As an analyst with over two decades of experience in the financial sector and a keen interest in the crypto space, I find Marathon Digital Holdings’ latest Bitcoin purchase to be a strategic move that aligns with their long-term vision. The company’s decision to treat Bitcoin as a premier strategic treasury asset is indeed intriguing, given the volatility associated with this digital gold.
Marathon Digital Holdings recently finalized its sale of convertible senior notes with a 2.125% interest rate, maturing in 2031. The funds generated from this offering were then utilized to purchase approximately 4,144 Bitcoins for $249 million, with an average cost of around $59,000 per Bitcoin.
The latest purchase increased the company’s BTC reserves to 25,000 BTC and came after CEO and chairman Fred Thiel stated the company was adopting a HODL strategy for the asset.
Marathon Digital’s Latest BTC Purchase
As an analyst, I’ve learned that Marathon Digital recently disclosed they utilized a portion of the earnings from the sale of their senior notes, approximately $292.5 million. These convertible notes, due in September 2031, carry an annual interest rate of 2.125% and can be exchanged for cash, Marathon Digital (MARA) shares, or a combination of both. This capital influx enabled Marathon Digital to acquire 4,144 Bitcoin at an average price point of around $59,000 per BTC.
“In a heavily demanded sale, MARA raised $300 million by offering convertible senior notes. Using these funds, we acquired approximately 4,144 Bitcoins, which were worth about $249 million at the time. This addition increased our strategic bitcoin reserve to more than 25,000 Bitcoins.”
Marathon Digital also stated that it intends to utilize the leftover funds from sales to buy more Bitcoin and for various corporate expenses such as strategic acquisitions. If certain conditions are met, Marathon Digital has the option to cash out all or a portion of its notes at a price equivalent to 100% of the note’s principal amount, plus any accumulated and unpaid interest.
As a crypto investor, I’d share that the earnings from selling these notes were roughly $292.5 million, after accounting for the initial purchaser’s discounts and commissions, but prior to any estimated offering expenses charged to MARA. Looking ahead to August 14, 2024, MARA plans to utilize the leftover net proceeds from this sale. These funds will be allocated towards purchasing more bitcoin and for various corporate purposes. These purposes could encompass bolstering working capital, strategic acquisitions, expanding existing assets, and settling outstanding debts and other obligations.
The Premier Strategic Treasury Asset
Based on statements from a representative of Marathon Digital, the company views Bitcoin (BTC) as their primary strategic reserve asset, which is why they have implemented a diverse approach to acquiring it. In fact, Marathon Digital has been consistently purchasing BTC, with their most recent acquisition taking place in July 2024, where they bought 2,282 BTC for approximately $124 million.
In simpler terms, Marathon Digital’s Q2 earnings didn’t meet expectations set by Wall Street analysts because they reported revenues of $145 million, which was 9% less than predicted. However, even with this decline, the company managed a significant year-on-year growth of 78% compared to Q2 in the previous year (Q2 2023). The decrease in Marathon Digital’s Q2 earnings is linked to reduced profitability from crypto mining due to a historic low in profits following the halving event. Additionally, the price of miner hash also hit an all-time low in early August as speculation suggested that major public Bitcoin miners might struggle to remain profitable.
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2024-08-18 11:13