BitMine Crashes 39% After It Files to Raise $2 Billion for More ETH

This morning I published a story highlighting four crypto treasury companies at risk of massive price drops because of how they structured their initial raises. A few hours later BitMine Immersion technologies — the first company mentioned in the story — brought those fears to fruition with plans to raise an additional $2 billion to support its accumulation strategy.

BitMine Crashes 39% After It Files to Raise $2 Billion for More ETH

The registration comes on the same day that the firm closed a $250 million private round. The crash could indicate investor angst over more dilution.

On Wednesday, Ethereum treasury company BitMine Immersion Technologies (BMNR) fell 39% (53% during intraday trading) after the company filed a registration statement with the Securities and Exchange Commission (SEC) to sell up to $2 billion in securities to support its accumulation strategy. 

The filing comes on the same day that the company officially closed a $250 million private placement round known as a PIPE (private investment in public equity) from institutional investors meant to kickstart its transition into a crypto holding firm.

A Shaky Foundation

Up until Wednesday BitMine had been an investor darling, as its stock surged by almost 3,000% after the company announced its new strategy and brought on famed crypto bull Tom Lee as board chairman.

However, this price run-up was in many ways a mirage. 

An investigation published Wednesday morning by Unchained revealed that BitMine’s jump was built on a largely illiquid stock with a very small float (4.3 million shares). The PIPE was going to increase that count by almost 13x (see chart below), creating a massive sell wall that would flood the market with more shares than there would be demand.

What’s surprising about this particular crash is that unlike previous downturns for companies like Sharplink (SBET) and Upexi (UPXI), which fell after their PIPE shares became liquid, Wednesday’s filing from BitMine does not immediately dilute the current share count. So that doesn't justify a 40% drop. 

In fact, one investor in the $250 million PIPE confirmed to Unchained that those shares must be separately registered with the SEC; only at that point could they be sold. That could change in short order, as BitMine can register the shares at any time and then the SEC would to provide comments or approve it. Still, today’s filing gave no indication of when that might be.  

When the company does start selling that $2 billion worth of securities — the filing indicates that those sales can come in both debt and equity forms and can begin immediately — shareholders will be diluted. But the exact amount and rate of dilution will depend on a number of factors such as market demand and the specific type of instrument. For instance, the direct issuance of equity will have an immediate effect, while selling convertible debt that will not mature for several years could push out the dilution timeline.  

These securities will become immediately liquid because, as of Wednesday’s filing, the company classifies itself as a Well-Known Securities Issuer (WKSI)  but that status does not apply retroactively to the 55.6 million PIPE shares.

Investor FOMO Becomes Fear

The bigger lesson here is that investors may have become sensitized to massive dilution events that can come with the ramp-up of these treasury companies. Otherwise it is difficult to justify Wednesday’s drop given the fact that no new shares were issued. It is also entirely possible, though hard to prove, that some investors may have seen BitMine’s filing and misinterpreted it as the registration of the PIPE shares, which is widely expected to happen in the near future.

The $2 billion shelf registration could be a smart business move for the company and beneficial to its shareholders in the long term. The challenge for the management team will be accretively accumulating Ethereum at a pace that exceeds the rate of dilution. 

"One key performance metric for BitMine going forward will be increasing ETH held per share and also driving reflexive benefits by accumulating a larger share of the supply of ETH," said Lee in a press release.

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• These 4 Crypto Treasury Companies Are Primed for a Price Crash

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• Crypto Treasury Companies Are All the Rage. Could They Cause an Industry Collapse?