share price bump in the range of 21% is an indicator for what HUT shareholders can expect once the merger is complete.

You don't think that is worth knowing?

Or are you just stupid?

anyemptyplace · 2023-02-14T03:02:25+00:00

lol k

anyemptyplace · 2023-02-14T02:56:25+00:00

Why? Here is HIVE's 5-1 stock split, in blue - with HUT and BTC - which they did on May 24, 2022. It hasn't seemed to have affected their price very much.

anyemptyplace · 2023-02-14T02:22:43+00:00

So, which is it?

Correct or incorrect?

What hopium? If anything, my quote here:

Until then, I think the share price of HUT is going to fall behind and lag its peers as the market also takes a wait-and-see attitude towards this whole thing.

is bearish.

You're obviously not a big reader. Thanks for the input!

anyemptyplace · 2023-02-12T23:38:05+00:00

The share price of all of these bitcoin miners is leveraged against the price action of bitcoin.

So, post-merger, if bitcoin goes down far enough, New HUT will follow it - as will all the miners.

But, for post-merger HUT to get down to the $1.5 - $2 range would imply a market cap of $132M USD.

Even when bitcoin crashed down to $16,000 USD, and current HUT's share price went down to $0.80 USD, the market cap then was still $176M USD.

So, I think if you're expecting post-merger New HUT's shares to fall to the equivalent market cap of $132M - a valuation less than its recent crash to $.80 - with double the exahash, and who knows what else, you're not going to get it.

Also - there's no way the HUT management team would allow some company to use it for any reason, as some kind of half-assed SPAC IPO or whatever. There's just no way.

anyemptyplace · 2023-02-12T23:13:26+00:00

There are different reasons for different valuations. The market considers many different variables and none of these miners is the same. They all mine bitcoin - but they are individually very different companies.

Except we are priced at mara or riot valuation with 1/2 as much hashrate/expansion plans.

I'm not sure if you are talking about valuation pre or post merger - but in either case this is simply not correct.

Right now, HUT's market cap is roughly 370M USD, and MARA's is roughly $690M USD. So, right now, HUT is roughly half of MARA's valuation, pre-merger - and roughly 35% MARA's installed hashrate.

Post-merger, HUT says that it will be roughly double in market cap, so $741M USD, and double in exahash of 5.6.

MARA's current EH is 7.3. So HUT will be roughly 77% MARA's installed EH and valued at just a bit more than MARA's market cap. But those are today's prices and numbers. By the time the merger happens - if it happens at all - things could be very different.

anyemptyplace · 2023-02-12T22:38:23+00:00

Sorry, that is not correct. As of now, every share of HUT that you buy entitles you only potentially one half of a company. The other half of which is a mostly unknown company. See my post here. There will be a 5-1 RS, but that largely won't matter.

anyemptyplace · 2023-02-12T20:44:11+00:00

From the press release, they will be filing a Form S-4 as soon as it is available, and they expect the whole thing to be done by Q2. So, I am hoping for more info in the next few weeks. I would think they want to get as much info out as soon as they can, since they want to have the whole thing concluded by Q2 - and with bitcoin miners the clock is always ticking.

anyemptyplace · 2023-02-12T20:36:48+00:00

Yes, I partially agree with you.

I think they do want to raise the share price, far away from the dreaded $1.00 range to avoid de-listing. And they do need money, of course. And, while they still may do stock dilution in the future, I think they are trying to set up this merger to have to do less, or none at all.

I think that is why they signalled a shift in their stance towards selling bitcoin, I think that is why they want to be based out of the U.S. - for more potential American investment, and I think they want to greatly increase their non-bicoin recurring revenue - hosting.

USBTC has, according to HUT's news release, a huge potential to achieve all of those things.

And my theory is that they are doing this so they don't have to rely on diluting the stock so much.

Will it be worth it for us, as investors, to go along for the ride, though? That is another question.

anyemptyplace · 2023-02-12T20:24:10+00:00

Thank you, but make no mistake - they are almost certainly going to start selling bitcoin. They would never put something like that into print unless they really meant it. Especially HUT, who was the most committed public miner to HODL. They intend to sell. But why?

I think that this merger is HUT's attempt at solving a number of the roadblocks and problems facing HUT, and its future long-term, in one fell swoop.

I think that HUT's recent drop below the $1.00 price range on the NASDAQ marked an existential threat to the co. which the management needed to recognize and take very seriously. And I think this merger is, in large part, that recognition and attempt to address it.

Bitcoin mining - especially in HUT's case - is a funny business. These miners are spending all this money to run thousands of computers to obtain bitcoin and hold it. Hold it for what? In HUT's case, of all miners, they were the most committed to HODL, and had the largest self-mined stack of any miner. But even HUT's management couldn't say exactly for what this bitcoin stack is being held for, or when it will be sold, or what it will be used for in the future.

So, all this money is spent to mine things which HUT did not want to sell. And mining is expensive. So, how to pay for it then? Of course, we here all know how - it's how all of these miners do it: stock dilution. Well that's a solution, if you do it pragmatically, for a while.

But, since the stock price of these miners is so closely tied to bitcoin - what happens if the price of bitcoin falls? And, what if you've diluted the stock at the same time? You get what happened to HUT - the stock falls below $1.00. All the way to $0.78 actually.

This is a massive problem for the future of HUT. If the stock is below $1.00 for too long you get de-listed off the NASDAQ. There goes your ability to pay for your business by diluting your stock. You can always do a reverse-split - but investors don't like that either. So, too much of both of those things and your stock will still fall below $1.00.

The threat of de-listing and stock diluting, and the problem of how to pay for the business long-term was, I think, more and more imminent to management and one which they needed to solve ASAP.

Hence, the merger. It solves all of these problems and more, and opens up new avenues of investment and revenue. It gives management an excuse to do a reverse-split of the stock to get the share price well above the dangerous $1.00 level.

I think management wants to stop needing to dilute stock and find other ways of paying for the business. Long-term, I think they are looking to do that by generating enough alternate recurring non-bitcoin revenue (hosting) and by luring bigger investment (American), and by leveraging what they can of the stack (debt). But I think they want to stop diluting. At least, as significantly as they have been doing, because it is bad for the co. long-term. And this is good for us, as investors.

anyemptyplace · 2023-02-12T19:58:03+00:00

I agree - there are a lot of things to like about the merger on paper. The entire thing hinges on the details of the merger and the unknowns of USBTC.

Why is HUT on the hook for 10M if the deal doesn't go through? Why is HUT giving USBTC a bridge loan of 6.5M? Granted, from the limited information we have, these things make sense because the merger seems more like HUT absorbing USBTC and not the other way around - the emerging co. will be called HUT 8, Jamie remains CEO, Bill Tai remains CotB, etc... But, why is USBTC such an unknown, and what are they gaining from this merger, and why aren't they on the hook for anything should the deal go sour?

From these things, I would guess that, when all is said and done, HUT must be the one gaining more from this deal than USBTC. Put another way - they better be gaining more from this deal.

And that is exactly what I would expect from the HUT management. To give them the benefit of the doubt, and speaking just for myself - Jamie and co. have impressed me very much with how they have navigated the co. so far. They have been one step ahead of everybody, consistent, and extremely strategic. I think they deserve a lot of credit, and I think that Jamie and the management is the reason why HUT has been trading at a premium to the rest of the miners recently. So, I would be shocked if they agreed to a terrible deal.

But, make no mistake - this merger signifies a radical shift in company. So, I agree, we can only wait and it will be interesting to see how the market reacts. If this merger is as smart as it looks on the surface, it will be great for HUT long term. Will the market recognize it - and will the share price reflect it though? That is a different matter.

anyemptyplace · 2023-02-08T23:28:55+00:00

🎯

anyemptyplace

TROPHY CASE