Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Marathon Patent Group Stock Tumbled Today

By Jon Quast - Jan 21, 2021 at 1:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's new director is a bright spot even as bitcoin keeps falling.

What happened

Shares of bitcoin-mining company Marathon Patent Group (MARA -8.84%) tumbled on Thursday, as the price of bitcoin continued falling. As of 1:15 p.m. EST, the stock was down 10%.

So what

In recent days there has been some news regarding Marathon's management, though it's not likely contributing to the stock's decline. Kevin A. DeNuccio was recently added to the board of directors. DeNuccio has twice been a chief executive officer of a public company, once with Redback Networks and then with Violin Memory. Both of those experiences ended with a sale of the company, but DeNuccio didn't hint that will be the plan with Marathon. In the press release he expressed excitement to be joining "at this pivotal time in Marathon's growth phase."

A frustrated man lays his head on the table with a down stock chart in the background.

Image source: Getty Images.

Yesterday, DeNuccio was listed as a beneficial owner of Marathon stock with 5,000 shares, according to a filing with the Securities and Exchange Commission.

Gaining an experienced executive like DeNuccio is a good thing for Marathon. Furthermore, now his interests are more aligned with common shareholders, which is also a positive. None of this explains why Marathon stock has been down the last several days, even though these events correspond with the stock going down.

MARA Chart

Even having pulled back, Marathon stock and bitcoin have still outperformed the stock market over the past year. MARA data by YCharts

Now what

There's a two-fold reason Marathon stock today is really down today, and it will have a big influence over whether this stock is up or down tomorrow too. First, as already mentioned, the price of bitcoin is down today. Bitcoin is down 8.5% over the past 24 hours, according to CoinDesk. And it's down roughly 25% from all-time highs set earlier this month. Since Marathon mines bitcoin, it's logical for the stock to be affected.

More importantly, Marathon is extremely overbought in my opinion. Even with the pullback, the stock trades at hundreds of times trailing sales. This extreme valuation is due to hype -- consider that this was a penny stock that's been pumped. It worked out well for shareholders in 2020. But when bitcoin pulls back, it dampens enthusiasm for investments like this and the valuation takes a hit. And Marathon could have much further to fall if traders dump this and move on to the next big thing.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marathon Patent Group, Inc. Stock Quote
Marathon Patent Group, Inc.
MARA
$10.11 (-8.84%) $0.98

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.