Hut 8 Mining jumps on Nasdaq listing

On 9 June, crypto miner Hut 8 Mining announced that it had won approval to list its shares on the Nasdaq Global Select Market.

Like any crypto mining stock that oscillates in tandem with the price of Bitcoin and Ethereum, Hut 8 Mining [HUT.TO] has had an up-and-down 2021 so far. Its share price is up 21.3% year to date through to 17 June at CAD$4.72.

However, the stock of Hut 8 Mining is down 70.5% from its intraday high of CAD$15.98, which it peaked at on 22 February. Furthermore, it has fallen 4.2% in the week since announcing its secondary listing on the Nasdaq Global Select Market, despite an initial surge.

  

There are a limited number of ETFs that hold Hut 8 Mining shares, partly due to the fact that the stock is only listed on the Toronto Stock Exchange. The HANS-GINS Tech Megatrend ETF [ITEK.L], which rebalanced its portfolio of holdings back in March to focus more on blockchain stocks, has a year-to-date daily total return of 11.59% as of 17 June, according to Yahoo Finance data. The fund had a 0.47% weighting in Hut 8 Mining on 17 June.

 

Hut 8 Mining lists on the Nasdaq

Hut 8 Mining’s shares began trading on the Nasdaq under the ticker [HUT] on 15 June. The company’s underwriters agreed to buy 20 million units at the cost of CAD$5 a share plus a warrant that grants holders the right to buy another half a share. Hut 8 Mining’s Toronto-listed shares grew 5.8% between 9 and 15 June.

The listing has been a tailwind for Hut 8 Mining, as it makes its stock more available to investors, particularly retail, who might not have access to over-the-counter stocks or those listed in Toronto.

Hut 8 Mining had a mixed 2020 fiscal year. The market crash in March of last year depreciated the price of Bitcoin and had a major impact on the company’s revenue, which was CAD$38.9m for the year, down from CAD$81.9m in 2019. Hut 8 Mining’s income also jumped from CAD$2.1m to CAD$3.9m.

  

Meanwhile, the company mined just 2,798 bitcoins in the 12 months to the end of December 2020 versus 8,618 in fiscal 2019. The dramatic reduction in bitcoins mined is partly the result of the halving event, which took place in May 2020.

In stark contrast, revenue in the first quarter of 2021 was a record CAD$30.5m versus the CAD$12.7m that was reported in the year-ago quarter. By the end of the quarter, the company had 2,271 bitcoins worth CAD$168.2m as of 31 March. Net income was CAD$35.5m compared to a loss of CAD$10.2m in the year-ago quarter.

During the earnings call, the company announced it was expanding its mining capacity through the purchase of $30m worth of Nvidia’s [NVDA] cryptocurrency mining processors. Hut 8 Mining expects to use these to mine Ethereum and other blockchain networks.

 

Energy consumption

Extending mining operations beyond Bitcoin and reducing mining energy consumption is becoming increasingly important for miners, given cryptocurrency’s ongoing volatility, geopolitical pressures and criticism of crypto mining’s environmental impact.

The recently launched Bitcoin Mining Council has been set up to standardise energy reporting and includes companies, such as Hut 8 Mining, Galaxy Digital [GLXY.TO], Marathon Digital [MARA] and Riot Blockchain [RIOT].

Jaime Leverton, CEO of Hut 8 Mining, told the BBC’sTech Tent in May that the aim of the council is to “counter the noise and some of the misinformation that’s coming at the Bitcoin mining industry”. She explained that members wanted to “shape the narrative” around energy usage, while addressing concerns that the industry isn’t environmentally friendly.

“That should reduce competition for Hut 8. As much of China’s mining capacity is taken offline, mining margins on each Bitcoin improve. This will eventually be reflected on Hut 8’s income statements” - Vishesh Raisinghani, founder of Sharpe Ascension

 

The launch of the council has coincided with China's state council initiating a crackdown on crypto mining farms — some regions throughout the country have been extremely popular due to cheap electricity. The country accounts for two-thirds of all Bitcoin mined, according to data by CoinShares, creating an opportunity for domestic miners in the US and Canada.

“That should reduce competition for Hut 8. As much of China’s mining capacity is taken offline, mining margins on each Bitcoin improve. This will eventually be reflected on Hut 8’s income statements,” wrote Vishesh Raisinghani, the founder of Sharpe Ascension, in The Motley Fool.