CleanSpark (CLSK) stock price retreated for two straight days even as Bitcoin remained above $70,000. It crashed by over 8.2% in the regular session and by 10% in the extended session as other Bitcoin mining stocks like Marathon Digital and Riot Blockchain jumped.
Dilution and insider sales
CleanSpark share price crashed hard as investors remained concerned about three main factors. First, there are concerns about the increased insider sales. Data shows that insiders have sold substantial stocks in the past few days.
Matthew Schultz, the Chairman of the board, sold stock worth $8.4 million this week. Just last week, Zachary Bradford, the CEO, sold shares worth almost $9 million. He also sold shares worth $3.2 million.
In all, data by Barchart shows that insiders have sold over 44 million shares in the past three months. In most cases, insider sales are usually a sign that a company is not doing all that well.
Second, the CLSK share price also tumbled after the company announced a big stock offering. It will raise $800 million by selling shares, which will dilute existing shareholders by about 20%. Share sales are usually bad for companies since they increase the number of outstanding shares in the market.
As shown in the chart below, CleanSpark has been a highly dilutive company. The most recent filings showed that it had over 185 million in outstanding shares, up from 131 million in July. It had just 4.46 million outstanding shares in 2019.
The company’s cash raise is intended to boost its balance sheet. In its most recent financial results, the firm said that it had $229 million in liquidity, which was made up of $62.5 million in cash and 3,700 Bitcoin.
As such, the cash element is important since CleanSpark will need to boost spending in the coming months. Like other Bitcoin mining companies, CleanSpark needs to increase its mining capacity because of the upcoming Bitcoin halving.
Halving, which is set to happen in April, will lead to a cut in block rewards, which will reduce the number of coins that are mined every day to about 450. Therefore, if BTC prices remain intact, it means that companies like CleanSpark will see lower revenues.
CleanSpark stock price forecast
The daily chart shows that the CLSK share price jumped to a high of $25.77 this week and then tumbled heavily on Thursday. This retreat is notable since the stock has plunged below the crucial support level at $23.40, its highest swing on February 27th. It has formed a double-top pattern, which is a popular bearish sign.
Therefore, the outlook for the CleanSpark share price is extremely bearish, with the next point to watch being at $20. A drop below $20 could see it tumble to the neckline of the double-top pattern at $14.90.
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