- Bit Brother will deliver a 1 to 1000 stock split on Wednesday.
- This is an important step aimed at gaining SEC compliance.
- The company faces numerous challenges even as Bitcoin sits at a two-year high.
Bit Brother (BETS) stock price is hovering near its record low as investors question the company’s Bitcoin mining strategy. The shares plunged by more than 10% on Tuesday and were trading at $0.0058. That price was slightly above its all-time low of $0.0038.
Bit Brother is a Chinese company that was formerly known as Urban Tea and Delta Technology. The company was known for being a retailer and distributor of specialty tea products in China. As part of its growth strategy, the management decided to start Bitcoin mining, an industry that is still growing.
Bit Brother’s stock has not done well since then. According to TradingView, the shares have crashed from $415 in 2019 to $0.0058 as investors question its strategy. It has also retreated after the firm repeatedly diluted its shareholders through capital raises. On December, the firm announced that it would raise $12 million through stock and warrants offering.
Similarly, in October, the firm said that it would raise $5.04 million through registered direct offering. In January, it also raised $7.1 million to fund its operations and Bitcoin mining machines. Since then, it has brought several machines, with the most recent purchase being in December when it bought 3,300 units of S19 miners.
BETS stock chart
Bit Brother stock price jumped sharply on Monday after the company announced a 1 to 1,000 reverse split of its Class A shares. This split is set to take place on Monday. This split is important because it will automatically push its stock price at $5.8. As a result, the company’s Nasdaq listing will be safe since it received a warning from the exchange in December.
BETS stock price has been left in the dust as other Bitcoin mining companies like Riot Platforms, Cipher Mining, Argo Blockchain, and Marathon Digital surged. These companies were among the top performers in 2023 as they jumped by over 300%.
The concern among investors is whether Bit Brother can become a profitable mining company. For one, a look at its Investor Relations page shows that it has not published its quarterly results since 2021. This means that there is little visibility of its business performance.
The other challenge is that it is quite challenging to turn a profit in Bitcoin mining because of its substantial energy consumption. This explains why most mining companies have struggled to become profitable in the past few years. Riot Platforms had a net loss of $13.5 million in Q3 while Cipher Mining lost $0.07 per share.
One reason for the lack of profitability is that mining companies must account for miner depreciation, which happens at a fast pace. Therefore, these challenges explain why the BETS stock price will struggle to recover even as the price of Bitcoin remains at its highest point in over two years. There are also concerns about its Chinese roots as tensions between the US and China continues.
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