BitMine stock will be in the spotlight in the coming days as it publishes its financial results, which will include another unrealized loss. BMNR was trading at $14.64, a few points above this month’s low of $12.73. This article explores why the stock may rebound over time.
BitMine is Transitioning From Dilution to Value Creation
Tom Lee’s BitMine has a simple business strategy. Its goal is to own 5% of Ethereum, a strategy it has perfected using the dollar cost averaging (DCA) method. This approach has seen it buy over 5.74 million ETH tokens, mostly using cash generated from selling shares, a move that has led to substantial dilution.
On the positive side, BitMine is now approaching its goal of buying about 6 million coins, meaning that the era of dilution will be over. After that, the company will start generating revenue through its staking program, which will make about 3% annually.
With at least 6 million coins, BitMine will be making about 180k ETH coins in a year from staking. In the worst-case scenario, if Ethereum drops to $500, it means that the company will make an annual revenue of $90 million. In another scenario, if ETH jumps to $5,000, its annual staking revenue will be $900 million.
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BitMine has its preferred shares, which it will spend less than $40 million in annual dividends. Also, it is an asset-light company with just a handful of workers, meaning that it will be keeping most of the staking revenue.
With its staking revenue, BitMine will start returning funds to its shareholders through a combination of dividends and buybacks. Tom Lee hopes that he will buy back shares worth over $4 billion over time, which will be possible depending on Ethereum’s performance.
Historically, Ethereum has had some major dips and strong rallies. Just last year, it moved from $1,500 in April to nearly $5,000 within a few months. This cycle will likely return over time, boosting BMNR shares.
BitMine Has Made Some Moonshot Investments
BitMine is not just an Ethereum accumulator. It has made some other investments that it hopes will pay off eventually. Also, it will likely use its shares to make some more investments over time.
The most notable investment is in Beast Industries, a company that owns Mr. Beast’s channels, Feastables, and Step, an all-in-one financial app. Its investment in Beast Industries could one day become huge, especially if it decides to go public. Estimates are that it is now valued at over $5 billion.
The company also owns a stake in EightCo, which owns WLD tokens worth $102 million and a $90 million stake in OpenAI. This investment may also become huge over time, especially when OpenAI goes public.
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